Page |0

COMPETITION LAW
 Page |1

INTRODUCTION
Competition is a process in which market players compete for customers by engaging in
economic rivalry. In a commercial context, competition also refers to a condition in which
businesses compete for client loyalty in order to fulfill their goals. One of the pillars of a
successful corporate environment is free and fair competition. The Indian economy has been
one of the strongest performers in recent years and is on a high-growth path. In many crucial
areas of the economy, a greater degree of competition can act as a catalyst for unlocking the
full potential of the economy. It is vital to maintain an environment that allows fair
competition results in the market, restrains anti-competitive behavior, and discourages market
players from engaging in unfair trade practices for the benefit of consumers and the economy
as a whole. As a result, in the global economy, the rivalry has become a driving factor. The
Indian Competition Act of 2002 is quite comprehensive, and it was enacted to satisfy the
needs of economic growth and worldwide economic advances in the area of competition
legislation. The legislation is in sync with other policies such as trade policy, FDI rules,
FEMA, and so on, ensuring that overall competition policy is consistent.
 Page |2

Question (a): An understanding has been reached among the manufacturers of cement
to control the price of cement, but the understanding is not in writing and it is also not
intended to be enforced by legal proceedings. Examine whether the above
understanding can be considered as an ‘Agreement’ with the meaning of Section 2 (b) of
the Competition Act. 2002.

Ans: The Competition Policy's goal is to enhance efficiency and maximize national welfare
while also creating a business environment that encourages healthy market competition. An
agreement that prevents a company, individual, or group from entering into a contract for the
manufacture, supply, distribution, storage, acquisition, or control of goods or services that
causes or is likely to create a significant reduction in competition. Agreements made in
violation of the foregoing are null and invalid. These agreements are seen to have a
significant negative impact on competitiveness.

Two kinds of Agreements

- Horizontal Agreement1- Section 3(3) of the Competition 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 the geographical area of the 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.
- Vertical Agreement 2- Vertical agreements are agreements that are entered amongst
enterprises or persons at different stages of the production chain say e.g., an agreement
between an input supplier and a manufacturer of a product using the input or agreements

1
Tanisha Kohli, Horizontal agreements under the Competition Act, 2002, available at:
https://blog.ipleaders.in/horizontal-agreements-under-the-competition-act-2002/#:~:text=Equation%202%3A
%20An%20Agreement%2C%20the,effect%20on%20competition%20in%20India.
2
Himanshi Garewal ,Vertical agreements under Competition Act, 2002, available at:
https://blog.ipleaders.in/vertical-agreements-under-competition-act-2002/ Dec 19, 2021
 Page |3

between principals and dealers, etc. These are agreements that operate at different levels
of trade.

Section 2(b):
Agreement ‘includes any arrangement or understanding or action in concert:
i. Whether or not, such arrangement, understanding, or action is formal or in writing or
ii. Whether or not such arrangement, understanding, or action is intended to be
enforceable by legal proceedings.
In view of the above definition of agreement ‘, an understanding reached by the cement
manufacturers to control the price of cement will be an agreement within the meaning of
Section 2(b) of the Competition Act, 2002 even though the understanding is not in writing
and it is not intended to be enforceable by legal proceedings.

Question (b): The orange producers of Nagpur have formed an association to control
the production of oranges. Examine whether it will be considered as a cartel within the
meaning of Section 2(c) of the Competition Act, 2002.

Ans: Cartel: As per section 2(c) of the Competition Act, 2002 the term “cartel” includes an
association of producers, sellers, distributors, traders, or service providers who, by agreement
amongst themselves, limit, control, or attempt to control the production, distribution, sale or
price of, or, trade in goods or provision of services. The term “cartel” has an inclusive
meaning.

To summarise, a cartel is a group of rivals, businesses, or individuals that wants and agrees to
decrease (or eliminate) competition while maintaining the appearance of competition. Parallel
behavior in prices, dispatch, supply, and other areas is another popular basis for identifying a
cartel. In addition to attempts at control, the Competition (Amendment) Bill 2020 (the
Competition Bill) includes attempts to limit the production, distribution, sale, or price of
goods or the provision of services under the ambit of the cartel. 'Buyer cartels' are likewise
covered by the Competition Bill.

Thus, in this case, an association formed to control the production of oranges is within the
aforesaid definition of a cartel. Hence the association of orange producers of Nagpur will be
considered as a cartel under the provisions of the Act.
 Page |4

CONCLUSION
The Competition Commission's objective is to prohibit anticompetitive behaviors, promote
and sustain competition, safeguard consumers' interests, and ensure free trade in India's
marketplaces. The Competition Act of 2002's principal goal is to foster and maintain market
competition while also preventing actions that harm competition. Anti-competitive
agreements, enterprise abuse of dominant position, and mergers that produce or are likely to
cause a considerable adverse effect on competition inside India are all prohibited by the Act.
Finally, it is the Commission's responsibility to prohibit anticompetitive activities, promote
and sustain competition, safeguard consumers' interests, and ensure free trade in India's
marketplaces. Also, the companies are forced by competition law to improve their product
quality and productivity in order to attract customers, giving them a competitive advantage
over their market competitors. Thereby ensuring that the unethical activities meant to gain
greater market share than what might be attained through honest competition are prohibited,
maintaining a fair marketplace for consumers and producers.