NATIONAL LAW INSTITUTE UNIVERSITY

BHOPAL

COMPETITION LAW
Semester VII

HORIZONTAL AGREEMENT

SUBMITTED BY: SUBMITTED TO:

SIDDHANT BARMATE
ROLL 2017BALLB112 Dr. V.K. DIXIT
Presentation

The new rivalry law of India, to be specific, the Competition Act, 2002 (Act, for brief altered in 2007) in
its preface features its significant destinations so as ―to forestall works on having unfriendly impact on
rivalry, to advance and support rivalry in business sectors, to secure the premiums of customers and to
guarantee opportunity of exchange carried on by different members in business sectors in India‖. The
Preamble likewise commands that the financial advancement of the nation should be kept in see in
executing the Act's targets. Jaivir Singh, Professor at Jawaharlal Nehru University New Delhi, contends
that opposition strategy in creating economies should uphold their general advancement way. An
overview of the writing shows that there is no concurred rundown of the components of rivalry law
however the accompanying figure noticeably in the laws of most nations (UNCTAD, 2002): Measures
identifying with arrangements between firms in a similar market to control rivalry. These measures can
incorporate arrangements prohibiting cartels just as arrangements permitting cartels in specific situations.
Measures identifying with endeavors by an enormous officeholder firm to freely practice market power
(in some cases alluded to as maltreatment of prevailing position). Measures identifying with firms that,
acting aggregately yet without an unequivocal understanding between them, endeavor to practice market
power. These measures are some of the time alluded to as measures against aggregate strength. Measures
identifying with endeavors by a firm or firms to drive at least one of their adversaries out of a market.
Laws precluding savage estimating are a case of such measures. Measures identifying with joint effort
between firms for the reasons for research, improvement, testing, showcasing, and dispersion of items.
Measures for control of mergers, combinations and acquisitions. The above rundown of six estimates
which happen in most rivalry laws, isn't comprehensive nor does it recommend that each measure is given
a similar weight or portrayed in a similar phrasing in every nation with a working rivalry law.

_________________________________________________________________________________

II.DEFINITION OF HORIZONTAL AGREEMENT

A Horizontal Agreement is an understanding between contending firms in a similar industry, which may
bring about diminished rivalry. Subjects of such arrangements may include2:

Basic evaluating approaches

Basic creation quantities

Data sharing

In numerous nations, hostile to serious conduct and unreasonable strategic approaches are controlled by
antitrust laws.

All in all, Horizontal Agreement is an arrangement for co-activity between at least two contending
organizations working at a similar level in the market. This is for the most part to build up a solid
connection between contenders. The considerable statements of the arrangement may incorporate
approaches with respect to estimating, creation and appropriation. The understanding may likewise
examine sharing of data with respect to the items and the market.3 Horizontal Agreements can provoke
infringement of antitrust laws in light of the fact that these arrangements may incorporate provisos which
limit rivalry.

Flat Agreements may cause negative market impacts regarding costs and nature of items. Then again,
level collaboration can prompt generous financial advantages, for example, sharing danger, cost reserve
funds, sharing skill and making advancements quicker.

Value fixing is a term related with flat arrangements. It is a game plan wherein a few contending
organizations settle on a mystery consent to set costs for their items to forestall genuine rivalry. Value
fixing is a criminal infringement of government antitrust resolutions. Value fixing likewise incorporates
mystery setting of good costs among providers and supported makers or merchants to beat the opposition.

III. Hostile to COMPETITIVE AGREEMENTS4

Firms go into arrangements, which may have the capability of confining rivalry. Arrangements could be
formal composed archives or oral understandings, regardless of whether enforceable by legitimate
procedures. Even arrangements are those among contenders. An especially poisonous sort of flat
arrangements is the cartel. Flat arrangements are bound to decrease rivalry than arrangements between
firms in a buy dealer relationship.

Even AGREEMENTS: Agreements between at least two ventures that are at a similar phase of the
creation chain and in a similar market establish the level assortment. An undeniable model that rings a
bell is an understanding between endeavors managing in similar item or items. In any case, the market for
the product(s) is basic to the inquiry, if the understanding channels the law. The Act has taken
consideration to characterize the applicable market. To pull in the arrangement of law, the items must be
substitutes. On the off chance that gatherings to the arrangement are the two makers or retailers (or
wholesalers), they will be regarded to be at a similar phase of the creation chain.

The Act looks to keep monetary operators from contorting the serious cycle either through concurrences
with different organizations or through one-sided activities intended to reject genuine or possible
contenders. It dislikes arrangements among contending ventures (even concurrences on) costs or other
significant parts of their serious collaboration.

