MODULE 1 – INTODUCTION

BASIC CONCEPTS

https://blog.ipleaders.in/competition-law-in-india-2/
#Evolution_and_development_of_Competition_Act

DEFINITION
Competition law is the field of law that promotes or seeks to maintain
market competition by regulating anti-competitive conduct by
companies.
Competition law is implemented through public and private
enforcement. It is also known as antitrust law (or just antitrust), anti-
monopoly law, and trade practices law; the act of pushing for antitrust
measures or attacking monopolistic companies (known as trusts) is
commonly known as trust busting.

MARKET DEMAND AND SUPPLY THEORY

The law of supply and demand describes how the relationship

between supply and demand affects prices. If a supplier wants more
money than the customer is willing to pay, items will most likely stay
on the shelf. If the price is set too low, customers will be eager to buy
the items, but each item will be less profitable. The law of supply and
demand is based on the interaction between two separate economic
laws: the law of supply and the law of demand. Here's how they work.

ECONOMIC AND LEGAL CONCEPTS OF COMPETITION

ECONOMIC: Today the economic market has an inflow of goods and
services and with that the need for competition law to protect the
rights of the consumer and ensure freedom of trade has become the
need of the hour. Competition Law simply put protects the rights of
the consumers and enterprising entrepreneurs.

LEGAL: Competition Law is codification of rules designed to

promote and sustain market competition. Across the globe, these laws
are prevalent with active enforcement & advocacy functions. Today,
over 100 countries have competition law regimes and competition law
enforcement agencies.

MARKETS AND MARKET STRUCTURE

Market structure, in economics, refers to how different industries are

classified and differentiated based on their degree and nature of
competition for goods and services. It is based on the characteristics
that influence the behavior and outcomes of companies working in a
specific market.

TYPES OF MARKET STRUCTURE

1. PERFECT COMPETITION
Perfect competition occurs when there is a large number of small
companies competing against each other. They sell similar products
(homogeneous), lack price influence over the commodities, and are
free to enter or exit the market.
Consumers in this type of market have full knowledge of the goods
being sold. They are aware of the prices charged on them and the
product branding. In the real world, the pure form of this type of
market structure rarely exists. However, it is useful when comparing
companies with similar features. This market is unrealistic as it faces
some significant criticisms described below.

 No incentive for innovation: In the real world, if competition

exists and a company holds a dominant market share, there is a
tendency to increase innovation to beat the competitors and
maintain the status quo. However, in a perfectly competitive
market, the profit margin is fixed, and sellers cannot increase
prices, or they will lose their customers.
 There are very few barriers to entry: Any company can enter the
market and start selling the product. Therefore, incumbents must
stay proactive to maintain market share.

2. MONOPOLISTIC COMPETITION
Monopolistic competition refers to an imperfectly competitive market
with the traits of both the monopoly and competitive market. Sellers
compete among themselves and can differentiate their goods in terms
of quality and branding to look different. In this type of competition,
sellers consider the price charged by their competitors and ignore the
impact of their own prices on their competition.

When comparing monopolistic competition in the short term and long

term, there are two distinct aspects that are observed. In the short
term, the monopolistic company maximizes its profits and enjoys all
the benefits as a monopoly.
The company initially produces many products as the demand is high.
Therefore, its Marginal Revenue (MR) corresponds to its Marginal
Cost (MC). However, MR diminishes over time as new companies
enter the market with differentiated products affecting demand,
leading to less profit.
3. OLIGOPOLY
An oligopoly market consists of a small number of large companies
that sell differentiated or identical products. Since there are few
players in the market, their competitive strategies are dependent on
each other.

For example, if one of the actors decides to reduce the price of its
products, the action will trigger other actors to lower their prices, too.
On the other hand, a price increase may influence others not to take
any action in the anticipation consumers will opt for their products.
Therefore, strategic planning by these types of players is a must.

In a situation where companies mutually compete, they may create

agreements to share the market by restricting production, leading to
supernormal profits. This holds if either party honors the Nash
equilibrium state and neither is tempted to engage in the prisoner’s
dilemma. In such an agreement, they work like monopolies. The
collusion is referred to as cartels.

4. MONOPOLY
In a monopoly market, a single company represents the whole
industry. It has no competitor, and it is the sole seller of products in
the entire market. This type of market is characterized by factors such
as the sole claim to ownership of resources, patent and copyright,
licenses issued by the government, or high initial setup costs.
All the above characteristics associated with monopoly restrict other
companies from entering the market. The company, therefore, remains
a single seller because it has the power to control the market and set
prices for its goods.
COMPETITION THEORY
.
This model assumes that new firms can freely enter markets and
compete with existing firms, or to use legal language, there are no
barriers to entry. By this term economists mean something very
specific, that competitive free markets deliver allocative, productive
and dynamic efficiency.

PERFECT COMPETITION VS MONOPOLY

The number and types of firms operating in an industry and the nature
and degree of competition in the market for the goods and services is
known as Market Structure

PERFECT COMPETITION
A market situation where a large number of buyers and sellers deal in
a homogeneous product at a fixed price set by the market is known
as Perfect Competition. Homogeneous goods are goods of similar
shape, size, quality, etc. In other words, in a perfectly competitive
market, the sellers sell homogeneous products at a fixed price
determined by the industry and not by a single firm. In the real world,
the situation of perfect competition does not exist; however, the
closest example of a perfect competition market is agricultural goods
sold by farmers. Goods like wheat, sugarcane, etc., are homogeneous
in nature and their price is influenced by the market.
MONOPOLISTIC COMPETITION
A Monopolistic Competition Market consists of the features of both
Perfect Competition and a Monopoly Market. A market situation in
which there is a large number of firms selling closely related products
that can be differentiated is known as Monopolistic
Competition. The products of monopolistic competition include
toothpaste, shampoo, soap, etc. For example, the market for soap
enjoys full competition from different brands and has freedom of
entry showing the features of a perfect competition market. However,
every soap has its own different features, which allows the firms to
charge a different price for them. It shows the features of a Monopoly
Market.

DIFFERENCE BETWEEN PERFECT COMPETITION AND

MONOPOLISTIC COMPETITION

PERFECT MONOPOLISTIC
BASIS COMPETITION COMPETITION

It is a market situation
It is a market situation
where a large number
in which there is a
of buyers and sellers
large number of firms
MEANING deal in a
selling closely related
homogeneous product
products that can be
at a fixed price set by
differentiated.
the market.

NUMBER OF This market has a very This market has a large

SELLERS large number of number of sellers.
 PERFECT MONOPOLISTIC
BASIS COMPETITION COMPETITION

sellers.

This market has This market has closely

NUMBER OF
homogeneous related but
PRODUCT
products. differentiated products.

ENTRY AND There is freedom of There is freedom of

EXIT OF entry and exit in this entry and exit in this
FIRMS market. market.

This market is more

This market has a
DEMAND elastic but has a
perfectly elastic
CURVE downward-sloping
demand curve.
demand curve.

As each of the firms The firms have partial

in this market is a control over the price
PRICE
price-taker, the price because of product
is uniform. differentiation.

In this market, no In this market, high

SELLING
selling costs are selling costs are
COSTS
incurred. incurred.

LEVEL OF There is perfect There is imperfect

KNOWLEDGE knowledge of market. knowledge of market.
RELATION BETWENN C. POLICY AND C.LAW

The competition act which was introduced in the year 2002 was
amended by the competition amendment act in 2007 which mainly
deals with the philosophy of modern competition laws. The act helps
to prevent the anti-competitive agreements and abuse of dominant
position by large companies. This act also regulates the combinations
of acquisition and acquiring of control which causes an appreciable
adverse effect on competition within the country.

OBJECTIVES

 The Competition Act of 2002 is a piece of legislation that aims

to defend consumer interests from anti-competitive behaviour,
foster and sustain market competition, safeguard consumer
interests, and guarantee other market participants’ freedom of
trade. The Monopolies and Restrictive Trade Practices Act, 1969
(MRTP Act), which formerly applied only to India, has been
replaced by the new law.

 The three foundational pieces of competition legislation upon

which the Competition Act has been built are the National
Competition Policy (NCP), the Competition Appellate Tribunal,
and the Competition Commission of India (CCI).

 The major reason for passing this legislation is to make sure that
market competition operates as intended and that customers
have access to a broader variety of goods at reasonable costs.
CONSTITUTIONAL ASPECTS

https://www.slideshare.net/Achalaggarwal3/constitutional-aspect-of-
comp-law

ARTICLE 39(B)(C)

Under the Indian Constitution, the concentration of wealth violates

the Directive Principles of State Policy.
Article 39(c) of the DPSP states that “the operation of the economic
system does not result in the concentration of wealth and means of
production to the common detriment”.
The concentration of wealth in the hands of the richest has aggravated
the rich-poor gap and inequality in India.
Directive Principles of State policy

MODULE 2 – EVOLUTION OF COMPETITION LAW

SOURCES OF COMPETITION LAW

Competition law, also known as antitrust law in some jurisdictions, is

a legal framework designed to promote fair competition and prevent
anti-competitive practices in the marketplace. The sources of
competition law can vary by jurisdiction, but they generally include a
combination of statutes, regulations, and judicial decisions. Here are
the primary sources of competition law:

1. Statutes and Legislation:

Antitrust Laws: Many countries have specific antitrust laws that form
the backbone of their competition law. Examples include the Sherman
Act and the Clayton Act in the United States, the Competition Act in
the United Kingdom, and the Competition Act in Canada.
Competition Codes: Some jurisdictions have comprehensive
competition codes that consolidate various provisions related to
competition law in a single piece of legislation. For example, the
European Union has the Treaty on the Functioning of the European
Union (TFEU), which includes competition rules.

2. Regulatory Agencies:

Antitrust Authorities: Regulatory bodies, often referred to as antitrust

or competition authorities, are responsible for enforcing competition
laws. Examples include the Federal Trade Commission (FTC) and the
Antitrust Division of the U.S. Department of Justice in the United
States, the European Commission in the European Union, and the
Competition and Markets Authority (CMA) in the United Kingdom.

