UNIVERSITY INSTITUTE OF LEGAL STUDIES, PANJAB UNIVERSITY,

CHANDIGARH

BUSINESS LAWS II

PROJECT

REGULATIONS ON ANTI
COMPETITIVE AGREEMENTS

SUBMITTED TO: SUBMITTED BY:

Prof. Shefali Singh SRISHTI
SHARMA

168/19
B.A. LL. B
(HONS.)
8TH SEMESTER
SECTION C
 ACKNOWLEDGEMENT

I would like to express my sincere gratitude to my Business Laws subject teacher, Prof.
Shefali Singh, for her guidance and inspiritment throughout the course of this project. I’m
also grateful to Prof. Rajinder Kaur, Director, UILS, for providing me a great platform and
giving me this opportunity. I’m also indebted to my family and friends for their constant
succor and support. At last I express my gratitude to the library staff, who have helped me in
this project directly or indirectly.

Thank you
 TABLE OF INDEX

S.NO CONTENTS PAGE

NO.

1 Introduction 5
.

2 Anti – Competitive Agreements: Section 7

. 3

Horizontal 8
Agreements 14
Vertical
Agreements

3 Market and Anti – Competitive 17

. Agreements

4 Appreciable Adverse Effect 19

.

5 Exclusions under Section 3 (5) 21

.
 TABLE OF CASES

Cases
Alkali Manufactures Association of India v America Natural Soda Ash Cooperation 13
Arizona v. Maricopa County Case 9
Competition Commission of India v. Co-ordination Committee of Artists and Technicians of
W. B. Film and Television and Ors 17
FICCI-Multiplex Association of India v. United Producers/ Distributors Forum 9
Foundation for Common Cause & People Awareness v. PES Installations Pvt. Ltd. & Ors 10
In Re: Aluminum Phosphide Tablets Manufacturers 10
Jindal Steel v. SAIL 14
Kapoor Glass Pvt. Ltd. v Schott Glass India Pvt. Ltd 15
Northern Pacific Railway Co. v. United States 11
Registrar of Restrictive Trade Agreements v. W.H. Smith and Sons 7
Tata-Engineering (Telco) v. Registrar of Restrictive Trade Agreement 20
Technip S.A. v. S.M.S. Holding Pvt. Ltd 7
United States v. Microsoft Corporation 14
INTRODUCTION

India’s new competition law, the Competition Act, 2002, was passed by the Parliament in
December, 2002 and received the assent of the President of India on January 13, 2003,
thereby becoming the law of the land from that date. 1 The Competition Act, 2002 was
amended by the Competition (Amendment) Act, 2007 and again by the Competition
(Amendment) Act, 2009.The need for a new competition law was felt in the country because
competition law itself is a rapidly expanding subject and has expanded enormously,
especially since the early 1990s.

The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969, the earlier Act on
competition in India, was considered to have become obsolete in certain areas in the light of
international economic developments, in the sense that the new economic environment of the
country required to shift their focus from curbing monopolies to promoting competition. The
MRTP Act was framed to deter and also dismantle any concentration of economic power to
the common detriment, for the control of monopolies, for the prohibition of monopolistic and
restrictive trade practices.2

The Act, 2002 prohibits or regulates:

Anti – Competitive agreements, prohibited by Section 3 of the Act;

Abuse of dominant position, prohibited by Section 4 of the Act; and
Combinations, regulated by Section 5 and 6 of the Act

The project focuses on the analyses of Anti-competitive Agreements under the Competition
Act, 2002. Since, the businesses thrive on intense competition and dynamic of market
environment, prohibiting anti-competitive agreements is necessary. The paradigmatic
structure of regulation of anti-competitive practices in India is ingrained under Section 3 of
the Act.3 While doing business in India, parties are prohibited from executing anti-
competitive agreements. Generally, the agreements which cause or are likely to cause
Appreciable Adverse Effect on Competition (AAEC) are anti-competitive agreements. Such
agreements may be horizontal or vertical.

1
Vinod Dhall; Competition Law Today; Oxford University Press; New Delhi; 2007; Pg 499.
2
Md. Zafar Nomani & Faizanur Rahman; (2013); Regulation of Anti-Competitive Practices and Trade Secret
Laws under Competition Legislation of India: A Paradigmatic Analysis; 2; 96-110.
3
Id.
One of the principal aims of the Act, 2002 as declared in its preamble is to prevent practices
having adverse effect on competition. A duty has also been cast on the Competition
Commission to eliminate practices having adverse effect on competition and which further
reinforces the objective set out in the preamble. 4 Competition laws in India prohibits all
agreements which cause consumer harm by way of limiting production and distribution of
goods and services and fixing prices higher than normal. Such agreements are considered to
have an adverse effect on competition. For example, a cartel of producers, traders, together
may fix prices higher than normal leading to loss in consumer welfare.

