BATCH 2019-24

SYNOPSIS
Topic

“Understanding the Legality of Cartels

under Competition Law in India”
Competition Law

Submitted to: Submitted by:

Ms. Aishwariya, Gaury Singh
ASSISTANT PROFESSOR (CL) B. A. LLB Hons.,
FACULTY OF LAW, ROLL NO- 91901040009
MARWADI UNIVERSITY

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 Introduction
The competition commission of India is responsible for the regulation and enforcement of
Cartel laws which is governed by the Competition Act, 2002.  The decision of the
competition commission regarding any particular case can be challenged and appealed to the
National Company Law Appellate Tribunal (NCLAT) and following to the Supreme Court of
India. The Competition Commission Act, 2002 bars the civil courts from the enforcement of
any proceeding in respect of any particular matter which is enunciated by the Commission
and NCLAT under the governed act. 
The collusion of the companies into a single entity generally happens due to the fear of
missing out in the market. Generally, strong competing firms have an added advantage to
grab huge amounts of attention from the public for selling its products and services, therefore,
in order to curb that competition, the firms merge together to attain a higher amount of profits
collectively.
Types of Collusion

They are two ways of collusion; one is implicit and the other is explicit collusion. An explicit
collusion agreement occurs when the members of the cartel actually meet to decide upon how
to control the market. Such collusion is considered illegal in the jurisdiction of India by the
competition act. While on the other hand, Implicit collusion which is also termed as “tacit
collusion” essentially occurs when the members of the collusion show willingness through
their actions to engage in an agreement collectively.  

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 3of 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.

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  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.
Some of the landmark case laws that are also perused as reference for understanding the
legality of cartels under Competition Law in India are as follows:
1. Flashlight Case1
2. Rajasthan Cylinders Case2
3. Madhya Pradesh Chemists and Distributors Federation v. Madhya Pradesh Chemist
and drug association3
1
Suo Moto 01/2017
2
Civil Appeal 3546/2014
3
Civil Suit No. 64/2014

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 4. Jeetendra Gupta v. Competition Commission of India4

1.1. Review of Literature

 "Cartels under Indian Competition Law: An Overview" by Priyamvada
Gopalakrishnan and V. Niranjan, published in the Journal of Indian Law and Society,
Vol. 10, No. 2 (2019). This article provides an overview of cartels and their illegality
under Indian competition law, and analyses the legal framework for detecting and
penalizing cartels.
 "Cartels and Collusion under Indian Competition Law: A Critical Review" by Anant
Mishra and Parveen Kumar, published in the International Journal of Law and
Management, Vol. 60, No. 2 (2018). This article critically evaluates the Indian
competition law framework in relation to cartels and collusion, and examines the
effectiveness of the legal provisions in deterring cartel behavior.
 "Cartel Regulation in India: A Critical Review" by Rishabh Khare, published in the
Journal of Antitrust Enforcement, Vol. 7, No. 1 (2019). This article reviews the
regulatory approach of the Competition Commission of India towards cartels, and
assesses the effectiveness of the enforcement mechanisms in deterring and punishing
cartel behavior.
 "Cartels and Competition Law in India: An Analysis" by Abhishek Jain, published in
the Journal of Business and Intellectual Property Law, Vol. 2, No. 2 (2018). This
article analyzes the legal framework for detecting and punishing cartels in India, and
examines the challenges faced by the competition authorities in regulating cartel
behavior.
 "Cartels in India: A Critical Analysis" by Ashish Kumar and Rakesh Kumar,
published in the Indian Journal of Law and Justice, Vol. 10, No. 1 (2019). This article
critically evaluates the Indian competition law framework in relation to cartels, and
examines the effectiveness of the legal provisions in deterring cartel behavior.
 "Cartels in India: A Legal and Economic Analysis" by P. Raghavendra Rao, published
in the Journal of Competition Law and Economics, Vol. 12, No. 4 (2016). This article
provides a legal and economic analysis of cartels under Indian competition law, and
examines the challenges faced by the competition authorities in detecting and
penalizing cartel behavior.