3. International Agreements:

International Organizations: Organizations like the United Nations

Conference on Trade and Development (UNCTAD) and the
Organisation for Economic Co-operation and Development (OECD)
contribute to the development of international principles and
guidelines related to competition law.
Trade Agreements: Some regional and international trade agreements
incorporate competition law provisions. For instance, trade
agreements negotiated between countries or regions may include
commitments to maintain fair competition.

4. Case Law and Judicial Decisions:

Court Decisions: Judicial decisions play a crucial role in shaping and

interpreting competition law. Courts at various levels issue rulings
that establish legal precedents and clarify the application of
competition law principles.
Common Law Principles: In jurisdictions with a common law legal
system, competition law principles may be derived from the common
law doctrine of restraint of trade and other related legal concepts.

5. Guidelines and Policies:

Competition Guidelines: Antitrust authorities often issue guidelines

and policies to provide clarity on the application of competition laws.
These documents offer insights into the authorities' interpretation of
the law and their approach to specific issues.
Merger Guidelines: Many jurisdictions have guidelines specifically
addressing mergers and acquisitions to ensure that they do not
substantially lessen competition.

6. Legislative Amendments:
Updates and Amendments: Competition laws are subject to periodic
updates and amendments to address emerging issues and trends in the
marketplace. Legislative bodies may enact changes to enhance the
effectiveness of competition regulation.
Understanding the interplay between these various sources is essential
for practitioners, businesses, and policymakers involved in the field of
competition law. The specific sources and their relative importance
can vary significantly from one jurisdiction to another.

COMMON LAW DOCTRINE OF RESTRAINT OF TRADE

The common law doctrine of restraint of trade is a legal concept that

has evolved over centuries and is closely associated with competition
law. It refers to agreements or practices that restrict or impede free
competition in the marketplace. The doctrine is aimed at preventing
actions that might unduly limit trade, competition, and economic
activity.

Key elements of the common law doctrine of restraint of trade

include:

1. Agreements in Restraint of Trade: Contracts or agreements that

include clauses restricting trade are generally viewed with
suspicion. Such clauses may involve non-compete agreements,
exclusive dealing arrangements, and other provisions that limit a
party's ability to engage in competitive activities.

2. Reasonableness Test: Courts often apply a reasonableness test to

determine the legality of a restraint of trade clause. If the
restriction is deemed reasonable in scope, duration, and
 geographic extent, it may be deemed valid. However, if the
restriction is deemed overly broad or unfair, it may be
considered unenforceable.

3. Public Interest Considerations: Courts also consider the broader

public interest in maintaining competition and preventing
monopolies or anti-competitive behavior. If an agreement is
found to be contrary to the public interest, it may be declared
unenforceable.

4. Trade Secrets and Confidential Information: The protection of

legitimate business interests, such as trade secrets and
confidential information, may be considered reasonable grounds
for imposing certain restraints. However, the protection must be
proportionate and not go beyond what is necessary for
safeguarding these interests.

5. Effect on Competition: Courts assess the impact of a restraint of

trade on competition. If an agreement is found to significantly
undermine competition, it may be invalidated.

6. Evolution with Statutory Law: While the common law doctrine

of restraint of trade provides a foundational framework, it has
evolved alongside statutory competition laws. Many
jurisdictions have enacted specific antitrust or competition laws
that address various forms of anti-competitive behavior, and
these laws often work in conjunction with the common law
doctrine.

It's important to note that the specifics of the doctrine can vary across
jurisdictions, and legal standards may change over time through court
decisions and legislative actions. In modern times, competition law
has become more codified, with statutes providing specific guidelines
for permissible and impermissible conduct in the marketplace.

ANTI TRUST LEGISLATIONS

In India, the primary legislation governing competition and antitrust

matters is the Competition Act, 2002. The act was enacted to prevent
practices that have an adverse effect on competition, to promote and
sustain competition in markets, to protect the interests of consumers,
and to ensure freedom of trade carried on by other participants in the
markets. The key components of the Competition Act, 2002, include:

1. Competition Act, 2002:

The Competition Act is the principal legislation dealing with antitrust

matters in India. It comprises four substantive sections, each focusing
on different aspects of competition law:
 Anti-Competitive Agreements (Section 3): Prohibits agreements
that cause or are likely to cause an appreciable adverse effect on
competition in India. This includes agreements related to price
fixing, bid rigging, market sharing, and limiting production or
supply.
 Abuse of Dominant Position (Section 4): Prevents entities with a
dominant position in the market from abusing their dominance
by imposing unfair or discriminatory conditions, limiting
production, or engaging in practices that stifle competition.
 Combinations (Section 5 and Section 6): Regulates mergers,
acquisitions, and amalgamations that may have an adverse effect
on competition in India. It requires the approval of the
 Competition Commission of India (CCI) for certain types of
combinations.
 Regulation of Combinations (Combination Regulations, 2011):
Provides detailed procedures and criteria for notifying and
assessing combinations under the Competition Act.

2. Competition Commission of India (CCI):

The Competition Commission of India (CCI) is the regulatory

authority responsible for enforcing the provisions of the Competition
Act. It investigates and takes action against anti-competitive practices,
abuse of dominance, and regulates combinations.

3. Orders and Regulations:

The CCI has the authority to issue orders and regulations to provide
further details and guidance on the implementation of the Competition
Act.

4. Amendments and Updates:

The Competition Act has been amended over the years to address
emerging issues and improve the effectiveness of competition
regulation in India.
The Competition Act, along with the regulations and guidelines issued
by the CCI, plays a crucial role in shaping and regulating competition
in the Indian market. It covers a wide range of antitrust issues, and the
CCI actively investigates complaints, conducts market studies, and
issues orders to address anticompetitive behavior. It is important for
businesses operating in India to be aware of the provisions of the
Competition Act to ensure compliance and to understand the
implications of their business practices on competition in the market.

DISTINCTION BETWEEN MRTP AND COMPETITION ACT

MRTP ACT (MONOPOLIES COMPETITION ACT, 2002

AND RESTRICTIVE TRADE
PRACTICES ACT)
The MRTP Act is a legislation that The Competition Act, 2002 is a
was established in 1969 with the legislation that was established in
primary objective of curbing 2002 with the primary objective of
monopolistic practices and promoting and protecting competition
promoting competition in the in the Indian market.
Indian market.
The MRTP Act is regulated by the The Competition Act, 2002 is
Ministry of Corporate Affairs. regulated by the Competition
Commission of India (CCI).
The MRTP Act has provisions for The Competition Act, 2002 has
the regulation of monopolies and provisions for the prevention of anti-
the prevention of restrictive trade competitive agreements, the
practices. regulation of combinations (mergers
and acquisitions), and the prevention
of abuse of dominant position.
Penalties for non-compliance Penalties for non-compliance under
under the MRTP Act include fines the Competition Act, 2002 include
and imprisonment. fines and penalties for individuals and
companies.
The MRTP Act is not applicable to The Competition Act, 2002 applies to
certain sectors like agriculture, all sectors of the economy.
small-scale industries and
services.
The MRTP Act does not have The Competition Act, 2002 has
provision for leniency policy. provision for leniency policy.
The MRTP Act does not have The Competition Act, 2002 has
provision for settlement of cases. provision for settlement of cases.

MODULE 3 – ANTI - COMPETITIVE AGREEMENT

AGREEMENT DEFINITION

Section 2(b) of the Competition Act, 2002 gives us the definition of

agreement. It says that an agreement includes any arrangement,
understanding or concerted action entered between parties. It may or
may not be in writing.

Anti-competitive agreements are agreements among competitors to

prevent, restrict or distort competition. Section 3 of the Competition
Act,2002 prohibits agreements, decisions and practices that are anti-
competitive.
Anti-competitive agreements under competition law are broadly
classified into two categories, the Anti-competitive Horizontal
Agreement and Anti-competitive Vertical Agreement.

RULES OF DETERMINING APPRECIABLE ADVERSE

EFFECT ON COMPETITION (AAEC)
DEFINITION:
"Appreciable Adverse Effect on Competition" refers to a substantial
negative impact on the competition within a particular market or
industry. It occurs when anti-competitive behavior or agreements
significantly reduce competition, leading to adverse effects on market.

The Competition Act provides a framework for assessing whether a

particular practice or agreement has an appreciable adverse effect on
competition. The Competition Commission of India (CCI) plays a
crucial role in evaluating and determining such effects based on
factors like market concentration, market entry barriers, market shares
of competitors, and the effect on consumer welfare.

APPRECIABLE ADVERSE EFFECT ON COMPETITION (AAEC):

When some practices restrict competition in market, they are said to

have AAEC. There can be AAEC in 3 ways:

 Anti-competitive agreement
 Abuse of dominance
 Combinations

1. Anti-competitive agreement

(i) No one shall enter into any agreement in respect of production,

supply, distribution, storage, acquisition or control of goods or
provision of services, which causes or is likely to cause AAEC. The
Competition Commission of India (CCI) determines AAEC on the
following factors:
  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 the consumers
 Improvements in production or distribution of goods or services.

(ii) Any agreement entered into in contravention of the provisions

contained in sub-section (1) shall be void.

(iii) Agreements entered by enterprises involved in identical business

including cartels which:
 Determines purchase or sale prices;
 Limits or controls production, supply, markets, technical
development, investment or provision of services;
 Shares the market or source of production or provision of
services by way of allocation of geographical area of market, or
type of goods or services, or number of customers in the market
or any other similar way;
 Results in bid rigging or collusive bidding
(iv) Vertical and Horizontal agreements
Vertical agreements occur between persons at different levels of
production (producer, distributor, seller etc) while horizontal
agreements occur between persons at same level of production (seller-
seller, producer-producer etc) and are classified into:
 Tie-in arrangements: agreement imposing on purchaser of
goods, as a result of such purchase, to purchase some other
goods. (e.g. Microsoft required purchasers to buy all MS Office
products with Windows; this was held anti-competitive U.S.
courts).
  Exclusive supply agreement: agreements restricting purchaser
from acquiring or otherwise dealing in goods other than those of
the particular seller.
 Exclusive distribution agreement: agreements to limit, restrict or
withhold the output or supply of goods or allocating market for
sale of goods.
 Refusal to deal: agreements restricting by any method the
persons to whom goods are sold or from whom goods are
bought.
 Resale price maintenance: agreements 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 otherwise clearly
stated.
There are some agreements which are considered anti-competitive
perse like bid rigging, cartels etc. while other agreements are
determined to be anti-competitive on the basis of facts and
circumstances of each case.