In order to illustrate further, the principle objective of supplier of goods and services who are
in a position to manipulate the market is to maintain their profits at pre-determined levels and
they seek to achieve this through various means. Agreements for price-fixing, limiting supply
of goods or services, dividing the market, etc. are the usual modes of interfering with the
process of competition and ultimately reducing or eliminating competition. Where
competition is adversely affected to an appreciable extent, such agreements would be anti-
competitive under the law.

There is a preponderance of evidence suggesting that markets are vulnerable to manipulations

of manufactures and sellers, aimed at profiteering to the detriment of the consumer. 5 Products
and services are of wide variety, many of them are complex and the consumer has imperfect
product knowledge. Consumers, therefore, needs and deserves legal protection against certain
trade practices that have adverse effect of preventing and suppressing competition.

4
https://shodhganga.inflibnet.ac.in/bitstream/10603/100395/12/12_chapter%204.pdf; visited on June 100, 2021.
5
Id
 ANTI – COMPETITIVE AGREEMENT: SECTION 3

term anti-competitive agreements as such has not been defined by the Act. However, section
3 prescribes certain practices which will be anti-competitive and the Act has also provided a
wide definition of “agreement” under section 2(b). Agreement under the competition law
includes any arrangement or understanding or action in concert whether or not formal or in
writing or is intended to be enforced by legal proceedings. Such wide definition has been
provided for because the parties often choose not to formalize the agreement, in fact they
sometimes go to great lengths to hide the agreement or any trace of it. In particular cartels are
usually shrouded in secrecy.6 There is rarely direct evidence of action in concert and the panel
must draw upon its experience and common sense to determine whether those involved in
any dealings have some form of understanding and are acting in cooperation with each other.7

In order to constitute an agreement, a concerted action on the part of enterprises is a sin qua
non.8 In Registrar of Restrictive Trade Agreements v. W.H. Smith and Sons 9, the court
observed, ‘people who combine together to keep up prices do not shout it from the house
tops. They keep it quiet. They make their own arrangements in the cellar, where no one can
see. They will not put anything into writing nor even into words. A nod or a wink would do.”

Section 3(1) of the Act, 2002 enumerates a general prohibition i.e. it prohibits agreements
which restrict the production, supply, distribution, storage, acquisition or control of goods or
provision of services, which causes or are likely to cause an appreciable adverse effect on
competition within India. Further Section 3(2) provides that any agreement in contravention
of this provision shall be void.

Bar from entering anti-competitive agreements - Section 3(1) of the Act provides a general
prohibition on the following to enter into agreements which causes or is likely to cause an
AAEC in India:

• Enterprise and enterprise;

• Enterprise and association of enterprises;

• Two associations of enterprises;

6
Supra Note 1 at Pg. 502
7
Technip S.A. v. S.M.S. Holding Pvt. Ltd.; (2005) 5 SCC 465
8
Supra Note 4
9
(1968) 3 All ER 721
• Two persons;

• Person and an association of persons;

• Between two association of persons;

• Person and an enterprise;

• Person and an association of enterprise;

• Association of persons and enterprises;

• Association of persons and association of enterprises

A scan of sections 3(3) and 3(4) will demonstrate that they invariably make a distinction
between “Horizontal” and "Vertical” agreements between firms. The horizontal agreements
are those among competitors in the same chain of production while the vertical agreements
are between different parties in the supply chain. The competition law view vertical
agreement more leniently than horizontal agreements. The Act does not specifically use the
terms horizontal or vertical agreements. Section 3(3) of the Act talks about horizontal
agreements and section 3(4) deals with vertical agreements.