All in all, the ―rule of reason‖ test is needed for building up that an arrangement is illicit. Nonetheless,
for particular sorts of arrangements, the assumption is commonly that they can't fill any helpful or
procompetitive need. In view of their assumption, the administrators don't expose such arrangements to
the

―rule of reason‖ test. The Act assumes that the four kinds of arrangements between undertakings,
associated with the equivalent or comparable assembling or exchanging of merchandise or arrangement of
administrations have an apparent unfriendly impact on rivalry. These four kinds of arrangements between
big business are as portrayed here under:

Arrangements with respect to costs: These incorporate all arrangements that legitimately or by
implication fix the buy or deal cost.

Arrangements with respect to amounts: These incorporate arrangements pointed toward restricting or
controlling creation, gracefully, markets, specialized turn of events, venture or arrangement of
administrations.
Arrangements with respect to offers (deceitful offering or offer gear): These incorporate tenders
submitted because of any joint action or understanding.

Arrangements with respect to showcase sharing: These incorporate arrangements for sharing of business
sectors or wellsprings of creation or arrangement of administrations by method of allotment of
topographical zone of market or sort of merchandise or administrations or number of clients in the market
or some other comparative way.

Such level arrangements, which incorporate participation of cartels, are ventured to prompt outlandish
limitations of rivalry and are in this manner attempted to have an obvious antagonistic impact on rivalry.
This would imply that there would be extremely restricted extension for attentiveness and understanding
with respect to the arraigning and settling specialists and almost no degree for the wayward ventures to
counter the assumption (the deviant undertakings reserved the privilege to upset passages and
punishments proposed to be forced under the canceled MRTP Act and the Restrictive Trade Practices Act
of the U.K.)

Rivalry LAW IN INDIA As for Flat Arrangements

The Law identifying with Even Arrangements in different nations including India might be talked about
as follows:

I. INDIA
Enactment

The most seasoned mainstay of the Indian rivalry overall set of laws is the Syndications and Prohibitive
Exchange Practices Demonstration of 1969 (MRTP Act), which speaks to the primary endeavor to
manage rivalry issues.

The Legislature designated a board of trustees in 1999 to inspect the sufficiency of the MRTP
Demonstration so as to recommend a cutting edge rivalry law framework just as to build the chance of
managing cartels. Compliant with the suggestions of this advisory group, the Opposition Demonstration
of 2002 (revised in 2007), was ordered on thirteenth January 2003.However, as per the Opposition
Commission of India

(CCI), the CCI itself ―needs further fortifying through utilitarian rules for its activities‖, and India
doesn't have - as of now solid lawful devices to differentiate worldwide cartels, (for example, the
―Vitamins cartel‖).The old rivalry law just accommodated general arrangements, while the upgraded one
explicitly addresses cartel concerns, yet ―India must guarantee that the law is properly executed and
should likewise create powerful procedures for researching global cartels.‖ (Chowdhury, 2006)

Part I, Segment 2 of the Opposition Demonstration of 2002 (the ―Act‖) characterizes:

(b) ―agreement‖ such any game plan or comprehension or activity in show

regardless of whether, such plan, comprehension or activity is formal or recorded as a hard copy; or

regardless of whether such game plan, comprehension or activity is proposed to be enforceable by lawful
procedures;

(c) ―cartel‖ incorporates a relationship of makers, dealers, merchants, brokers or specialist organizations
who, by understanding among themselves, breaking point, control or endeavor to control the creation,
conveyance, deal or cost of, or, exchange products or arrangement of administrations.

Part II, Area 3 of the Demonstration manages the ―Prohibition of agreements‖.

Contextual investigation

India has been engaged with a global cartel from 1990 to 1999, the supposed ―Vitamins cartel‖: driving
makers of nutrients including Roche AG and BASF of Germany, Rhone-Poulenc of France,

_____________________________________________________________________________________

Takeda Substance of Japan shaped a cartel splitting the world market and value fixing for various sorts of
vitamins.Overcharges affected agricultural nations, and during the intrigue time frame, India's cheats
were USD 25.71 million.According to a CCI report, ―CUTS, an India-based public premium
association, gathered some data on the nutrients cartel and gave it to the opposition authority for example
MRTPC for additional activity. Nonetheless, the MRTPC arrived at the resolution that no case could be
made in such manner. The ground for coming to such an end result were, be that as it may, not known.―

The cartel worked for more than 10 years and later arraigned with the assistance of Rhone-Poulenc which
abandoned from cartel and helped out US specialists. Roche paid fines of US $ 500 million and all out
fine gathered surpassed US $ 1 billion in the US alone.The cheats paid by 90 nations bringing in nutrients
were assessed as much as $ 2700 million during the 1990s. The examination additionally uncovered that
wards with powerless cartel requirement system endured more. (Clarke and Evenett, 2003)

V.PRESUMPTION UNDER Area 3(3) Rivalry ACT:REBUTTABLE OR IRREBUTTABLE

Areas 3 and 4 of the Opposition Demonstration (India) identifying with hostile to serious arrangements
and maltreatment of predominant postion, were as of late brought into power on May 20, 2009.