2. Abuse of Dominance
When an industry grows to such an extent that it practically rules out
all other competitors in the market and acquires complete control over
the market and consumers it is said to have acquired dominance.
When it uses position of strength, in the relevant market to:

 Operate independently of competitive forces prevailing in the

relevant market,
 Affect its competitors or consumers or the relevant market in its
favor, it is said to have abused its dominant position.

The CCI determines abuse of dominance by enterprise if it:

  Imposes unfair or discriminatory price or condition in purchase
or sale.
 Limits production or scientific development
 Denies market access in any manner.
 Concludes contract subject to supplementary obligations
 Uses position in one relevant market to enter into or protect
other relevant market

Relevant Market is a set of products or services that are considered

substitutes by consumers, both in terms of their characteristics and the
geographic area where they are offered.

A relevant market is where the adverse effects have to be determined.

It is divided into 2 categories:

i. Relevant geographic market (section 2(s) ): Market comprising

the area in which the conditions of competition for supply or
demand of goods or services are distinctly homogenous and can
be distinguished from the conditions prevailing in the
neighboring areas.

It is determined on following factors:

a) Regulatory trade barriers

b) Local requirements
c) Distribution facilities
d) Consumer preferences

ii. Relevant product market (section 2(t) ): Market comprising all

those products or services which are regarded as interchangeable
 or substitutable by the consumer, by reason of characteristics of
the products or services, their prices and intended use.

It is determined on following factors:

a) Physical characteristics or end-use of goods
b) Price of goods or service
c) Consumer preferences
d) Classification of industrial products

In the famous Belaire Owner’s Association v. DLF Ltd case, the

imposition of unfair conditions on payment of sales price and
deposition of maintenance, limitations on filing objections and
claiming timely delivery etc., on the consumers were held abusive of
dominant position.

Predatory Pricing
It means “to sell goods or provision of services, at a price which is
below the cost, as may.…with a view to reduce competition or
eliminate the competitors”. Reliance Jio alleged for predation but
since it did not have dominant position, allegations failed.

3. Combinations
Combination includes merger, amalgamation, and acquisition of
shares and acquiring of control. Enterprises entering into
combinations have to notify the CCI, which has to decide within 90
working days either to permit or deny such combination else
combination is deemed to have been approved.

The CCI checks combinations on following factors:

 a. Likelihood of increase in prices or profit margins
b. Effective competition before and after combination
c. Market share
d. Removal of competitors from market
e. Contribution to economic development

CCI is empowered under the act to issue directions, orders and levy
penalty to ensure fair competition in market.

PERSE RULE AND RULE OF REASON

https://www.legalserviceindia.com/legal/article-5489-rule-of-reason-
v-s-per-se-rule.html

PER SE RULE
Per Se Rule is simply when one person on whom are the offences or
the allegations which pertain to a specific issue is alleged in front of
any Court of Law, such alleged person has the onus to prove that such
allegation is a falsified one. In regular cases, should there be an
allegation filed against a person, the Courts would demand conclusive
evidence to prove and hold the accusation as admitted.

In these cases, the accused person need not prove anything unless
some form of conclusive proof is held against them. Wherein, in the
Per Se Rule, the accused person, from the moment of alleging, the
burden to claim innocence falls on them. This rule will be employed
only in the horizontal agreements as admitted under Section 3(3) of
the Competition Act, 2002. This is also called the Rule of
Presumption as the defendant party must prove that there is no such
arrangements made by them in the first place.

RULE OF REASON
The rule of reason is exactly opposite to the Per Se Rule, that is, the
informant holds the onus of proving the information alleged by them
or any anti-competitive agreement claimed by them. Section 3 (1) of
the act might cause or likely may cause an appreciable adverse effect.

The reason being the application of Rule of Reason where the onus on
the informant to prove the facts, it causes an appreciable adverse
effect, as there is the preponderance of probability as applied by the
Competition Commission of India.

So, in Section 3 (1), Rule of Reason is applied and not Per Se Rule.
Similarly, in Section 3 (4), in the vertical agreements, as there are
different stages or levels or production chain, it may cause an
appreciable adverse effect. Consequently, the Rule of Reason is
applied.

DIFFERENTIATING BETWEEN THE HORIZONTAL AND

VERTICAL AGREEMENTS

There is a fine line difference between the horizontal agreements and

the vertical agreements. If there is an exclusive agreement between
two products that decide to sell together exclusively, will this be
cartel? For example, PVR Cinemas and Coca Cola enter into an
agreement to sell Coca Cola and its associated beverages in PVR
premises. Would this constitute a competition concern as the business
of other similar companies are being restricted or a consumer concern
as the customer's right to choose similar companies' products is being
fettered? The answer to this would be to test the levels of the
comparable market of the two products.
Cinema market is completely irrelevant to the beverage market. One's
presence will not affect the other. So, these different level market
players join hands to present both of their products to form one
experience. So, this qualifies under Section 3 (4) and thus for anybody
claiming against these issues will have the onus to prove the
accusation. This was the case in Shamsher Kataria v. Honda. Thus, the
Rule of Reason is applied.

Similarly, in the case of a provisional store chain like 7-Eleven cannot

agree to sell Coca Cola products alone as his market is to sell general
goods as the consumers wish to purchase and there should be no
restriction felled at that end. Therefore under Section 3 (3), if such
agreements happen and someone becomes an informant, then the
other person holds the onus to prove the accusation wrong, that is, Per
Se Rule is applied.

RELEVANT MARKET

In plain terms, a relevant product market refers to two forms of

interchangeability of the good or service - the first of which is
'demand side substitution,' which establishes a situation where the
market player receives no benefit by a small rise in cost price as the
customer has the choice of substituting the usage of such the good or
service, and the second kind is 'supply side substitution,' that says a
circumstance in which other market players boost the availability of
such the good or service removing the effect of an increase in cost
price. Section 2(t) of the Act defines the 'relevant product market' as a
market that includes all products or services that consumers consider
to be interchangeable or substitutable. This determination is based on
factors such as the characteristics of the products or services, their
prices, and their intended use.

RELEVANT GEOGRAPHIC

To determine a relevant geographic market, it is crucial to consider

the location of buyers and sellers within the market. The geographic
boundaries of the market should encompass an area where all
competitive conditions for the products or services are similar. The
presence of the market can be classified as local, regional, national, or
international, depending on the locations of the buyers and sellers
involved. By understanding the geographic scope of the market, we
can gain insights into the nature and extent of competition within that
specific area. Section 2(s) of the Act defines the relevant geographic
market as a market that includes an area where the competitive
conditions for the supply or demand of goods or services are clearly
similar and distinguishable from the conditions prevailing in
neighboring areas. In other words, it refers to a specific geographic
region where the market conditions for buying and selling goods or
services are noticeably uniform and can be differentiated from the
conditions in nearby areas. This definition helps to determine the
boundaries and extent of the market based on the homogeneity of
competitive factors in a particular geographic area.

RELEVANT PRODUCT MARKET

In plain terms, a relevant product market refers to two forms of

interchangeability of the good or service - the first of which is
'demand side substitution,' which establishes a situation where the
market player receives no benefit by a small rise in cost price as the
customer has the choice of substituting the usage of such the good or
service, and the second kind is 'supply side substitution,' that says a
circumstance in which other market players boost the availability of
such the good or service removing the effect of an increase in cost
price. Section 2(t) of the Act defines the 'relevant product market' as a
market that includes all products or services that consumers consider
to be interchangeable or substitutable. This determination is based on
factors such as the characteristics of the products or services, their
prices, and their intended use.

FACTORS CONSIDERED BY CCI

Refer this for a quick revision in anti-competitive agreement

https://legal-wires.com/lex-o-pedia/study-notes-anti-competitive-
agreements-under-competition-act-2002/

HORIZONTAL AGREEMENTS

Section 3(3) of the Act states that- Any agreement entered into
between enterprises or associations of enterprises or persons or
associations of persons or between any person and enterprise or
practice carried on, or decision taken by, any association of
enterprises or association of persons, including cartels, engaged in
identical or similar trade of goods or provision of services, which—

(a) Directly or indirectly determines purchase or sale prices;

(b) Limits or controls production, supply, markets, technical
development, investment or provision of services;
(c) Shares the market or source of production or provision of services
by way of allocation of geographical area of market, or type of goods
or services, or number of customers in the market or any other similar
way;
(d) Directly or indirectly results in bid rigging or collusive bidding,
shall be presumed to have an appreciable adverse effect on
competition.

There is direct or indirect determination of prices, it is between

competitiors presumed and anti-competitive. Sharing of
• Prices,
• Input costs,
• Price/cost components,
• Profit margins,
• Cost structure and price calculation,

Atypical cartel- also known as HUB and SPOKE- is the exchange of

sensitive information between competition and third party. There is no
direct cartel and they channelize themselves through hub.

Adverse effect on Competition Commission of India-

 Price signalling- wherein there is signal from a cartel to another.

 Oligopoly Market- there is Tacit Collusion, which means price
signalling with the knowledge that competitor, is likely to follow
similar trend.

For instance, exchange of prices between two suppliers through a

common distributor.

Cases of cartel that are considered worst form of anticompetitive

conduct also fall under Section 3(3) of the Act. Direct evidence in the
form of a specific agreement in terms of fixing the prices etc. would
not be available, therefore the authorities rely upon circumstantial and
indirect evidence to come to a conclusion on the existence of an
agreement between parties, In the Cement Cartel Case, the Hon’ble
CCI has held that existence of the agreement can be inferred from the
intention and conduct of the parties ad that the parallel behaviour in
price is indicative of a coordinated behaviour amongst the participants
in the market.

The Hon’ble CCI has identified but for test in the Cement Cartel Case
wherein it held that but for: some anticompetitive conduct between
the parties the action and conduct of the parties cannot be explained.
CCI has also viewed that price parallelism amongst the price of
cement across the country is not reflective of the oligopolistic market
and in light of the fact that the details relating to the cement
companies was facilitated through the association, the price
parallelism was indicative if a co-ordinated behaviour under Section
3(3) of the Act.