Horizontal Agreements

FORMS OF HORIZONTAL AGREEMENTS UNDER SECTION 3(3):

PRICE FIXING AGREEMENT

Agreements through which the companies mutually set the prices that they want to charge in
the market are called price fixing agreements. Imagine a market where four firms
manufacturing cement agree to sell their products at a fixed price. Although, sometimes a
slight increase in the price of each product hardly matters to a consumer; such price fixing
will ultimately generate huge profits for the colluders. Other types of price-fixing agreements
include agreements that jointly predetermine the size of profit margins, the extent of
discounts and the level of price increase.10

10
http://epgp.inflibnet.ac.in/epgpdata/uploads/epgp_content/law/03._competition_law/10._horizontal_agreems_a
nd_their_types/et/8133_et_et.pdf; visited on June 100, 2021
In FICCI-Multiplex Association of India v. United Producers/ Distributors Forum 11,
there was a collective decision of the opposite parties(Producers and distributors) not to
release films to the multiplexes with a view to pressurize the multiplexes into accepting the
terms of revenue sharing ratio. The purpose of forming United Producers and Distributors
Forum was extracting better revenue sharing ratios from multiplexes. UPDF had issued
notices instructing all producers and distributors not to release any film for the purpose of
exhibition at the multiplexes operated by the members of the informant. Competition
Commission held that the arrangement entered into by the opposite parties is covered within
the mischief of clauses (a) and (b) of section 3(3) of the Act.

The Arizona v. Maricopa County Case12 is a landmark case in context of price fixing. In
this case, a number of foundations were established by doctors to promote the community
with a competitive alternative to existing health insurance plans. The foundations, by
agreement of their member doctors, established the maximum fees the doctors could claim in
full payment for health services provided to the policy holders of specified insurance plans.
The State of Arizona alleged that they were engaged in an illegal price fixing conspiracy. The
US Supreme Court held that fee agreements disclosed by the record in the case, among
independent competing entrepreneurs, doctors, fitted squarely into the horizontal price-fixing
mold and was a per-se violating.

LIMITING AND CONTROLLING PRODUCTION

There can be a scenario where competitors agree to restrict and control the production
thereby controlling the supply in the market. Output restrictions can take place through
various forms including agreements on production volumes and agreements on sales
volumes. The objective of controlling and limiting supplies is to create scarcity in the market
and subsequently raise prices in the market.

MARKET ALLOCATION AND SHARE

Another common horizontal agreement amongst competitors is market sharing. These are
also called market allocation and market division agreements. Under such agreements, the

11
(2011) CCI 32
12
457 US 332 (1982)
competitors agree to divide amongst themselves specific territories, customers, or products.
Such market allocating actions are restrictive in nature because they leave no room for
competition in the market. For example, an agreement amongst competitors to allot certain
customers to particular sellers and to allocate or divide sale territories would be
anticompetitive.

BID RIGGING

Bid rigging takes place when bidders collude and keep the bid amount at a pre-determined
level. Such pre-determination is by way of intentional manipulation by the members of the
bidding group. Bid rigging is the way that conspiring competitors effectively raise prices
where purchasers which are often various departments and authorities of the Government
acquire goods or services by soliciting competing bids.

In the case of Foundation for Common Cause & People Awareness v. PES Installations
Pvt. Ltd. & Ors.13 the Commission examined inter alia allegations of bid rigging by the
bidders in the tender floated by Hospitals Services Consultancy Corporation, for supply,
installation, testing and commissioning of Modular Operation Theatre and Medical Gases
Manifold System to Sports Injury Centre, Safdarjung Hospital, New Delhi. The Commission
found commonality of mistakes (such as common typographical errors) in the tender forms
by the bidders as indicative of collusion amongst them to manipulate the process of bidding.
The Commission imposed a penalty upon each of the contravening party.

In the case of In Re: Aluminum Phosphide Tablets Manufacturers 14, the Commission
examined the allegation of anti-competitive acts and conduct in the tender for procurement of
Aluminum Phosphide Tablets required for preservation of central pool food grains by Food
Corporation of India (FCI). In this case, the Commission inter alia noted that the identical bid
price was not possible unless there was some sort of prior understanding. The Commission
found the collective action of identical bids and simultaneous entry into the premises of FCI
before submission of bids as indicative of factors to support the alleged existence of an
understanding between the parties.

13
Case 43 of 2010
14
Suo Moto Case No. 02 of 2011
Gathering cogent evidences are crucial. Direct evidences are undeniably best evidences in the
eyes of law, however, due to their absence the Commission has given due regard to
circumstantial evidences, at the same time emphasizing the need for them to be persuasive in
nature. Mere price parallelism can be coincidental and may not be enough to establish
collusion and in such cases, some other corroborating evidence might be necessary.15

The framework of analysis for determining whether an agreement has an AAEC is different
for hard core “horizontal” agreements and “vertical” agreements. The Act states explicitly
that egregious horizontal agreements – i.e., price-fixing, output restrictions, market-sharing,
bid - rigging – are presumed to give rise to an AAEC. Such agreements including cartels are
placed in special category and are subject to the adverse presumption of being anti-
competitive.16 This approach is similar, but is not necessarily identical, to the per se rule in
the US law.

