COMPETETION LAW NOTES

- Exclusive supply and distribution agreement.

- Element product and geographich market
- Re- sale price maintenance
- Type in arrangments
- Collusive bidding / bid rigging
- Horizontal - vertical agreements
- Social justice (article 39A)
- Recommendation and objective of raghavan & sachar committee
- Section 19(3) and 19(4)- adverse and appreciable effect on market

1. Exclusive supply and distribution agreement.

The Competition Act comprises a non-exhaustive list of vertical agreements that may be only
prohibited upon an investigation of the CCI that they cause or can probably cause, an
appreciable adverse effect on competition (AAEC) in India. The types of vertical restraint
identified in the Competition Act include exclusive supply agreement, tie-in arrangements,
exclusive distribution agreement, resale price maintenance & refusal to deal.

What are exclusive agreements?

An exclusive agreement is an agreement between two or more two parties for the purchase of

goods exclusively from the prescribed seller in the agreement. The main component of an

exclusivity agreement is the understanding that the buyer will not purchase the goods, provided

by anyone else other than the seller for the specified time period of the agreement. Hence, it

dictates that the seller is the exclusive supplier of the specified goods to the buyer. This

agreement generally happens in a vertical seller/buyer relationship where a buyer consents to

buy exclusively from the seller. Competition law takes into consideration the two broad

categories of exclusive agreements, i.e.,

(a) Exclusive Distribution Agreements; and

(b) Exclusive Supply Agreements.

Exclusive Supply Agreements

Exclusive Supply Agreements

Exclusive Supply Agreements are defined under Section 3(4)(c) of the Competition Act, 2002

("Act") as agreements restricting the purchaser from purchasing/dealing with goods other than

those of the seller. Exclusive supply agreements operate a restriction on the seller. Exclusive

supply agreements are also known as 'single branding' agreements or 'quantity forcing'

arrangements. Exclusive Supply Agreements can be de jure as well as de facto.

A de jure exclusive supply agreement operates as a direct restriction on the buyer from buying

goods from a competing source.A de jure exclusive supply agreement operates as a direct

restriction on the buyer/distributor/supplier from procuring/buying goods from a competing

supplier or source.

A de facto exclusive supply agreement is one where the seller manipulates the covenants of the

contract in such a way that the buyer is influenced to concentrate all its requirements from a

single seller.A de facto exclusive supply agreement is when the seller manipulates the contract

covenants in such a manner that the buyer is induced to concentrate all its requirements from a

single seller. Usually, the seller acting on the prior knowledge of the buyer's product/input

requirement for a particular year specifies an off-take quantity in the contract knowing fully that

the said specified quantity constitutes the majority of the purchaser's total demand of a

particular product during a specific period of time.

Exclusive distribution agreement

An exclusive distribution agreement is defined under Section 3(4)(c) of the Act as an agreement

that restricts, limits, or withholds the supply or output of any goods or designates any area or
market for the sale or disposal of goods. An exclusive distribution agreement operates as a

restriction on the seller. An exclusive distribution agreement can also be identified either as a

territorial restriction, where the seller agrees to sell his products only to one distributor in a

particular group of consumers or in a particular territory. Exclusive distribution agreements can

also operate as an agreement providing for an exclusive medium/channel for sale/distribution of

goods, e.g., either offline or online.

2. Element product and geographich market

Geographic Market

The geographical boundaries of the relevant market can be similarly defined.

Geographic dimension involves identification of the geographical area within which

competition takes place. Relevant geographic markets could be local, national,

international or occasionally even global, depending upon the facts in each case. Some

factors relevant to geographic dimension are consumption and shipment patterns,

transportation costs, perishability and existence of barriers to the shipment of products

between adjoining geographic areas. For example, in view of the high transportation

costs in cement, the relevant geographical market may be the region close to the

manufacturing facility.

The principle of geographic market is similar to that of product market. The geographic

market is defined by purchasers’ views of the substitutability or interchangeability of

products made or sold at various locations. In particular, if purchasers of a product sold

in one location would, in response to a small but significant and non-transitory increase

in its price, switch to buying the product sold at another location, then those two
locations are regarded to the in the same geographic market, with respect to that

product. If not, the two locations are regarded to be in different geographic markets.

