JAIPUR NATIONAL UNIVERSITY

SEEDLING SCHOOL OF LAW AND GOVERNANCE

TOPIC: ANTI-COMPETITIVE AGREEMENTS

SUBMITTED TO: SUBMITTED BY:

Mr. Suyash Kunal Joshi Deepak Mehta
Asst. Professor L.LB (Vth Sem.)
SSLG R32651
 DECLARATION

This is to certify that the project work entitled “Anti-Competitive Agreements” submitted by
Deepak Mehta in the partial fulfilment of the award of LL.B of the Jaipur national university,
seedling school of law and governance is a record of her work under my supervision and
guidance. The matter embodied in the dissertation has not been submitted elsewhere.

Supervisor:
Mr. Suyash Kunal Joshi
Assistant professor
SSLG
INTRODUCTION

Anti-competitive agreements are a central concern in competition law, as they distort market
dynamics and harm consumers. Such agreements between businesses (or other economic agents) can
reduce competition by fixing prices, limiting output, dividing markets, or engaging in other forms of
collusion. This can lead to increased prices, decreased product quality, reduced innovation, and less
consumer choice. As a result, competition law seeks to prevent these practices to promote fair
competition and protect the public interest.

What Are Anti-Competitive Agreements?

An anti-competitive agreement is typically any arrangement, understanding, or concerted practice

between two or more parties that has the effect of preventing, restricting, or distorting competition
in the relevant market. These agreements can occur horizontally between competitors at the same
level of the market, or vertically between firms operating at different levels of the supply chain.

Key Categories of Anti-Competitive Agreements

The Competition Act, 2002 in India, which governs the practice of competition law, categorizes anti-
competitive agreements into two main types:

Horizontal Agreements:

▪ These are agreements between competitors—businesses operating at the same level in the
market (e.g., between two manufacturers of the same product, or between two retailers selling
the same product).
▪ Horizontal agreements are particularly dangerous because they directly affect competition in
the market by restricting the choices available to consumers.
▪ Examples of horizontal anti-competitive agreements include:
o Price-fixing: Competitors agree to set prices at a certain level, rather than letting
market forces determine the price.
o Market sharing: Competitors agree to divide the market into territories or customer
bases, so they don’t compete in each other’s areas.
 o Bid-rigging: Competitors collude to fix the outcome of a competitive bidding process,
ensuring that one of them wins the contract.
o Output restrictions: Competitors agree to limit the quantity of goods produced or sold
in the market, reducing supply and driving up prices.

Vertical Agreements:

▪ These are agreements between firms operating at different levels of the supply chain (e.g.,
between a manufacturer and a distributor, or a supplier and a retailer).
▪ While vertical agreements can be more difficult to prove as anti-competitive, some can still
have significant adverse effects on competition.
▪ Examples of vertical anti-competitive agreements include:
o Resale Price Maintenance (RPM): A manufacturer or supplier sets a minimum resale price
that retailers must follow, preventing discounting and stifling price competition.
o Exclusive Supply Agreements: A supplier agrees to sell only to a particular retailer,
preventing competitors from entering the market.
o Exclusive Distribution Agreements: An agreement where a seller agrees to distribute its
products only through a specific distributor, thereby restricting other distributors from
selling those products.
o Tying and Bundling: A firm may require customers to buy a less desirable product as a
condition for purchasing a more desirable product, which can limit competition in the
market for the tied product.

The Legal Framework: The Competition Act, 2002 (India)

The Competition Act, 2002 is the primary legislation governing anti-competitive practices in India.
It is enforced by the Competition Commission of India (CCI), which is empowered to investigate,
adjudicate, and penalize anti-competitive conduct.

Section 3 of the Competition Act, 2002 – Anti-Competitive Agreements

Section 3 of the Competition Act specifically deals with the prohibition of anti-competitive
agreements. It divides agreements into two main types:
 1. Section 3(1):
This section prohibits any agreement that causes or is likely to cause an appreciable adverse effect
on competition in India. It covers both horizontal and vertical agreements, whether they are explicitly
anti-competitive or have the potential to harm competition.