THE PER SE RULE AND ITS RATIONALE

The per se rule and its rationale was explained by the US Court in Nothern Pacific Railway
Case17 whereby, the Court observed that “there are certain arrangements or practices which
because of their pernicious effects on competition and lack of any redeeming virtue are
conclusively presumed to be unreasonable and therefore illegal without any elaborate enquiry
as to the precise harm they have caused.” The Court further stated that this rule of per se
unreasonableness avoids the necessity for an incredibly complicated and prolonged economic
investigation into the entire history of the industry involved as well as industries related.

PRINCIPLE OF “SHALL PRESUME”

In case of Horizontal agreements listed in Section 3(3), once it is established that an

agreement has an appreciable adverse effecting competition, the burden of proof would then
shift to the defendant. This presumption is not in itself an evidence but only a prima facie
case for the party in whose favour it exists. According to section 4 of the Indian Evidence Act
whenever it is directed that the court shall presume a fact, it shall regard such fact as proved,
unless the

15
The Quarterly Newsletter of Competition Commission of India (CCI), FAIR PLAY; VOLUME 26 : JULY -
SEPTEMBER 2018: available at: https://www.cci.gov.in/sites/default/files/Newsletter_document/Fairplay-July-
September-2018.pdf.
16
Supra Note 1 at Pg. 505
17
Northern Pacific Railway Co. v. United States; 356 US 1 (1958)
contrary is proved. Thus, it is quite clear that the presumption as to appreciable adverse effect
on competition in regard to the Horizontal agreements envisaged in Section 3(3) is rebuttable
but the burden to rebut the same would lie upon the person charged with the commission of
such trade practices. Hence, it is quite apparent that they are not 'deemed' anti-competitive
practices there is a clear distinction between presumed and deemed restrictive trade
practices.18

CARTELS

Cartel is also a horizontal agreement. Cartels have been described as ‘cancers on the open
market economy’ and ‘the supreme evil of antitrust’. 19 Section 3(3) also covers Cartels.
Section 2(c) of the Act, 2002 defines Cartel. It states that a cartel includes an association of
producers, sellers, distributors, traders or service providers who, by agreement amongst
themselves, limit, control or attempt to control the production, distribution, sale or price of,
or, trade in goods or provision of services. Put simply, a cartel is an agreement between
competitors not to compete with each other. This definition is inclusive and wide. 20
Cartelization is regarded as one of the most pernicious offence since it has no redeeming
feature and there is no question about the harm that it causes to the consumers and to the
economy.21

Amino Acid Lysine cartel: It is one of the landmark cases decided in the US. Two Japanese,
two South Korean and one US Company agreed not to compete on price of lysine. Price of
lysine rose on account of collusion from 68 cents per month to 98 cents in 1990 and
continued at that level until detection in 1995. Evidence was collected with the assistance of
FBI included documents / transcripts of secretly recorded conversations.22

International Vitamins Cartel: Leading producers of vitamins including Roche AG and

BASF of Germany, Rhone-Poulenc of France, Takeda Chemical of Japan formed a cartel
dividing up the world market and price fixing for different types of vitamins during the
1990s. The cartel operated for over 10 years and later prosecuted with the help of Rhone-
Poulenc which defected from cartel and cooperated with US authorities. Roche paid fines of
US $500 million and total

18
Supra Note 4
19
Supra Note 10
20
Supra Note 1 at Pg. 506
21
Supra Note 1 at Pg. 506
22
https://www.cci.gov.in/sites/default/files/presentation_document/2ndwork_grbhatia_20080523133418.pdf?
download=1; visited on June 2, 2021
fine collected exceeded US $1 billion in the US alone. The overcharges paid by 90 countries
importing vitamins were estimated to the tune of US $2700 million during the 1990s.

In Alkali Manufactures Association of India v America Natural Soda Ash Cooperation 23,
the ANSAC comprising of six American Producers of soda ash attempted to ship a
consignment of soda ash at cartelized price to India. Based on the ANSAC' membership
agreement, the Monopolies and Restrictive Trade Practices Commission held it as prima facie
cartel and granted interim injunction. The Supreme Court, however, overruled the order of
the Commission on the ground that the MRTP Act did not give it any extra territorial
operation.