For example, markets for sand, gravel, cardboard boxes, refuse hauling and other

heavy but low value products are often quite small because the cost of transportation is

a large fraction of the cost of the product. Transportation cost therefore can indirectly

affect the limits of the geographical markets. Limits of geographic markets are often

determined by transportation costs, tariffs, trade barriers etc. As an illustration, if foreign

producers of a product must pay a tariff (domestic producers do not) then the resulting

increase in the price of the foreign product may be so large that the consumers would

not switch from the domestic product for the foreign product. Similarly regulations such

as for health and safety can serve as barriers to the sale of some goods and services.

The relevant geographic market could be determined by the Competition Authority

having regard to all or any of the following factors:

Regulatory trade barriers;

– local specification requirements;

– national procurement policies; • adequate distribution facilities;

– transport costs;

– language;

– consumer preferences;

– need for secure or regular supplies or rapid after-sales services.

Barriers to market entry include administrative decisions by State agencies, legal

provisions relating to conditions of manufacturing and delivery, legal professional

standards, trade policy (tariffs, quotas, antidumping measures etc), financial barriers

laid down by the State and barriers in terms of techniques, technologies and intellectual

property rights.

3. Resale price maintenance

The concept of Resale Price Maintenance (“RPM”) is defined in the Competition Act, 2002 (“the

Act”). RPM is a contractual arrangement between a manufacturer and distributor or wholesaler

or any other party in the supply chain whereby the manufacturer imposes a resale price at which

the distributor is required to sell the product. This helps the manufacturer maintain a uniform

price across end-customers. The concept itself is not illegal but is considered a violation of the

Act

Meaning -

Under the Indian Competition Act, Resale Price Maintenance (RPM) is defined under Section

3(4) (e) of the Act as including any agreement to sell goods on the condition that the prices to

be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is

clearly stated that prices lower than those prices may be charged.
Also known as vertical price fixing, RPM refers to agreements or practices among enterprises at

different levels in a distribution channel, wherein an enterprise decides the resale price at which

a product or service must be sold by a distributor. As a vertical intra-brand restraint, RPM

governs the resale price of products or services of a particular manufacturer. RPM, in its usual

form, is the practice of setting a price floor, below which sales cannot occur, as in the case of

minimum resale price maintenance. In its classic formulation, RPM is the act of directly

controlling the retail transaction price for the manufacturer's products. However, RPM may also

be accomplished through some programs under which a manufacturer unilaterally announces

its recommended retail prices and stops dealing with retailers that do not follow its suggestions.

CCI's adjudication on RPM

The CCI has adjudicated on the concept of RPM, through decided judgments.

The first was in the case of M/s Esys Information Technologies Pvt. Ltd. v. Intel Corporation &

Anr1 . In this case, the Informant (a distributor) alleged that Intel was a dominant enterprise that

inter-alia indulged in the practice of RPM. The CCI however recorded that the mere monitoring

of resale price by Intel at a macro level cannot be termed as resale price maintenance in terms

of section 3(4)(e) of the Act and cannot by itself be said to be anti-competitive. No evidence was

found by the Director General of Investigation (DG) to suggest that the aforesaid act of Intel

would in any manner create barriers to new entrants in the market, drive existing competitors

out of the market, or foreclose competition.

For the first time, in Re: M/s Fx Enterprise Solutions India Pvt. Ltd v. M/s Hyundai Motor India

Limited,3 the CCI held that the restriction imposed by a company (Hyundai) on the maximum

permissible discount that may be given by a dealer to the end-consumer, amounts to an act of

RPM, that violated the Act. The CCI found that Hyundai monitored the maximum permissible
discount levels through a 'Discount Control Mechanism' which was implemented in the following

manner:

● Hyundai mandated the dealers to adhere to the maximum permissible discount by not
authorizing them to give discounts above the recommended range.
● Hyundai admitted to appointing 'mystery shopping agencies' to collect data with respect
to the levels of discount offered by its various different dealers all over NCR.
● Though Hyundai contended that their discount schemes were recommendatory in nature
and that the distributors/ dealers were not mandated to follow the scheme, there was
enough evidence to show that a penalty punishment mechanism had been put in place
by Hyundai for any non-compliance by the dealers with the discount scheme.