California produces 60% of wine in the entire United States, in case

there is bad growth of grapes the State intervene in order to regulate
the price of the same. It is also known as Political Doctrine.

Exchange of other types of information (apart from prices) may also

be problematic, such as:
 Strategic information,
 Business plans,
 Production /sales details,
 Capacity details, and
 Expansion plans.
 Information exchange is especially problematic in oligopolistic
and concentrated markets.
Exchange of sufficiently historic data is unlikely to create
anticompetitive effects. Exchange of genuinely aggregated data, i.e.
where recognition of company level information is difficult, should
not raise concerns.

Noerr–Pennington doctrine, private entities are immune from liability

under the antitrust laws for attempts to influence the passage or
enforcement of laws, even if the laws they advocate for would have
anticompetitive effects. Petitioning is immune from liability even if
there is an improper purpose or motive. The doctrine is grounded in
the First Amendment protection of political speech, and upon
recognition that the antitrust laws, 'tailored as they are for the business
world, are not at all appropriate for application in the political arena.'

There is exception for the same which has been stated under Section
19(3) of the Competition Act:-
The Commission shall, while determining whether an agreement has
an appreciable adverse effect on competition under section 3, have
due regard to all or any of the following factors, namely:

a) Creation of barriers to new entrants in the market;

b) Driving existing competitors out of the market;
c) Foreclosure of competition by hindering entry into the market;
d) Accrual of benefits to consumers;
e) Improvements in production or distribution of goods or
provision of services;
f) Promotion of technical, scientific and economic development by
means of production or distribution of goods or provision of
services.

Certain Key Issues under Horizontal Agreements:

1. Limiting production or supply
All decisions on increase or decrease of production, sales or capacity,
entry into new markets, capacity utilization etc. should be taken
independently. Any agreement/understanding on the above between
competitors may raise concerns. It is best to keep a record of
independent business reasons for any decisions regarding the same.

2. Market sharing
There should not be any formal or informal agreement or
understanding with competitors in relation to sharing of territories /
products. Competitors must not agree not to target each other’s
customers (regardless of the size of these customers).

3. Bid-rigging
Any agreement…which has the effect of eliminating or reducing
competition for bids or adversely affecting or manipulating the
process for bidding. Common forms of bid rigging:

 Bid suppression,
 Complementary bidding,
 Bid rotation,
 Agreements not to bid against each other or squeeze other
bidders,
 Agreements on common terms or pricing formulae.

A.R. Polymers Case- the COMPAT overturned the CCI decision on

the grounds that CCI and the DG failed to give due weightage to the
nature of the market for jungle boots, manner in which the tender is
conducted, and execution of the rate contract to arrive at finding of
bid rigging solely on the grounds of identical pricing.

Factors which may not mitigate liability:

 Success or failure of a cartel.
 Normal practice in the industry.
 Ignorance of the law.
 The agreement /understanding between parties not being in
writing.
 The practice occurring through a trade association.
 Remaining silent in a meeting where an anti-competitive
practice took place.
 Not leading but merely following others in the practice.

VERTICAL AGREEMENTS

Section 3(4) of the Act deals with vertical agreements. In accordance

with Section 3(4), the vertical agreements are entered amongst
Enterprises or Persons at different stages or levels of the production
chain in different markets in relation to production, supply,
distribution, storage, sale or price of or trade in goods or provision of
services.

Production chain at different stages/levels making a vertical

agreement.

In simple words, in order to have a vertical agreement, an agreement

can be entered between raw material supplier and manufacturer;
between manufacturer and wholesaler; between wholesaler and
retailer, since each of them is on the different stages of the production
chain. The agreement can be related to production, supply,
distribution, storage, sale or price of the trade-in goods or provisions
of service.

It is pertinent to note that in circumstances where vertical agreement

contravenes Section 3(1) of the Act, that is, causes or likely to cause
an AAEC on competition shall be prohibited and shall be void.

VERTICAL AGGREEMENT AND REPLE OF MARKET POWER

It is pertinent to note that, unlike horizontal agreements, vertical

agreements do not include a fusion of market power. However, the
vertical agreements impact competition in the market only in the
circumstance of firms inflicting vertical restraint has a high degree of
market power. Also, in such circumstances, competition from other
firms’ products (intra brand competition) is definient. In contrast, in
the circumstance wherein the firm imposing vertical restraint has not
adequate market power or there exists adequate intra-brand
competition, then the prohibition on competition between the
distributors and retailers pertaining to the identical brand may not
impact on competition in the market. Hence, the factor of market
power must be assessed meticulously while determining cases of
vertical agreements.

The vertical agreements are not per se anti-competitive but considered

to be anti-competitive, if these agreements cause or likely to cause
AAEC in India. If vertical agreements are met with factors stipulated
under Section 19(3) of the Act. For instance, these agreements
foreclose the market, limit inter-brand and intrabrand competition in
the relevant market then such vertical agreements are anticompetitive
and void.
TYPES:

 Tie-in arrangement;
 Exclusive supply agreement;
 Exclusive distribution agreement;
 Refusal to deal;
 Resale price maintenance.

Tie-in arrangement
Tie-in arrangements is an agreement wherein a seller sells one
desirable product on a precondition that buyers shall purchase a
second less desirable product or service. The former product shall be
known as a tying product and the latter shall be known as a tied
product. It is not required that the tying product and the tied product
must be identical to each other in characteristics. Not all tie-in

arrangements are illegal and not all illegal tie-in arrangements are per
se illegal. The plaintiff who raises the claim of per se impingement,
has the burden of proof to satisfy the following conditions:

a) The seller has put condition that sale of one product shall be
done on the purchase of the second product by the buyer

b) The two products bear different characteristics and are separate

products. 3. The seller has adequate position in the irrelevant
market for the tying product in pursuance to execute the tie-in.
It is precisely noted, for the factor of offence of tying under the ambit
of the Act, it is vital that the consumer has been coerced into buying
both the tying and tied product that in consequence by virtue of their
characteristics or commercial utilization bear no link with the issue of
main contract.

At some instances the tie-in arrangement and bundling seems to be

alike. However both are technically different.

The competition law concerns that could arise from tying or bundling
in a relevant market are the followings:

1. Likelihood of foreclosure on the market of tied product.

2. High entry barriers in both the market of tying and tied products.

It should be noted that tie-in arrangements can cause “abuse” in view

of Section 4(2)(d) of the Act, that constitutes listing as abuse as well.
Prominently, presence of dominance in the market of tying products is
a requisite factor for determining whether tying is abusive in
competition. Hence, the first and foremost factor in the alleged case of
abusive tying is to erect that the firm possesses a dominant position in
the market of tying products. In addition tie-in arrangement concerns
the competition law since such agreements restrict competitors free
access to the market for the tied product due to the firm imposing
tying conditions has the competence to leverage in another relevant
market. That conclusively is abuse of dominance. Forbye, the
consumers are coerced to renounce their free choices between
competing products. In light of Section 4(2)(d) of the Act does not
mandate factual evidence of foreclosure but it is sufficient to manifest
that tie-in arrangement could create a foreclosure effect on the market.
Exclusivity
Exclusive arrangements mandate a buyer to purchase all of its
essential or a huge part only from one dominant seller or
arrangements which mandate a supplier to sell all of its products or
services or a huge part to a dominant player.

There are two kinds of exclusive agreements, these are:

1. Exclusive distribution agreement- 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

2. Exclusive Supply agreement- includes any agreement restricting

in any manner the purchaser in the course of his trade from
acquiring or otherwise dealing in any goods other than those of
the seller or any other person

The exclusivity aspect may not be always present as a contractual

clause and the same can be manifested from the way of conducting of
parties engaged.

The exclusivity poses a serious concern in circumstances of dominant

enterprises and their suppliers since exclusive supply agreement
entered by dominant enterprise can impulsively lead to foreclosure of
market to competitors. Thus, in circumstances of adequate and
sufficient market power the exclusive agreements can be a source of
abuse of dominance.
The other possible competition concerns with respect to exclusive
agreements are primarily restricted intra-brand competition and
partitioning of market which eventually leads to price discrimination.
Forbye, when a large number of suppliers induce exclusive
distribution, this practice can induce collouison, both at the suppliers
stage and the distributors stage.

However, the exclusive agreements bear pro-competitive effects as

well. For instance, safeguard on investment done by sellers, avoid the
occurrence of free riding from buyers end in circumstance of buyer’s
exclusive agreement and avoid free riding upon investments done
from the buyers end in circumstance of supplier exclusive agreement.
Further, it helps in keeping a good brand image by thrusting
uniformity and quality authentication on distributors.

Refusal to deal
Refusal to deal is a concept wherein one firm denies or refuses to sell
to another firm, desiring to sell only at a price that is recognized to be
excessive pricing or is desiring to sell under conditions that are
implausible. The keypoint of competition uneasiness arises when a
firm has a dominant position and denies or refuses to deal with
another firm and that refusal proves to be detrimental to the
competition and consumers.

1. The refusal to deal can embody in the following conducts, these

are:

2. Refusal to supply a product or service (that are obtainable from

market) to non-competitors
 3. Refusal to supply a product or service (that are obtainable from
market) to competitors 3. Cease supplying to third parties

4. Denial to supply a product or service that has never been

accessible on the market 5. Denial to grant licensing of
Intellectual Property rights

Resale Price Maintenance (RPM)

In accordance with Explanation to Section 3(4) of the Act, the RPM is
defined as, 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. With the mechanism of RPM, a
manufacturer and its distributors consent that distributors shall sell
manufacturers product at price stipulated. In circumstances where the
reseller denies to keep up with the prices, either furtively or openly,
the manufacturer can opt to cease doing business with the reseller.

RPM can be carried through individually or collectively. Under the

ambit of individual RPM, the supplier stipulates the retail prices at
which the products are to resold. Likewise, under the ambit of
collective RPM, suppliers stipulate the retail prices. When RPM is
executed, the price of products are imposed alike regardless of distinct
location, quality and characteristics.

Section 3(4)(e) of the Act does not specify with regard to anti-
competitive aspects of RPM. but, here are two classifications
pertaining to RPM that are recognized as anti-competitive. These are
as follow:
 1. Fixed price: it is a contract where prices are fixed for a product
and no adjustments are allowed unless specified in the contract.
The contract is subjected to negotiations when there are
specifications present in the contract. The contract puts the
contractactor to a potential maximum risk emanating from cost
escalations.