Area 3 of the Demonstration proclaims that enemy of serious arrangements will be void and forbids
undertakings and people from going into arrangements in regard of creation, gracefully, circulation,
stockpiling, securing or control of merchandise or arrangement of administrations that causes or is
probably going to cause a considerable antagonistic impact on rivalry in India.

By and large arrangements are grouped into level and vertical arrangements with the end goal of rivalry
laws. Be that as it may, the Indian law doesn't utilize this phrasing. In any case it very well may be seen
that, in substance Segment 3(3) covers flat arrangements, while Segment 3(4) covers vertical
arrangements. The significance of this differentiation is that typically level arrangements identifying with
value fixing, market sharing and so forth are viewed "according to se "against serious and no defence is
accessible.

Clarification.— For the motivations behind this sub-segment, "offered fixing" signifies any arrangement,
between endeavors or people alluded to in sub-segment (3) occupied with indistinguishable or
comparable creation or exchanging of products or arrangement of administrations, which has the impact
of killing or lessening rivalry for offers or antagonistically influencing or controlling the cycle for
offering

The utilization of the expression " will be assumed" in Area 3(3) raises impressive measure of uncertainty
on the idea of the assumption raised. Is the assumption rebuttable or irrebuttable? One sentiment says the
assumption can be invalidated ( see here), while another assessment is that it can't be refuted (see here).

The significance of this inquiry might be clarified by this model:

A specific arrangement between undertakings occupied with indistinguishable exchange of products is

express asserted to be one which offers markets by method of topographical allotment. When this reality
of market sharing is set up, the undertakings won't be permitted to show how the understanding isn't
hostile to serious, if the assumption is irrebuttable. While on the off chance that it is rebuttable, at that
point its lone a matter of weight of verification. When the necessities on Area 3(3) are met, the weight
will be on the endeavors to show how their understanding doesn't have an obvious unfavorable impact on
rivalry.

VI.CONCLUSION

The law perceives licensed innovation rights and so as to encourage their security, it grants sensible
limitations forced by their proprietors. Since trades don't affect markets in India, arrangement between
exporters, notwithstanding being flat, are absolved.
Flat arrangements are those that are between endeavors at a similar phase of the creation chain. For
instance, understanding between two opponents is a flat arrangement. In instances of arrangements
between opponents at fixing costs or for restricting creation or for sharing business sectors, there is an
assumption in the Demonstration that such arrangements cause calculable unfavorable consequences for
rivalry.

A common rundown of Level Arrangements can be found in Article 81(1)(a)(c) of the European People
group Deal and Part III of UNCTAD,2004

12
BIBLIOGRAPHY

1.STATUTES

• Competition Act,2002(Amended in 2007)

• Sherman Act,1989(15 USC § 1)
2.BOOKS

• Competition Law India, Policy Issues, and Developments. 1st Edition, New Delhi, Oxford, 2006
• Vinod Dhall, Competition Law today, concepts, issues, and the law in practice, 1st Edition, Oxford
University Press, India, 2007
• Dr. Souvik Chatterji, Competition Law in India and Cartels in India and USA, 1st Edition,
Allahabad Law Agency, India, 2014

2.WEBSITES

• http://www.mondaq.com/india/x/250048/Trade+Regulation+Practices/AntiCompetitive+Agreeme
nts+Tests+And+Tribulation
• http://books.google.co.in/books?id=YrkMLy9Z6OwC&pg=PA56&lpg=PA56&dq=horizontal+agr
eements+competition+law+india&source=bl&ots=L7DU1_gRH4&sig=IaRUzT1MP9iL8KSWC
NaWMJqMmqA&hl=en&sa=X&ei=L5fWUovCIof_rAeTroGAAw&ved=0CDoQ6AEwAw#v=o
nepage&q=horizontal%20agreements%20competition%20law%20india&f=false

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Home » Competition Issues » CASE STUDY 02

CASE STUDY 02
Director General (Supplies & Disposals), Department of Commerce, Ministry of Commerce & Industry,
Government of India, New Delhi v. M/s Puja Enterprises and Others*

Forum:
Competition Commission of India (CCI), New Delhi

Act/ Sections referred:

The Competition Act, 2002

Section 3 of the Competition Act, 2002 – Prohibition of anti-competitive agreements

Agreements/decisions [Horizontal agreements] including “Cartel” engaged in identical or similar trade

of goods/services are presumed to have Appreciable adverse effect (AAE) on competition.
– 3(3) (b)- limits or controls production, supply, markets, technical development, investment or
provision of services;

– 3(3)(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;

