Anti - Competitive Agreements

Anti- Competitive Agreements

Competition Law and Anti- Competitive Agreements in India

Anti-competitive agreements (Section 3) are prohibited under the Competition Act. Anti-competitive Agreements deal under Competition Law typically deal with two types of agreements namely horizontal and vertical agreements. Horizontal agreements are those among competitors and vertical agreements are those relating to an actual or potential relationship of purchasing or selling to each other.

The following agreements entered into by association, enterprise or person are deemed as anti- competitive under the Act:

  1. Agreement having appreciable adverse effect on competition (AAEC) – no enterprise or association of enterprises or person or association of persons 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 an appreciable adverse effect on competition within India.

The following factors are considered by the Commission for determining whether an agreement has an appreciable adverse effect on competition (Section 19)-

  • Creation of barriers to new entrants in the market;
  • Driving existing competitors out of the market;
  • Foreclosure of competition by hindering entry into the market;
  • Accrual of benefits to consumers;
  • Improvements in production or distribution of goods or provision of services;
  • Promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.
  • Any agreement entered into including cartels (a cartel is an agreement between competing firms to control prices or exclude entry of a new competitor in a market), engaged in identical or similar trade of goods or provision of services, 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 the 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 having AAEC in India
  • Agreement at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including—
  • tie-in arrangement;
  • exclusive supply agreement;
  • exclusive distribution agreement;
  • refusal to deal;
  • resale price maintenance

If the aforesaid agreements/ arrangements cause an appreciable adverse effect on competition in India then they are prohibited under the Act.

Remedies in case of anti-competitive agreements- Section 27 of Competition Act

The Competition Commission can pass the following orders in case of anti-competitive agreements including Cartels:

  1. Pass any interim order during the pendency of the enquiry.
  2. Serve a cease and desist order directing the offending parties to a cartel to discontinue and not to repeat such agreements.
  3. May order the offending parties to modify the agreements to the extent and in the manner as may be specified in the order.
  4. May impose on each member of cartel a hefty pecuniary penalty

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Competition Law in India

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