2. Minimum resale price: in this aspect of agreement, a

manufacturer stipulates a minimum price above which the
retailers shall sell the products. The manufacturer in such a
scenario keeps watch on the conduct of retailers in order to
make certain their conduct is in accordance with the condition
imposed on them. In circumstance, it is fetched that retailers are
deviating from pricing below the stipulated price, they are
terminated or subjected to termination.

It is prominent to note that vertical restraints such as RPM can avoid

price competition amongst wholesalers, distributors or dealers which
conclusively impact on consumers adversely. An agreement of RPM
is subject to the rule of reason. Section 3 of the Act mandates that
such agreements should be scrutinized meticulously and if fetched to
be causing or likely to cause AAEC then such an agreement is void.

EXCEPTION

Section 3(5) of the Competition Act envisages that nothing contained

in Section 3 (prohibiting anti-competitive agreements) shall restrict
the right of any person to prevent infringement or imposing of
reasonable conditions that may be necessary for protecting his/her
intellectual property rights i.e. copyright, trademark, patent, designs
and geographical indications.
In the aforesaid context, CCI states that any ‘reasonable condition’
imposed for protection of IPR would not attract Section 3, however,
imposition of ‘unreasonable condition’ to protect IPR would
contravene Section 3 of the Act. The CCI provides an illustrative list
of practices/agreements which though entered into for protection of
IPR may contravene Section 3 of the Act. Such practices/agreements
are:

 Patent pooling- may be a restrictive practice if pooling firms

decide not to grant license to third parties;

 Tie-in arrangement– If under the tying arrangement, licensee is

required to acquire particular goods solely from the patentee
then it may be a restrictive practice;

 Agreement to continue payment of royalty even after the patent

has expired;

 Clause restricting competition in R & D;

 Licensee may be subjected to a condition not to challenge the

validity of IPR in question.

 Licensor fixes the price at which the licensee should sell.

 A licensee may be coerced by the licensor to take several

licenses in intellectual property even though the Licensee may
not need all of them.
  Condition imposing quality control on the licensed patented
product beyond those necessary.

 Restricting licensee’s right to sell the product of the licensed

know-how to persons other than those designated by the
licensor.

 Undue restriction on licensee’s business could be

anticompetitive.

 Limiting the maximum amount of use the licensee may make of

the patented invention may affect competition.

 Condition imposed on the licensee to employ or use staff

designated by the licensor.

Shamsher Kataria’s case elaborately dealt with provision of IPR

exemption under Section 3(5) of the Act. In the case the OPs had
claimed IPR exemption under Section 3(5) of the Act and stated that
the restrictions imposed upon the OESs (original equipment suppliers)
from undertaking sales of their proprietary parts to third parties
without seeking prior consent would fall within the ambit of
reasonable condition to prevent infringements of their IPRs. The
Commission observed that in order to determine whether an
exemption under Section 3(5) of the Act is available or not, it was
necessary to consider:

a) Whether the right which is put forward is correctly characterized as

protecting an intellectual property?
b) Whether the requirements of the law granting the IPRs are in fact
being satisfied?
The CCI in view of the facts and circumstances prevailing in the case
held that the exemption enshrined under Section 3(5) of the Act was
not available to those OEMs (original equipment manufacturers) who
had failed to submit the relevant documents evidencing grant of the
applicable IPRs in India, with respect to the various spare parts. The
CCI also stated that the OEMs had failed to show that the impugned
restrictions amounted to imposition of reasonable conditions, as may
be necessary for protection any of their rights.

The CCI in the case also rendered the clarification that though
registration of an IPR does not automatically entitle a company to
seek exemption under Section 3(5)(i) of the Act and the essential
criteria for determining whether the exemption under Section 3(5)(i)
is available or not is to assess whether the condition imposed by the
IPR holder can be termed as “imposition of a reasonable conditions,
as may be necessary for the protection of any of his rights”.

IPR AND COMPETITION LAW

REFER - https://enhelion.com/blogs/2022/08/22/the-interplay-
between-intellectual-property-law-and-competition-law-similarities-
and-differences/

https://blog.ipleaders.in/interplay-competition-law-ipr/#:~:text=While
%20IPR%20aims%20at%20safeguarding,%2C%20and%20anti
%2Dcompetitiveness%20acts.

CARTELS
A cartel is a group of firms that conspire to reach an agreement over
such conduct by explicitly communicating with each other for the
purpose of collusion.

A cartel simply means an agreement between two or more companies

or business partners who are engaged in providing goods and services
to the public in order to engage in the regulation of manipulative
pricing structures. The companies which come under the purview of
cartel organizations act as a single or complete entity.

A cartel basically has less command in the market than a monopoly. It

enshrines a situation where a single entity in the market owns all
aspects of products and services to make them available to the public
in abundance. Some cartels formed in order to curb the competition
while other cartels formed for illegal trade such as drugs and illegal
substances. The cartels act as a hindrance to new business startups
which generally stops the innovation for that particular product. This
then leads to a monotonous situation where the cartel has the sole
authority to provide goods and services to the public.

The Organization of Petroleum Exporting Countries (OPEC) is

considered the world’s largest cartel. It consists of a group of 13 oil-
producing countries whose motive is to coordinate and manage the
petroleum policies of its member countries. The activities of the
OPEC is to be considered legal because U.S. foreign trade laws
protect them.

LEGAL IMPLICATIONS OF CARTELS:

Cartelization in India is to be considered a civil offence that is

prohibited under the Competition Act, 2002. Cartel formations are
strictly prohibited under Section 3(1) to be read with Section 3(3) of
the act.

Section 3 of the act certainly prohibits and renders the agreement void
when the business partners enter into an agreement with respect to the
production of supply, distribution, storage, goods or provisions of the
services which are likely to cause an ample amount of adverse effect
to the competition in India.

Section 3 also stipulates the provision which basically prohibits the

anti-competitive agreement among the cartel enterprises which
includes:-

 Implicit and explicit determination of purchase and sale of

goods.
 Limiting the control of production, investment and sales
services.
 Allocation of the geographical market.
 Indulging in the collusive bidding.

Such agreements are consequently to be considered void.

Breaking the code of Section 3 of the Competition Act, 2002 is to be

considered a civil offence. All the enterprises who are involved in the
formation of the cartel would get penalized with a fine of up to three
times the stipulated collected profits or ten percent of the total
turnover, whichever is higher.

The act also involves cases with a criminal offence in the following
cases namely:-
  Non-compliance with the orders of the competition commission.
 Breaking an order of the National Company Law Appellate
Tribunal (NCLAT) without any reasonable grounds.

Under the cartel legislation stipulated under the Competition Act,

2002, both companies and individuals can be prosecuted. Under
Section 27 of the Competition Act, 2002, the commission can pass the
orders against the companies who are involved in contravening
Section 3 of the act:-

 To cease from any anti-competitive conduct.

 Paying penalty upto three times of total collective profits or ten
percent of the turnover.
 To modify any agreement with the contravention of Section 3.

Individuals can also be prosecuted under Section 48 of the act. Every

person who is involved in the cartelization of the company would be
responsible and is deemed to be found guilty.

PUNISHMENTS FOR CARTEL

In case of cartels, under Section 27 of the Act, the CCI is empowered

to impose on the enterprise a penalty of up to three times its profit for
each year of the continuance of such an agreement or 10% of the
turnover for each year of the continuance of such an agreement,
whichever is higher. The Amendment Act has expanded the scope of
turnover in the context of Section 27 of the Act to global turnover,
derived from all the products and services by a person or an enterprise
(as opposed to its approach on penalising parties basis Indian
turnover).

India, at present, does not have penalty guidelines to determine the

quantum of penalty to be levied in each case. The Amendment Act
provides for the CCI to frame penalty guidelines to provide an
objective process for the calculation of penalties. Therefore, we are
likely to see clear principles on penalties soon which will guide CCI’s
practice in this regard.

The Competition Act, 2002 does not have criminal punishments or

sanctions for involvement in the cartel formation, both for companies
and individuals. But, if the companies or individuals do not comply
with the stipulated orders of the competition commission, then they
have the power to initiate criminal proceedings with the metropolitan
magistrate. The punishment may range for up to three years with a
fine of INR 10 Million or both.

There is no governed norm or any guideline which determines

penalties in the cartel cases in India. But, however, based upon the
practice, the competition commission will have to consider a certain
or aggravating amount when determining the degree of penalty.

In Excel Crop Ltd V. Competition Commission of India, the Supreme

Court held and set aggravating and mitigating factors which would
then be used to determine the quantum of the penalty. Such factors
include:-

 The extent and nature of the contravention;

 The time period of cartels;
 Any kind of damage due to cartelization;
  Bonafide intent of the company;
 Profits that derived from the contravention.

CATELS CONDUCT WITH OUTSIDE JURISDICTION RELATES

MATTERS

Section 32 read with the Section 19(1) of the Competition Act, 2002
generally empowers the Competition Commission of India (CCI) to
deal with the extraterritorial jurisdiction, thereby giving the power to
inquire to any cartel which operates outside India or any foreign
company forming a cartel within India.

IMPORTANT CASE LAWS RELATED TO CARTELS

 Flashlight Case ( Suo Motu Case 01/2017 )

The court, in this case, held that there was no violation of Section 3 of
the act even when the information had been exchanged between the
competitors. The commission in this case noted that as there is no
fixation of prices in their agreement, thus, the presumption of
appreciable adverse effect on competition (AAEC) did not apply.

 Rajasthan Cylinders case ( Civil Appeal 3546/2014)

The Supreme Court in this case held that despite the identical fixation
of prices by the bidders and a trade association meeting, the court
found out that there was no involvement of any collusive bidding. The
parallel pricing fixation is the nature of the market and not the
collusion.
  Madhya Pradesh Chemists and Distributors Federation V.
Madhya Pradesh Chemists and drug association ( Case
64/2014)
The court, in this case, held that any agreement which causes an
adverse effect on competition but is not actually covered under
section 3 of the Competition Act, 2002. However, in such concerning
cases, the onus to prove the guilty side of the cartel is on Commission.