– 3(3)(d) – Directly or indirectly results in bid rigging or collusive tendering

Parties to the Case

1. Informant- Director General (Supplies & Disposals), Department of Commerce, Ministry of

Commerce & Industry, Government of India, New Delhi

2. Opposite Party (OP)- M/s Puja Enterprises and Others

3. Investigator- Director General (DG), Competition Commission of India (CCI)

Facts of the case

This case was initiated on a reference made by Director General-Supplies & Disposal (DGS&D),
Department of Commerce, Ministry of Commerce & industry, Govt. of India, New Delhi. In 2011, the
Ministry of Commerce, which is responsible for state procurement, put out to tender a contract to supply
ankle boot rubber soles to the military. The shoemakers submitted bids for the contract worth Rs. 10.45
crores rupees (€1.3 million) but suspicions were raised because their offers were similar.

It was found that the difference in quoted prices of different bidders was in a very narrow range and all
the tenderers barring one, had restricted the quantity to be supplied by it during the Rate Contract1
period.

The Directorate General of Supplies and Disposals, directly responsible for procuring the contract,
passed on its concerns to the CCI. The reference alleged predetermined, collusive and restrictive bidding
pattern or cartel formation by the bidders thereby violating the various provisions of the Act.

Issues Involved
(i) Whether conditions prevailing specifically with respect to the industry, the product in question, its
market etc. were conducive for collusive action by the parties?
(ii) Whether the identical/ near identical prices quoted by the parties against the Tender Enquiry of
DGS&D dated 14.06.2011 were a result of collusion amongst them and whether there are any direct or
indirect evidences in support of an agreement, formal or informal between them for bid rigging in
violation of the provisions of section 3(1) read with section 3(3) of the Act as alleged?
(iii) Whether, the restriction of total quantity to be supplied during the RC period and the restriction of
maximum quantity to be supplied per Direct Demanding Officer (DDO) was a result of collusion
amongst the parties and whether there are any direct or indirect evidences of collusive agreement
amongst the manufacturers in violation of the provisions of section 3(1) read with section 3(3) of the
Act as alleged?
(iv) Whether there is any violation of the Act under section 3(4) as alleged by the informant.

CCI Decision
After a detailed investigation, Competition Commission of India held that the bidder-suppliers by
quoting identical/ near identical rates had, indirectly determined prices/ rates in the Rate Contracts
finalized by DG S&D and indulged in bid rigging/ collusive bidding in contravention of the provisions
of section 3(1) read with section 3(3)(a) and 3(3)(d) of the Act.

Further, the Commission noted that the parties had also controlled/ limited the supply of the product in
question and shared the market of the product amongst themselves under an agreement/ arrangement in
contravention of the provisions of section 3(1) read with sections 3 (3) (b), 3 (3) (c) and 3 (3) (d) of the
Act.

The Commission was of the view that the opposite party bidders by quoting identical / near identical
rates had indirectly determined prices/rates in the rates contract finalised by the DG S&G and indulged
in bid rigging/ collusive bidding in contravening provisions. Further, the opposite parties by imposing
quantity restrictions for the RC period limited the supply of the product and the market share. They also
shared the market of the product among themselves under an agreement/arrangement.

The Competition Commission of India penalised 11 shoe manufacturers for indulging in collusive and
restrictive bidding. Imposing a penalty of Rs 6.18 crore on the 11 firms, CCI asked the companies to
‘cease and desist’ from anti-competitive practices in future.

The companies penalised include A R Polymers, Puja Enterprises, M B Rubber, Tirupati Footwear, H B
Rubber, Rajkumar Dyeing and Printing Works, Preet Footwears, S S Rubbers, R S industries, Shiva
Rubber Industries and Derpa Industrial Polymers.

Analysis of the Order

Typically there are four types of cartel conduct viz. price fixing, market sharing, output restricting and
bid rigging. Bid rigging takes place when the bidders collude to keep the bid amount at a pre-determined
level, which is by way of intentional manipulation by the members of the bidding group. Collusive
bidding or bid rigging defeats the very purpose of inviting tenders and is anti-competitive in nature. The
present order will definitely act as a deterrent to industries that usually engage in such practices when
the bidding takes place in government tenders. The present case is an example of complementary
bidding2 wherein the competitors agree to submit bids that are either too high to be accepted or contains
special terms that will not be acceptable to the buyer. In the instant case, the OP had started to restrict
their total quantity for the RC period only since 2010-11 and no such restrictions were held during
earlier years. Moreover their total installed capacity was 15, 72,000 pairs p.a whereas they restricted
their quantity to 7,00,000 pairs against the tender in reference to which the OP had no valid justification
to offer. If bid rigging takes place in government tenders, it is most likely to have adverse effects on its
purchases and public spending, ultimately causing huge loss to the exchequer.

–Prepared By: Arun Talwar, CIRC

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