“PRACTICE CARRIED ON OR A DECISION TAKEN”

Section 3(3) includes, apart, from an agreement, a practice carried on, or a decision taken by
an association. It appears therefore that it might cover any practice or decision of an
association relating to an activity mentioned in sub section (3) even if some of the members
of the association have not agreed with the particular decision.

OTHER HORIZONTAL AGREEMENTS

Certain horizontal agreements are analyzed under a “rule of reason” i.e. balancing the
benefits arising from the agreements against the restrictions on competition, for example,
horizontal agreements for research and technology development, setting standards,
specialization or for exchange of information. Such agreements that do not fall under section
3(3) would be covered by section 3(1) and would therefore be subject to the rule of reason as
against the “shall presume” rule24. This applies to joint ventures that can be proven to be
efficiency-enhancing; these will not be presumed to give rise to an AAEC. They are excluded
from the ‘shall presume’ rule.

It is common for enterprises to enter into or form joint ventures for specific or agreed
purposes. There is no standard or universally accepted definition of joint venture. Thus, an
issue can arise in a case under section 3 whether a particular agreement amounts to joint
venture or not. Thus,
23
(1998) 92 Comp. Cas.206 (MRTP)
24
Ibid at Pg. 507
an enterprise can use the proviso to section 3(3) as a gateway to escape from the “shall
presume” rule.

Vertical Agreements

FORMS OF VERTICAL AGREEMENTS UNDER SECTION 3(4)

The term vertical agreement has not been used in the Act as such. Section 3(4) of the Act,
however, provides for certain types of anti-competitive agreement between or amongst firms
at different stages or levels of the supply chain of any product or services:

TIE-IN ARRANGEMENTS

It includes any agreement requiring a purchaser of goods, as a condition of such purchase, to

purchase some other goods. This is an arrangement by which a seller agrees to sell a product
known as the tying item only on the condition that buyer agrees to buy a second product
known as the tied product from the seller. Such arrangements not only reduce or eliminate the
competition completely but also remove buyer’s resistance to the tied product. This practice
is often resorted to by enterprises to use the popularity of a product to promote the sale of less
popular product.25

One of the allegations against Microsoft in the anti – trust case against it was that it used its
dominance in personal computer operating systems to push the sale of its other products,
specifically its internet browser and media player systems.26

EXCLUSIVE SUPPLY AGREEMENTS

It includes any agreement restricting in any manner the purchase in the course of his trade
from acquiring or otherwise dealing in any goods other than those of the seller or any other
person. In Jindal Steel v. SAIL27, an exclusive supply agreement through a memorandum of
understanding (MOU), was entered into between Indian Railways and Steel Authority of
India (SAIL) to supply rails on a continuous basis. Jindal Steel and Power Limited alleged
that the

25
Supra Note 1 at Pg. 509
26
United States v. Microsoft Corporation; 258 F. 3D 34(DC Cir, 2001)
27
Case No. 11/2009
said MOU resulted in foreclosure of the relevant market for it. It was held that the MOU was
not hit by Sec. 3(4) and hence, not anti-competitive.

EXCLUSIVE DISTRIBUTION AGREEMENT

It includes any agreement to limit, restrict or withhold the output or supply of any goods or
allocate any area or market for the disposal or sale of the goods. The main feature of such
agreements is that the manufacturer or supplier agrees to supply certain goods for resale to
only one party, the exclusive distributor within a defined territory and no other party will be
supplied with the goods within that area by the supplier.

REFUSAL TO DEAL

It includes any agreement which restricts, or is likely to restrict, by any method the persons or
classes of persons to whom goods are sold or from whom goods are bought. It is a sort of
boycott. Refusal to buy or sell by a mutual agreement with an intention to restrict competition
is illegal. The Act, however, does not empower the authority to decide on behalf of any of the
parties whether they should enter into any particular agreement or not. To deal or not to deal
is the freedom of the enterprise and they can choose not to deal with any specific firm or
person. But where such refusal to deal falls within the definition of the Act, the behavior of
the enterprises is said to be anti-competitive.

In Kapoor Glass Pvt. Ltd. v Schott Glass India Pvt. Ltd. 28, Kapoor Glass, a family-owned
firm engaged in the business of glass ampoules alleged that Schott Glass India Pvt. Ltd
abused its position in the industry by imposing unfair and discriminatory conditions on the
purchase of goods related to glass tubes in India, thereby violating the provisions of the
Competition Act. Kapoor Glass alleged that Schott India, through joint ventures and
acquisitions, became a major player in the borosilicate glass tubes business in India. Schott
India then drove out competitors, including Kapoor Glass, by selling borosilicate glass tubes
at very low prices, it alleged. Schott India went on to not only control the prices of
borosilicate glass tubes but also to give loyalty discounts to other ampoule manufacturers and
even poach Kapoor Glass' employees, thereby
28
4240 Appeal No. 92/2012
bringing the latter's glass ampoules production to a halt, it was alleged. The Commission
decided to impose penalty on opposing party for its act of distorting competition in the
market.