 Jeetender Gupta V. Competition Commission of India ( Appeal

30/2014)
In this case, the Appellate tribunal stated that the legal machinery
under the Competition Commission Act, 20020 cannot certainly be
moved by a person who actually has no interest in whatsoever the
subject matter of the information is.

LENIENCY PROGRAMMEE

Leniency Programme of the Competition Commission is inscribed

under Article 46 of the Act. It is a type of an incentive to the cartel
members who are ready to share information with the Commission.
Also legally it can be said that it is a type of whistle-blower protection
to a cartel member who is ready to share the information relating to
the cartels. The Commission has framed various programmes to
encourage the members, willing to provide information that are
connected with the cartels or are in the process of infringing the
competition laws, to come forward and disclose such anti-competitive
agreements and assist the competition authorities in lieu of immunity
or lenient treatment. The leniency programme is a sort of protection
provided to the persons who come forward and disclose all the
information about the cartel who would otherwise face stringent
actions by the Commission if the cartel is detected by the Commission
on its own.

RELEVANT SECTIONS IN COMPETITION ACT, RELATED TO

LINIENCY PROGRAM

 Section 46: This section provides for immunity from penalties

and legal proceedings for a person who makes a full disclosure
of their involvement in anti-competitive practices and provides
evidence to the competition authority.[8]

 Section 46A: This section provides for reduction in penalties for

a person who makes a full disclosure of their involvement in
anti-competitive practices and provides evidence to the
competition authority, but does not qualify for immunity under
section 46.

 Section 47: This section provides for the procedure for making
an application for leniency under sections 46 and 46A, and the
criteria for granting such an application.

BENEFITS OF AVAILING LINIENCY PROGRAM

 Detection of cartel conduct: The Leniency Program encourages

parties to come forward and report cartel conduct, which helps
the Competition Commission of India (CCI) detect anti-
competitive practices that may otherwise go undetected.
  Enhanced enforcement efforts: By encouraging parties to come
forward and provide evidence of cartel conduct, the Leniency
Program enhances the CCI's enforcement efforts and enables it
to take action against anti-competitive practices more
effectively.

 Deterrent effect: The Leniency Program acts as a deterrent

against cartel conduct by increasing the risk of detection and
enforcement action. This can help to reduce the incidence of
anti-competitive practices in India.

 Encouragement of cooperation: The Leniency Program

incentivizes parties to cooperate with the CCI's investigation and
enforcement efforts, which can lead to a more efficient and
effective resolution of cases.

 Development of competition law jurisprudence: The Leniency

Program can contribute to the development of competition law
jurisprudence in India by providing guidance on the
interpretation and application of competition law provisions.

Overall, the Leniency Program in India serves as an important tool for

promoting and protecting competition in the Indian economy and for
ensuring that anti-competitive practices are effectively addressed.

DISADVANTAGES

 Difficulty in proving cartel conduct: Leniency applicants may

face difficulty in proving the existence of a cartel and
demonstrating their own involvement in the conduct. This can
 result in the CCI declining to grant leniency and instead
pursuing enforcement action against the party.

 Limited applicability: The Leniency Program may only be

applicable in limited circumstances, such as cases involving
cartel conduct. This means that parties involved in other types of
anti-competitive practices may not be able to take advantage of
the program.

 Reduced incentives for self-correction: By offering leniency to

parties who report cartel conduct, the Leniency Program may
reduce the incentives for companies to self-correct and take
steps to cease the anti-competitive conduct on their own.

 Concerns over fairness: Some parties may argue that the

Leniency Program is not fair, as it may result in certain parties
receiving reduced penalties while others face the full penalties
prescribed under the Competition Act, 2002.

 Risk of false or misleading information: Parties seeking leniency

may be incentivized to provide false or misleading information
in order to secure leniency, which can undermine the CCI's
enforcement efforts and the integrity of the Leniency Program.

While the Leniency Program in India serves as an important tool for

promoting and protecting competition in the Indian economy, it is
important for the CCI to carefully consider the potential
disadvantages and to ensure that the program is implemented in a fair
and transparent manner.

CONDITIONS FOR AVAILING THE LENIENCY PROGRAMME

The conditions which should be fulfilled by an applicant for availing

the benefits of lesser penalty regulations under Section 46 are-

1. The applicant should cease to have further participation in the

cartel from the time of its disclosure unless otherwise directed
by the Commission.
2. The applicant should provide all the vital disclosures in respect
of violation of section 3(3).
3. The applicant should provide all the relevant information,
documents and evidence as may be required by the competition
commission from time to time for further investigation.
4. The applicant should also cooperate genuinely, continuously and
expeditiously throughout the investigation and also in the
proceedings before the Competition Commission.
5. The applicant should not conceal, destroy, manipulate or destroy
or remove any relevant documents in any matter which could
contribute to the establishment of a cartel or which would hinder
any investigation process carried out by the Competition
Commission.

The Competition Commission may subject the applicant to further

restrictions and conditions in the matters of reduction of monetary
penalty after due regard to-

1. The stage at which the applicant comes with the application of

disclosure
 2. The evidence already in possession of the government
3. The quality and the vitality of the information provided by the
applicant.
4. The facts and circumstances of the case

The Commission under Section 46 has the power to provide a lesser

penalty than what is mentioned under the Act if it is satisfied that any
person related with the cartel has provided the Commission with the
full disclosure as needed. The Section also states that if a disclosure is
made after the report has been submitted, directed under Section 26
then no provision of lesser penalty shall apply to the case. Also the
leniency programme or the lesser penalty shall be imposed only on
the producer, seller, distributor, trader or service provider who has
made true and vital disclosures and that the lesser penalty shall only
be imposed if the person making the disclosure continues to cooperate
with the commission until the proceedings of the commission has
been completed. If in between the proceedings if a cartel member who
had agreed to share the information in lieu of lesser penalty does not
complies with the conditions on which the lesser penalty was imposed
or has given false evidence or has not made any vital disclosures then
in such cases the abovementioned persons may be tried for the
offence with respect to the lesser penalty but shall also be liable to be
tried to the imposition of penalty to which such person was made
liable in the first place, had the lesser penalty not been imposed.

The content of the application for lesser penalty has been mentioned
under Section 5(1) and 5(2) of the Act. This would include the
following-

1. Name and address of the applicant or of the authorized

representative or of the enterprise or enterprises in the cartel.
 2. In case the applicant is based outside the country, then the
address of communication in India including the phone number
and the email address.
3. A description of the cartel arrangement including the aim and
objective of the cartel
4. The details of the activities and the functions carried out for
securing such aim.
5. The nature of goods and services involved.
6. The geographic market coverage of the cartel
7. The commencement and duration of the cartel
8. The estimated volume of business that would be done by the
cartel
9. The names, positions, office locations and, wherever necessary,
home addresses of all individuals who, in the knowledge of the
applicant, are or have been associated with the alleged cartel,
including those individuals which have been involved on behalf
of the applicant.
10. Details regarding the competition authorities, forum or
courts to which the applicant has approached or intends to
approach in relation to the cartel.
11. A list of evidence regarding its nature and content which is
provided in support of the application for lesser penalty
12. Any other information as may be directed or asked by the
commission

MODULE 4 – ABUSE OF DOMINANT POSITION

ENTERPRISE DEFINITION

Section 2(h) defines enterprises.

It says that enterprise is a person or a department of the government,
that is engaged in any activity, relating to the

 production,
 storage,
 supply,
 distribution,
 acquisition or
 control of articles or goods, or
 the provision of services of any kind, or
 in investment, or
 in the business of acquiring,
 holding,
 underwriting or
 dealing with shares, debentures or other securities

of any other body corporate, but does not include any activity of the
government relatable to the sovereign functions of the government”.
DOMINANT POSITION

Dominant position refers to a position when something or someone is

in a superior position as compared to others contingent on certain
factors. In terms of section 4 of the competition act, 2002, Dominant
position means a position of strength, enjoyed by an enterprise in the
relevant market in India which enables it to;

o work independent of any competitive forces prevailing in the

relevant market or
o Influence its competitors or consumers or the relevant market in
its favor
This provision does not prohibit or implies dominance is illegal but
abuse of dominance is restricted.

Jai Balaji industries ltd vs UOI – Page 54 ( water project )

FACTORS DETERMINING DOMINANCE

 a market share.
 the size and assets of the undertaking.
 size and significance of contenders or competitors.
 the financial intensity of the undertaking.
 a reliance on customers on the undertaking.
 countervailing purchasing power.
 market structure and size of the market.

FACTORS DETERMINING ABUSE OF DOMINANT POSITION

Section 4(2) of the Act indicates the 4 kinds of abusive use of

dominant position :

a) Unfair or biased trade practices: According to this, abuse of

dominant position happens when an enterprise or group of
enterprise directly or indirectly imposes unfair or discriminatory:

 Conditions on sale of goods or rendering of services or

 Price in sale or purchase including predatory pricing of goods
or services.
TELCO v Registrar of the Restrictive Trade Agreements-
https://supremetoday.ai/issue/telco-vs-registrar-of-restriction-trade-
agreement--1997#:~:text=The%20court%2C%20in%20its
%20final,practice%20and%20therefore%20not%20registrable.

b) Limiting production or technical or scientific development: An

abuse of dominant position occurs in the market when a business
legitimately or in an indirect way forces conditions that limit the
creation of the merchandise or specialized or logical advancement
bringing about the creation of the products or administrations.

c) Denial of access to market, barriers to entry and expansion: Any

condition that makes forswearing access to the market in any way
will comprise an abuse of the dominant position.

d) The imposition of supplementary obligation: When a company is

very powerful in a market and uses that power unfairly, it's called
an "abuse of dominant position." This happens when the company
forces others to agree to extra conditions when making deals with
them. These extra conditions don't really have anything to do with
the main deal. For example, a powerful company might say to its
customers, "You can only buy from us if you also buy something
else completely unrelated." This is unfair because it limits the
choices of the customers and doesn't have anything to do with the
main product or service they want to buy.

e) Protection of different markets–There is an abuse of dominant

position when an enterprise uses that position is one market to
enable it to enter into or protect some other relevant market.
COMPARISON OF MRTP ACT WITH CONSUMER
PROTECTION ACT

MRTP Act Consumer Protection

Regarding Restrictive Trade

The Consumer Protection Act has
Practices, the MRTP Act only
been enacted in the interest of a
discusses situations with respect
single player in the economy i.e.,
to its effect on the competitive
the consumer.
situation in the economy.