2. Section 3(3):
This section specifically addresses horizontal agreements. These include:
o Price-fixing: Competitors agree on prices rather than letting competition determine them.
o Market-sharing: Competitors agree to divide markets geographically or by customers, so they
do not compete in each other's markets.
o Output restrictions: Competitors agree to limit the supply of goods or services to drive up
prices.
o Bid-rigging: Competitors collude to determine the outcome of a tender or bidding process.
Such agreements are per se (automatically) illegal, meaning they are prohibited outright under the
Act without needing to demonstrate that they have caused harm to competition or consumers.

3. Section 3(4):
▪ This section deals with vertical agreements. These may not be as harmful as horizontal agreements,
but they can still distort competition.
▪ The Competition Commission assesses these agreements based on whether they lead to an
appreciable adverse effect on competition (AAEC).
▪ Examples of vertical agreements are:
o Resale Price Maintenance (RPM)
o Exclusive Distribution or Supply Agreements
o Tying and Bundling
o Vertical agreements are not automatically presumed to be anti-competitive and are subject to
a rule of reason analysis, where the competitive effects of the agreement are evaluated.

Section 4 of the Competition Act – Abuse of Dominance

While Section 3 focuses on anti-competitive agreements, Section 4 of the Act addresses abuse of
dominance, which is a separate but related issue. Abuse of dominance occurs when a dominant firm
engages in practices that unfairly restrict competition or harm consumers. The abuse of dominance
can overlap with the effects of anti-competitive agreements, particularly in cases of market-sharing
or predatory pricing.
Investigation and Penalties for Anti-Competitive Agreements

The Competition Commission of India (CCI) is responsible for investigating suspected anti-
competitive agreements. The investigation process typically involves:

Complaint Filing:
A complaint can be filed by any person or group, or the CCI can initiate an investigation on its own.

Investigation:
If the CCI finds merit in the complaint, it directs the Director General (DG) to conduct a detailed
investigation. The DG may call for documents, conduct searches, and interrogate parties involved.

Penalty:
If the CCI concludes that an anti-competitive agreement exists, it can impose penalties. These
include:
A fine of up to 10% of the average turnover of the involved entities over the last three years or 3
years' profits (whichever is higher).
The CCI may also order parties to cease and desist from the anti-competitive conduct, and in some
cases, it may require structural changes (e.g., breaking up a cartel or reversing a merger).

Leniency Program:
The Competition Act provides a leniency program to encourage companies to come forward and
reveal information about anti-competitive agreements. In return, the companies may receive reduced
fines or immunity from prosecution.

Important Case Law on Anti-Competitive Agreements in India

Some landmark cases in India have helped shape the understanding and enforcement of anti-
competitive agreements:

CCI v. Google (2018):

Google was investigated for abusing its dominant position in online search and advertising. Although
primarily dealing with abuse of dominance, the case also touched on agreements with vendors and
others that were anti-competitive.
Builders Association of India v. Cement Manufacturers (2016):
This case involved a cartel among cement manufacturers to fix prices and divide markets. The CCI
imposed penalties on the companies and found that the agreements violated Section 3(3) of the
Competition Act.

In Re: Cartelization in the Poultry Industry (2014):

The CCI found that poultry feed manufacturers had entered into an illegal cartel to fix prices. It
imposed significant fines on the firms involved.

Indian National Shipowners Association (INSA) v. DGFT (2009):

The CCI found that certain shipping firms had engaged in price-fixing and collusion, which violated
Section 3(3) of the Act. The CCI imposed penalties on the involved firms.

CONCLUSION

Anti-competitive agreements are a significant threat to market fairness and consumer welfare. The
Competition Act, 2002 aims to regulate and prevent these agreements to ensure a level playing field
for businesses and protect consumers from unfair practices. While horizontal agreements like price-
fixing, market-sharing, and bid-rigging are prohibited outright, vertical agreements are subject to a
case-by-case evaluation under the Rule of Reason approach. The Competition Commission of India
(CCI) plays a pivotal role in enforcing these provisions and imposing penalties to deter anti-
competitive behaviour.

Ultimately, the goal of competition law is to encourage healthy competition, promote innovation,
reduce consumer prices, and ensure a fair marketplace.