RESALE PRICE MAINTENANCE AGREEMENT

It includes any agreement to sell goods on condition that the prices to be charged on the
resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated
that prices lower than those prices may be charged. It is a form of price fixing.

RULE OF REASON

Vertical agreements are subject the rule of reason and not the “shall presume” rule. Vertical
agreements in contravention of subsection 1 of section 3 cause or are likely to cause an
appreciable adverse effect on competition in India. This softer treatment acknowledges that
vertical agreements can have beneficial aspects as well, and these need to be weighed against
the harmful effects to see if the agreement is on balance anti-competitive. Under the per se
rule the action, without consideration for circumstances, is illegal. Under the rule of reason,
the circumstances under which the action was committed is to be considered.

It may be noted here that all the five concepts are carried forward in Competition Act, 2002
from its predecessor i.e. Monopolies and Restrictive Trade Practices Act, 1969. However, the
major difference is that under Monopolies and Restrictive Trade Practices Act, 1969, the
practices were categorized us 'Restrictive Trade Practices' and any enterprise indulging in
such practices was subjected to actions under Monopolies and Restrictive Trade Practices
Act, 1969, whereas under Competition Act, 2002 such practices will fall under the
prohibitory legal framework only when they cause or likely to cause appreciable adverse
effect on competition.29
29
Supra Note 4
 MARKET AND ANTI – COMPETITIVE AGREEMENTS

On March 7, 2017 the Supreme Court of India delivered an important judgment in

Competition Commission of India v. Co-ordination Committee of Artists and Technicians
of W. B. Film and Television and Ors.30 Over the years, CCI has consistently held that a
relevant market need not be defined for analysis under section 3. This view now stands
changed in light of SC's observation to determine the relevant market in which competition is
affected, even for examining the existence of an anti-competitive agreement. 31

A TV serial “Mahabharata” was produced in Hindi language, by M/S BRTV Mumbai, who
further entrusted sole rights to dub, it in Bengali language. M/S Hart Video (HV) was
appointed to do the same task and so was done. An agreement with the owners of 2 TV
Channels was executed in order to telecast the dubbed version in the state of West Bengal.
The association of producers “Eastern India Motion Picture Association” (EIMPA) and
Artists/Technicians “Committee of Artists and Technicians of West Bengal Film and
Investors” (Coordination Committee), raised objections to the telecast of the same by the way
of separate letters, almost containing the same concerns that entry of programs originally
made in other languages, in the
W. Bengal industry would hamper the production of local programs and serials in Bengali
language and thereby would adversely affect the job of local producers and artists.

CCI, on the information received realized the existence of a prima facie case and therefore
directed the Director General (DG) to investigate upon the alleged facts, which were found to
be correct and relevant market was determined by him as “Film and Television industry of
W. Bengal”. The CCI observed that the associations have been indulging in the activities
relating to the production, distribution and exhibitions of the films. And, therefore, the said
associations definitely fall within the ambit of “association of enterprises” as used under the
Act. Further, it was held by the CCI that it’s proved that the associations were engaged in
similar business as that of the producer of original “Mahabharat” i.e. both the parties working
at horizontal level, hence the action of the association attract the element of “Anti-
Competitive Agreement” as specifically given under Section 3(3), since the associations by
causing restriction on the telecast dubbed serial, was limiting or controlling the production,
supply of the serial in the market of “Film and Television industry of W. Bengal”.

30
AIR 2017 SC 1449
31
https://www.mondaq.com/india/Anti-trustCompetition-Law/642268/Anti-competitive-Agreement-The-
Magnified- Burden-Of-Proof; visited on June 2, 2021
An appeal was filed in COMPAT against the findings of CCI by the coordination committee
only, wherein it set aside the order of the majority view of the commission. It held that the
relevant market is not the one as held by the CCI but would be “Broadcast of TV Serial”.
And coordination committee which comprised of the artists and technicians is therefore not
on the same line of business as that of informant i.e. no horizontal business existed and hence
the question of competition between them under Section 3(3) does not arise.