This kind of an exemption is not

The MRTP Act does not apply to proffered under the Consumer
many enterprises, such as Protection Act.
banking or insurance companies.

The Consumer Protection Act is a

device to be used by aggrieved
The MRTP Commission can take consumers and does not operate
up issues suo motu and initiate to regulate the economy as a
inquiries into restrictive or unfair whole. Due to this, the Act does
trade practices. not envisage suo motu powers to
initiate inquiries into restrictive or
unfair trade practices.

There is no restriction on any The Consumer Protection Act

buyer of goods, whether for does not regard a buyer of goods
commercial or non-commercial
purposes, to approach the MRTP for commercial purposes as a
commission under the MRTP ‘consumer’, as contained in the
Act. definition of the Act.

Under the MRTP Act, the MRTP The Consumer Protection Act has
Commission was the only body a 3 tier redressal setup, at the
to approach in case of any district, state and national level.
grievance.

There is a limitation period of two

There is no limitation period for
years within which an aggrieved
those applying under in the
consumer must file a suit under
MRTP Act.
the Consumer Protection Act.

MARKET SHARE AND MARKET POWER -DIFFERENCE

MARKET SHARE

Market share" refers to the percentage of the total amount of goods

sold or services provided in a particular market accounted by a
certain enterprise. Market shares reflect the relative position of
suppliers on the market and, as such, can be very useful in assessing
market power. However, market shares are not the sole indicator of an
undertaking’s strength in the market.
MARKET POWER

Market power refers to the ability of a firm (or a group of firms) to

influence the price and terms of trade in a market. It is the degree to
which a company can control the market price, output, or other
competitive variables, allowing it to earn higher profits than it would
in a more competitive market.

RELATIONSHIP

While market share and market power are related, they are not
synonymous. A company can have a high market share without
necessarily possessing significant market power, and vice versa.
A high market share can sometimes be an indication of market power,
especially if it is accompanied by barriers to entry or other factors that
limit competition. However, a firm may have a large market share due
to factors such as low prices or superior product quality rather than
market power.
Conversely, a company with a small market share might still possess
significant market power if it has unique technology, strong brand
loyalty, or controls essential inputs.
In some cases, regulators may scrutinize firms with high market
shares to assess whether they are abusing their market power to the
detriment of consumers, through practices such as price fixing or
predatory pricing.

PREDATORY PRICE
MEANING

As per Section 4(2)(a) predatory pricing is a method of pricing in

which a seller sets a price which is so low that other sellers or
suppliers cannot compete with him and they are forced to exit the
market.
Predatory pricing not only forces other sellers to leave the market but
such an act also restricts others from entering the market.
Because of such a nature, predatory pricing is not allowed and is
banned in many countries. Such an act is considered a violation of
competition laws.

CASE STUDIES TO IDENTIFY PREDATORY PRICING

Example: If my business competitor was selling a computer at 40000

and I sold the same computer for 25000 as I knew that my competitor
would never sell for such a low price, then I am acting in predatory
pricing.

COMPONENTS OF PREDATORY PRICING

 The act of illegally setting the prices so low that any competitor
is eliminated from the relevant market.

 There is a violation of anti-trust law as predatory pricing paves

the ground for monopoly by making the market vulnerable to it.
  The lower price benefits can be availed by consumers only in
the short term.

 In the long run, the customer suffers as the entities succeed in

raising the prices thereby eliminating competition from the
market.

 When the price rises there is a decline in choice.

 The Competition Commission of India eliminates such practices

like predatory pricing treating it as an abuse of dominant
position which is prohibited under the Act.

CASES:

 Vaibhav Mishra vs. Sppin India Private Ltd. (known as ‘Shopee

Case’), 2022 - The issue was Sppin India was selling products
below the cost price and was offering huge discounts which
were nothing but predatory pricing as they intended to eliminate
competition from small players and this resulted in unfair trade
practices. CCI in its decision stated that though Shopee was
involved in predatory pricing, it was not holding any dominant
position in the online platform market. So it cannot be fined
under Section 4(2)(a)(ii) of the Competition Act.

 Fast Track Call Cab Pvt. Ltd. vs. Ani Technologies Pvt. Ltd.,
2015 - In this case, the Fast Track, a radio taxi service company
had filed a complaint before CCI against the opposite party Ani
Technologies, a radio taxi service company that ran their taxi
under the brand name OLA. The issue was that OLA was
offering heavy discounts to its customers and its cab drivers
 were also given good incentives. Because of this, the
competitors were finding it very difficult to match OLA and it
affected their business and that this amounted to predatory
pricing under Section 4(2)(a)(ii) of the Competition Act. The
Commission, prima facie found that OLA held a dominant
position in the market and therefore the DG was directed to
investigate the matter. On the basis of analysis, DG concluded
that OLA was not dominant in the relevant market as its share in
the market had declined due to the entry of Uber and therefore
the question of abuse does not arise. CCI considered the size and
resources of the competitors rather than the market share of
OLA and opined there was no abuse of Section 4 of the
Competition Act.

 C. Shanmugham and Manish Gandhi vs. Reliance Jio Infocomm

Ltd., 2017 - In this case, the informers (Mr. Shanmugham and
Mr. Gandhi) had alleged that Reliance Jio was indulging in
predatory pricing as they were abusing their dominant position
and this was a violation under Section 4 of the Competition Act.
The informers further said Reliance Jio had infused huge
investments and used free voice services, roaming services, data
services and heavy discounts to its customers as a tool to
penetrate into the market. This was causing losses to other
telecom operators. The issue was whether Reliance Jio had
violated Section 4 of the Competition Act by indulging in anti-
competitive practices through predatory pricing. CCI observed
there are many players in the relevant market. Some are
domestic and some are foreign. In this case, the competitors are
not excluded. These players have capabilities, capital and
economic resources. So customers have wide options to choose
from. CCI concluded that Reliance Jio has not abused its
dominant position so prima facie there is no case against
Reliance Jio.
https://blog.ipleaders.in/all-you-need-to-know-about-predatory-
pricing/#Components_of_predatory_pricing

PENALTIES FOR ABUSE – ORDERS PASSED BY CCI FOR

ABUSE

To an undertaking held to the abuse of dominant position, the

Commission can do several things on its parts-

 Direct the undertaking to suspend such acts that add up to

misuse. Occasions of such uses by the Commission can be
found in cases like in Re Shri Shamsher Kataria v. Honda Siel
Cars India Ltd, , and, also, Atos Worldline v. Verifoneindia,,
where the overarching parties were mentioned to stop it from
getting a charge out of activities that had been viewed as in
invalidation of Section 4.

 Impose disciplines of up to 10% of the ordinary of the turnover

for the last three preceding financial year.

There has been some concern about this arrangement, however, as far
as possible, it gives no rules for the count of punishments. The
Commission, as well, is yet to concoct rules of its own. Thus, starting
at now, the Commission has total tact in figuring punishments to be
endless supply of such individuals or ventures which are gatherings to
such maltreatment or abuse of power. Be that as it may, the COMPAT
has put a few conditions on the Commission undoubtedly. For a
situation, COMPAT advised CCI for CCI’s act of granting huge
punishments without giving any thinking to the equivalent. Besides,
in a similar case of M/s Excel Crop Care Limited v. Competition
Commission of India, 2017, COMPAT held that punishments are to be
determined based on the ‘significant turnover’. So, for a situation of
maltreatment against a multi-item organization, the turnover used to
compute the punishment would be the turnover from the specific
product(s) in conflict and not the general turnover.

Be that as it may, an anomaly is wild right now the working of the

Commission and the Appellate Authority, for the COMPAT itself
neglected to follow its point of reference of ‘pertinent turnover’ in the
case of M/s DLF Limited v Competition Commission of India & Ors.,
2018, COMPAT didn’t confine the figuring of the punishment based
on DLF Limited’s turnover emerging just from the private fragment,
in spite of the significant market all things considered being the
market for ‘very good quality private settlement’. COMPAT
maintained the punishment demanded by the CCI, which was
determined based on DLF’s turnover relating to its whole business
(i.e., the advancement of private, office and business properties).

Lastly, the Commission can pass a request to cause the division of the
prevailing venture with the end goal that doesn’t manhandle its
predominant position.

DIVISION OF ENTERPRISES.

https://blog.ipleaders.in/essential-facility-doctrine-section-4-
competition-act-2002/#Doctrine_of_Essential_Facilities_and_India

In India, the law of competition is still in its infancy. Whilst the

doctrine of the essential facilities is yet to be applied in practice by the
Supreme Court of India, there is a wide spectrum of interpretation in
the Indian competition law. For example, Section 4(2)(c) of the
Competition Act, 2002 (“the Act”) prevents an undertaking from
abusing its dominant position which leads to denial of market access.
In some of the cases, such as Shamsher Kataria v. Honda Siel Cars
India Ltd and Turbo Aviation Colo, the question had arisen with
respect to the ‘refusal of access’ before the Competition Commission
of India (“CCI”). However, the CCI did not specifically discuss this
aspect in both the cases.

An interesting aspect in India’s legal framework is that some or the

other legislative or regulatory mechanisms control most of the
essential facilities in the country. For example, the 1994 National
Telecom Policy lays down a spectrum authorization system, an
invaluable facility in the telecommunications sector. Similarly,
licensing systems operate by creating rules and regulations to be
followed in other vital sectors such as pharmaceuticals, petroleum and
gas, power etc. Thus, in line with the rule passed by the Supreme
Court of the United States of America in the Trinko Case. if certain
regulatory structure already exists providing for the functioning in
terms of legislative policy, the essential facilities doctrine is not
applicable.