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Civil Appeal No. 30/2014

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1.2. Statement of Problem
The issue of cartels and their legality under Indian competition law has been a subject of
debate and concern for policymakers, legal practitioners, and scholars. Despite the legal
prohibition against cartels, there have been instances of cartelization in various sectors of the
Indian economy, leading to adverse effects on consumer welfare and economic efficiency.
The problem is that the existing legal framework and enforcement mechanisms for detecting
and penalizing cartels may not be adequate to address the challenges posed by cartel
behavior. Therefore, there is a need for a critical analysis of the legality of cartels under
competition law in India, with a focus on identifying the gaps and limitations in the current
legal and regulatory framework and proposing appropriate reforms to strengthen the
competition law regime.

1.3. Objectives
 To examine the legal framework for detecting and penalizing cartels under Indian
competition law, with a focus on the Competition Act, 2002 and its enforcement
mechanisms.
 To critically analyze the economic, legal, and social implications of cartelization in
various sectors of the Indian economy, and assess the impact of cartels on consumer
welfare and economic efficiency.
 To identify the challenges and limitations in the existing legal and regulatory
framework for detecting and penalizing cartels, and propose appropriate reforms to
strengthen the competition law regime.
 To explore the international best practices and experiences in regulating cartels, and
assess their relevance and applicability to the Indian context.
 To examine the role of the Competition Commission of India (CCI) in regulating
cartels and promoting competition in the Indian market, and evaluate its effectiveness
in addressing the challenges posed by cartel behavior.
1.4. Hypothesis
Following Hypothesis has been nullified in the research project:
 The existing legal and regulatory framework for detecting and penalizing cartels
under Indian competition law is effective in deterring cartel behavior and promoting a
competitive market structure in India.

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  The role of the Competition Commission of India (CCI) in regulating cartels and
promoting competition in the Indian market is effective in deterring cartel behavior
and ensuring a competitive and efficient market structure in India.
1.5. Research Methodology
The method adopted here is “Doctrinal method” of acquiring information. Doctrinal method
allows the researcher to carry out a detailed historical research (history of law, for e.g.),
whereby the information has been gathered with the use of secondary sources with
established facts and figures, thus aiding in acquiring a better conceptual clarity.

1.6. Tentative chapterisation

 Chapter 1- Introduction
 Chapter 2- Cartels and its Legal Implications
 Chapter 3- Role of Competition Commission in regulating cartels
 Chapter 4- Case Studies
 Chapter 5- Suggestion and Conclusion

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References
Books
 Basu, K. (2019). Antitrust and Cartelization in India: Policies and Practice. Springer.
 Chowdhury, S. K. (2018). Competition Law in India: Policy, Issues, and
Developments. Routledge.
 Dwivedi, A., & Mishra, M. K. (2019). Competition Law in India: Policy, Issues, and
Challenges. Springer.

Articles
 Aiyar, A. S. (2017). Competition Law and Cartels in India. Economic and Political
Weekly, 52(2), 50-57.
 Jain, S., & Suri, A. (2018). Cartel Enforcement in India: Lessons for Emerging
Economies. Journal of Antitrust Enforcement, 6(2), 236-255.
 Mehta, A. (2018). An Analysis of Cartel Regulation in India: Current State and Future
Prospects. Journal of Competition Law and Economics, 14(1), 87-110.
 Patra, D. P. (2019). Cartelization and Competition Law in India: A Study of Major
Legal Developments. Journal of Intellectual Property Rights, 24(4), 202-211.

Reports
 Competition Commission of India. (2020). Annual Report 2019-20. Government of
India.
 Ministry of Corporate Affairs. (2019). National Competition Policy. Government of
India.
 Organization for Economic Cooperation and Development. (2019). Competition Law
and Policy in India. OECD Publishing.