The Supreme Court setting aside the order of the COMPAT, upheld the order of the CCI. It
discussed the concept of relevant market. In present case, the court held, the investigated
activities of the association surely caused the adverse effect since, the channels telecasting the
same almost succumbed to the threats of the association and the fact that the entry of dubbed
serial would pose the threat to the local producers and artists and enhance the competition in
the State of West Bengal itself is sufficient to conclude the “Film and Television industry of
W. Bengal” as relevant market. Therefore, the one held by COMPAT was very narrow.

It is possible that the effect of this ruling is likely to place a burden on the CCI to define
relevant market for investigations under section 3, especially when the express language of
the statute is silent.32

32 Id
 APPRECIABLE ADVERSE EFFECT

Section 3 uses the term ‘Appreciable adverse effects on Competition’ (AAEC). Adverse
effect may be said to occur when the agreement harms the competitors. The harm should be
in the consumer welfare sense of economics i.e. effect on prices or output. The word
‘appreciable’ is also too fluid and vague. Overall lot of scope has been left by the law that
gives way to subjective approach and multiple interpretations. While determining whether an
agreement has an appreciable adverse impact on competition or not, the Competition
Commission of India- the nodal agency, established under the Act has to look into the
following factors prior to arriving at its conclusion as per section 19(3):

• Creation of barriers to new entrants in the market

• Driving existing competitors out of the market

• Foreclosure of competition by hindering entry into the market

• Accrual of benefits to consumers

• Improvements in production or distribution of goods or provision of services

• Promotion of technical, scientific and economic development by means of production or

distribution of goods

The first three factors pertain to negative effects on competition while the remaining three
relate to beneficial or positive effects. Thus, in analyzing whether an agreement has an
appreciable adverse effect on competition, both the harmful and beneficial effects as
envisaged in section 19(3) of the Competition Act, 2002 are to be considered.33

‘Barriers to new entrants’ can be created through an agreement among existing players to
set unconscionably high standards. ‘Pushing existing competitors out of the market’ could
happen, if an enterprise enters into an exclusive supply agreement with distributors by
compelling the later to cease their trade with other suppliers. ‘Competition may be
foreclosed’ when an enterprise enters into a long term agreement with a supplier of raw
material or components by imposing a condition that no supply of raw material should be
made to anyone except with the explicit assent of the enterprise.

33
Supra Note 27
‘Accrual to consumers’ may be in the form of lower prices, enhanced quality, effective after
sales service, efficiency in delivery of services, affording safety to consumers etc.
‘Promotion of technical, scientific and economic developmental’ may emanate from
agreements related to research and development etc.

In Tata-Engineering (Telco) v. Registrar of Restrictive Trade Agreement 34 "the TELCO had

agreement with its dealers. Some of the clauses in the said agreement were (I) Dealer will not
directly sell the TATA trucks outside the territory assigned to him. (2) Dealer will maintain
organization for sale and service within his territory to the satisfaction of TELCO. TELCO
stated that they had to ensure equitable distribution of trucks so that the trucks reach even
remote places like Nagaland etc. Otherwise, the trucks will be concentrated in large micro-
centers only, where demand is heavy. Prompt end efficient after sales service is vital for the
truck users. Further, the dealer would not be able to maintain those facilities if he is not sure
of business from that area.

Hon’ble Supreme Court accepted these contentions and declared that restrictions imposed by
TELCO do not amount to restrictive trade practice. It was held that the restrictions ensure
equitable distribution of vehicles and efficient after-sales service to consumers and therefore,
they are construed as reasonable in nature.

34
(1977)2 SCC 55
 EXCLUSIONS UNDER SECTION 3(5)

Section 3(5) provide exemption to the general rule. The prohibition does not apply to
“reasonable” conditions in agreements that aim to protect certain intellectual property rights
(for instance patents, copyrights and trademarks). The competition law recognizes the value
of IPR’s as an incentive to creativity and economic growth. However, the restrictions must be
reasonable and necessary to protect the IPR. Similarly, agreements relating to the export of
goods are unimpeachable under the Indian Act on competition. The right of any person to
export goods from India to the extent to which the agreement relates exclusively to the
production, supply, distribution or control of goods or provision of services for such export is
protected.

Hence, even if any agreement falls within the prescribed definition of vertical restraint, it
would not be anti-competitive, if it is hit by any of the exceptions.