In the case of Arshiya Rail Infrastructure Ltd. v. Ministry of Railway

& Ors (“Arshiya case”), CCI discussed the definition of ‘essential
facilities’ first. The point, in this case, was that CONCOR, a PSU, was
refusing to keep the private train container from accessing the
terminals and sidings that were solely operated by them. The private
train containers (including the petitioners) argued that these facilities
would fall under “essential” freight infrastructure and hence essential
facilities doctrine would be applicable. Whilst rejecting this assertion,
CCI made the following remarks about the doctrine of essential
facilities:
“the essential facility doctrine is invoked only in certain
circumstances, such as existence of technical feasibility to provide
access, possibility of replicating the facility in a reasonable period of
time, distinct possibility of lack of effective competition if such
access is denied and possibility of providing access on reasonable
terms.”

Finally, CCI held that since private train containers can build such
facilities at their own expense and considering that there is no barrier
to the same, these facilities would not fall within the ambit of
essential facilities.

MODULE 5 – COMBINATION

COMBINATIONS:

According to Section 5 of the Competition Act, 2002 a combination is

an “acquisition of one or more enterprises by one or more persons or
merger or amalgamation of enterprises shall be a combination of such
enterprises and persons or enterprises”.

The Competition Act 2002 binds the parties to the combination and
sends the mandatory notification to the CCI for a combination and the
aforesaid act provides for high thresholds with regard to assets and
turnover.

In simple words, a combination can be defined as a merger,

acquisition, amalgamation between two or more enterprises or
businesses. The aforesaid act puts a responsibility on the government
to control such mergers, acquisition, and amalgamation. Therefore,
the provisions of the Competition Act 2002 ensure that there is fair
competition in the market.

MERGER

A merger occurs when two or more companies agree to combine their

operations into a single entity. In a merger, the companies involved
typically become equal partners in the new entity, sharing ownership,
control, and resources. Mergers are often pursued to achieve to
expand into new markets.

AMALGAMATION

Amalgamation is a term used interchangeably with merger. The

amalgamation of companies is the process of combining or merging
more than two companies to form a new company.

ACQUISITION

An acquisition happens when one company (the acquirer or buyer)

purchases another company (the target or seller). The target
company's assets, liabilities, and equity interests are typically
absorbed by the acquiring company. In an acquisition, the acquiring
company gains control over the acquired company by purchasing a
majority of its shares or assets.

TAKEOVER

A takeover occurs when one company (the acquiring company or

bidder) seeks to gain control over another company (the target
company) against its will or without its consent. Takeovers can be
friendly or hostile. In a friendly takeover, the management of the
target company agrees to the acquisition, whereas in a hostile
takeover, the acquiring company bypasses the target company's
management and directly approaches its shareholders.

HORIZONTAL, VERTICAL AND CONGLOMERATE

MERGERS

HORIZONTAL COMBINATIONS
Horizontal Combinations involve the merging of enterprises or firms
with identical level of production process, with substitute goods and
are competitors.
This combination enhances the business performance, financial gains
and shareholder value in the long run. The cost efficiency with the
staff cut-offs leads to the increased margins of the company.
However this tends to pave way for reduced competition as a
monopolist agenda emerges from the combinations of powerful
enterprises, along with the unemployment that follows which has a
very drastic and adverse effect on the economy of the country.
It is also bad for the consumers as the reduced competition gives the
companies a “higher pricing power.” Therefore these merges are the
chief focus and are often scrutinised by the Competition Law
Authority for the above given reasons.

NON-HORIZONTAL COMBINATIONS
The non-horizontal combinations are of two types: Vertical and
Conglomerate combinations.

VERTICAL COMBINATIONS
Vertical merging is “combining of business firms engaged in different
phases of the manufacture and distribution of a product into an
interacting whole”.
This leads to increased competitiveness, a greater process control,
wider market share, a better supply chain co-ordination and decline in
cost as this sort of integration is the structuring of supply chain of
companies under a particular company.

CONGLOMERATE COMBINATIONS
Conglomerate combinations involve firms or enterprises in unrelated
business fields. Such combination happens when two companies that
provide different services and goods or are integrated into varying
sectors of business merge together.

This sort of merger happens when the companies achieve a stronger

stand in the market both in products and services and profit
management, unlike when they are individual enterprises.
However it is to be note that Non Horizontal Conglomerations do not
promote loss of direct competition and are therefore not anti-
competitive within an overall framework.

PROCEDURE FOR REGULATION OF COMBINATION -

POWERS OF CCI

Section 29 of the Competition Act, 2002 deals with the “procedure for
investigation of a combination”.
Combinations can only be regulated when they tend to cause an
appreciable adverse effect in the market or they abuse their dominant
position in the market.
Moreover Section 5 and Section 6 of the Competition Act, 2002
covers the definition and provisions for regulation of combinations.

Step 1: To notify

The parties to the combination have an obligation to notify the

Competition Commission of India (CCI) regarding the merger or
combination as per prescribed under Section 6(2) of the Competition
Act, 2002.

CCI asks the parties to notify in order to determine whether such a

merger or combination can potentially cause an appreciable adverse
effect (AAEC) in the market.

Furthermore, in order to test the AAEC in the market, CCI takes into
consideration factors such as:
  actual and potential level of competition,
 level of competition through imports in the relevant market,
 the existence of entry barriers in the relevant market,
 the level of combination in the market etc.

Step 2: Inspection of the notice

CCI will carry out an inspection in accordance with CCI Amendment

Regulations, 2016. Moreover, if there are any defects found in the
merger or combination, the parties to the combination are asked to
remove such defects.

Step 3: Prima Facie Opinion

As per Section 29(1) of the Competition Act, 2002 the Competition

Commission of India needs to have a prima facie opinion within 30
days of the receipt of the notice.

Furthermore, the parties to a combination or a merger are asked to

publish the requisite details of the combinations in accordance with
Section 29(2) which creates an open invitation to the public to come
forth with a statement of objections within the 15 days from the
publishing under Section 29(3).
Moreover, the Competition Commission of India reserves a right to
demand additional information regarding the combination or merger
under Section 29(4) read with Section 29(5).

Step 4: Proceedings with regards to the final order

The Competition Commission, as per Section 31 of the Competition

Act, 2002 decides as to whether the combination will have an adverse
effect in the relevant market.
If at all, the commission findings state that there is no adverse effect
in the market, then the transaction will be approved under Section
31(1) of the Competition Act, 2002.

If the findings of the Commission states that the combination shall

have an adverse effect in the market, then it will declare the requisite
transaction null and void as per Section 31(2) of the Competition Act,
2002.

There can be a third case wherein, the Commission can provide the
parties with the modifications to be made in the transaction to curb
out the provisions which have the potential to cause an adverse effect
in the market. This is done in compliance with Section 31(3) of the
Competition Act, 2002.

ORDERS PASSED BY CCI

https://blog.ipleaders.in/comprehending-combination-competition-
law/#:~:text=According%20to%20Section%205%20of,enterprises
%20and%20persons%20or%20enterprises%E2%80%9D.
https://blog.ipleaders.in/combination-under-the-competition-law/

Case laws related to combinations

PENALTIES

1. PENALTY FOR FAILURE TO COMPLY WITH THE DIRECTIONS

OF COMMISSION AND DIRECT GENERAL-

In any case, if a person or entity fails to comply with the direction

given by the Commission under 36(2) or 36(4) or the directions given
by the Director General while exercising the powers referred to in sub
section 41(2), and that too without any reasonable cause, then such a
person will be punishable and shall have to fulfill a fine which could
extend up to the sum of 1 lakh rupees for each day of non-
compliance. However, this sum of penalty could not exceed one crore
rupees.

2. PENALTY FOR NON-FURNISHING OF INFORMATION ON

COMBINATIONS-
In case any person or entity fails to give notice to the Commission
under 6(2), then such a Commission shall be imposed by a penalty
which may extend up to one percent of the total turnover of the assets
of such a combination.

3. PENALTY FOR MAKING FALSE STATEMENT OR OMISSION TO

FURNISH THE MATERIAL INFORMATION-
In case a person or a party makes a statement which is false in any
material or they know that they are furnishing a false material and/or
omits to submit the material towards compliance of the Competition
Act 2002, then such a person is liable to a penalty of not less than
fifty lakh rupees and it may extend maximum to one crore rupees as
may be determined by the Commission.

4. PENALTY FOR THE OFFENCES IN RELATION TO

FURNISHING THE INFORMATION-
In case a person who is required to furnish information under the
Competition Act 2002 in form of any or documents or any other kind
and makes a statement which he knows is falls and/or omits some of
the material information, or willfully alter them or try to suppress or
destroy any such document then such a person is liable to be punished
with a monetary fine which may extend up to one crore rupees.

GUN JUMPING

Under Section 43A of the Competition Act, 2002 ("Act"), gun

jumping occurs when an enterprise either fails to notify the
transaction to the Competition Commission of India ("CCI") prior to
its consummation (procedural gun jumping), or when an enterprise
violates the standstill obligations by prematurely giving effect to the
transaction before CCI's approval (substantive gun jumping).

In the event of violation, the CCI may impose a penalty on the

enterprise which may extend to one percent of the total turnover or
assets of the combination, whichever is higher. Apart from monetary
penalty, initiation of proceedings for gun jumping also raises
significant reputational implications for the parties to the
combination.

The merger control regime under the Act is ex-ante and mandatorily
requires all combinations breaching the jurisdictional thresholds to be
notified to the CCI, unless otherwise exempted.1 It is also suspensory
in nature and requires the parties to "stand still" and not give effect to
the combination prior to the CCI approval or until 210 days have
elapsed from the filing of the notice.2 The Competition (Amendment)
Act, 2023 envisages a shorter timeline of 150 days as a relief to
enterprises waiting to give effect to the combination.3 However, this
provision is yet to be enforced.

Recently, gun jumping has caught the limelight since the CCI passed a
slew of orders penalising enterprises for gun jumping and the CCI
also released the draft of the new Combination Regulations4 for
public consultation which can have far-reaching implications, inter
alia, for gun jumping inquiries.

MODULE 6 – ENFORCEMENT OF MECHANISMS

ESTABLISHMENT AND CONSTITUTION OF COMPETITION

COMMISSION OF INDIA
POWERS
FUNCTIONS
JURISDICTION OF THE CCI
ADJUDICATION AND APPEALS
COMPETITION APPELLATE TRIBUNAL (COMPAT)

DIRECTOR GENERAL OF INVESTIGATION (DGI)

POWERS AND FUNCTIONS
ROLE OF DG IN INVESTIGATION

COMPETITION ADVOCACY