Export exemption is presumably on the ground that such anti-competitive agreements harm
only overseas consumer and are therefore of no concern to the national authorities. The
further argument could be to support the export efforts of domestic companies and thereby
increase national export earnings. However, the exemption is not intended to cover the effect
that the agreement might have in the domestic market.35

35
Supra Note 1 at Pg. 512
 CONCLUSION

Thus, because all the businesses thrive on intense competition and dynamic of market
environment, prohibiting anti-competitive agreements is necessary. The paradigmatic
structure of regulation of anti-competitive practices in India is ingrained under Section 3 of
the Act. The term anti-competitive agreements as such has not been defined by the Act.

Section 3 prescribes certain practices which will be anti-competitive and the Act has also
provided a wide definition of “agreement” under section 2(b). There is rarely direct evidence
of action in concert and the panel must draw upon its experience and common sense to
determine whether those involved in any dealings have some form of understanding and are
acting in cooperation with each other.

Section 3(1) of the Act, 2002 enumerates a general prohibition i.e. it prohibits agreements
which restrict the production, supply, distribution, storage, acquisition or control of goods or
provision of services, which causes or are likely to cause an appreciable adverse effect on
competition within India. Further Section 3(2) provides that any agreement in contravention
of this provision shall be void.

A scan of sections 3(3) and 3(4) will demonstrate that they invariably make a distinction
between “Horizontal” and "Vertical” agreements between firms. The framework of analysis
for determining whether an agreement has an AAEC is different for hard core “horizontal”
agreements. The Act states explicitly that egregious horizontal agreements – i.e., price-fixing,
output restrictions, market-sharing, bid – rigging – are presumed to give rise to an AAEC.
This approach is similar, but is not necessarily identical, to the per se rule in the US law.
Cartel is also a horizontal agreement. Cartels have been described as ‘cancers on the open
market economy’ and ‘the supreme evil of anti – trust’.

The term vertical agreement has not been used in the Act as such. Section 3(4) of the Act,
however, provides for certain types of anti-competitive agreement between or amongst firms
at different stages or levels of the supply chain of any product or service. Vertical agreements
are subject the rule of reason and not the ‘shall presume’ rule. Vertical agreements in
contravention of subsection 1 of section 3 cause or are likely to cause an appreciable adverse
effect on competition in India. This softer treatment acknowledges that vertical agreements
can have beneficial aspects as well, and these need to be weighed against the harmful effects
to see if the agreement is on balance anti-competitive. CCI has consistently held that a
relevant market need not be defined for analysis under Section 3. This view now stands
changed in light of SC's
observation to determine the relevant market in which competition is affected, even for
examining the existence of an anti-competitive agreement.

Section 3 uses the term ‘Appreciable Adverse Effects on Competition’ (AAEC). Adverse
effect may be said to occur when the agreement harms the competitors. The harm should be
in the consumer welfare sense of economics i.e. effect on prices or output. The word
‘appreciable’ is also too fluid and vague. While determining whether an agreement has an
appreciable adverse impact on competition or not, the Competition Commission of India- the
nodal agency, established under the Act has to look into the following factors prior to arriving
at its conclusion as per section 19(3).

Section 3(5) provide exemption to the general rule. The prohibition does not apply to
“reasonable” conditions in agreements that aim to protect certain intellectual property rights
(for instance, patents, copyrights and trademarks). Similarly, agreements relating to the
export of goods are unimpeachable under the Indian Act on competition.
 BIBLIOGRAPGHY

ACTS

1. The Competition Act, 2002

2. The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969

NEWSLETTER AND RESEARCH PAPER

1. The Quarterly Newsletter of Competition Commission of India (CCI), FAIR PLAY;

VOLUME 26: JULY - SEPTEMBER 2018. available at:
https://www.cci.gov.in/sites/default/files/Newsletter_document/Fairplay-July-
September-2018.pdf.
2. Nomani, Md. Zafar & Rahman, Faizanur. (2013). Regulation of Anti-Competitive
Practices and Trade Secret Laws under Competition Legislation of India: A
Paradigmatic Analysis. 2. 96-110.

BOOKS

1. Chatterji, Souvik; Competition Law in India; Allahabad Law Agency; New Delhi;
2017
2. Dhall, Vinod; Competition Law Today; Oxford University Press; New Delhi; 2007

WEBSITES

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competitive- Agreement-The-Magnified-Burden-Of-Proof; visited on June 10, 2021
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artists-and-technicians-of-west-bengal-film-and-television-and-others/; visited on
June 10, 2021
3. https://shodhganga.inflibnet.ac.in/bitstream/10603/100395/12/12_chapter
%204.pdf; visited on June 10, 2021
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2021