As a result, a penalty of INR 87 crores was imposed. Currently, on an appeal filed by Hyundai,

the National Company Law Appellate Tribunal (NCLAT) vide its order dated 18 July 2017 4 has

stayed the fine and recorded that the CCI, by denying Hyundai an opportunity to respond when

it changed the definition of the relevant market had violated Hyundai's right to fair hearing and in

turn failed to adhere with the principles of 'natural justice'.

4. Tie in arrangments

Tie-in arrangements is an agreement wherein a seller sells one desirable

product on a precondition that buyers shall purchase a second less desirable

product or service. The former product shall be known as a tying product and

the latter shall be known as a tied product. It is not required that the tying

product and the tied product must be identical to each other in characteristics.

Not all tie-in arrangements are illegal and not all illegal tie-in arrangements are

per se illegal. The plaintiff who raises the claim of per se impingement, has the

burden of proof to satisfy the following conditions:

1. The seller has put condition that sale of one product shall be done on the

purchase of the second product by the buyer

2. The two products bear different characteristics and are separate products. 3.

The seller has adequate position in the irrelevant market for the tying product in

pursance to execute the tie-in.

It is precisely noted, for the factor of offence of tying under the ambit of the

Act, it is vital that the consumer has been coerced into buying both the tying

and tied product that in consequence by virtue of their characteristics or

commercial utilization bear no link with the issue of main contract. uA tie-in

agreement under section 3(4)(a) has to tested for its actual or probable adverse effect

on the competition, this being the only determining factor as per the instant provision, to

be calculated in light of the enumerations made under section 19(3) of the Act.

Precedents of Tie-in Deal in India

Shri Sonam Sharma v Apple Inc. and Ors-

● The allegations in this case pertained to distribution agreements entered into between

Apple India Pvt. Ltd., Indian subsidiary of Apple Inc. U.S.A. and Vodafone Limited

and Bharat Airtel Limited, by virtue of which Apple iPhones (3G/3GS) could only be

purchased on the GSM network of Airtel or Vodafone and only through their

respective distributors.

● The allegations were compounded to have offended provisions both under section. 4

i.e. provisions condemning abuse of dominance and under section. 3 i.e. provisions
 deplore anti- competitive agreements likely to have Appreciable Adverse Effect on

Competition in the market. The alleged tie-in as identified by the C.C.I. was

Contractual tying between Apple and Vodafone/Airtel for distribution/sales

arrangement wherein the cellular Phone manufacturer and service provider have

collaborated to offer a packaged product to the customer.’

● As per the DG, the arrangement between Apple, Airtel and Vodafone of selling

‘locked’ iPhones was a Tie-in arrangement u/s. 3(4)(a). However given the miniscule

market share of Apple in the ‘Smartphone’ market in India (1%- 3% in terms of

volume) at the time of the aberrations i.e. between 2008- 2010, such tie-in could not

have caused any AAEC in the said market in India. With regard to violations u/s.

4,the DG point out the two relevant market first the market for smartphones and

second the market for GSM cellular services in India’and further deduced that Apple

or Airtel and Vodafone (individually) were not dominant in these markets

respectively.

Order

As per C.C.I.’s order, A tying arrangement occurs when, through a contractual or

technological requirement, a seller conditions the sale or lease of one product or service on

the customer’s agreement to take a second product or service Further in the order, C.C.I.

acknowledges that tie-ins are not per se anticompetitive as ‘economics literature suggests that

there are pro-competitive rationales for product-tying. These include assembly benefits,

quality improvement as also addressing pricing inefficiencies’. Thus, it seems clear that

C.C.I. in essence acknowledges that tie-ins should be dealt with under the rule of reason

approach as is the scheme under scheme. 3(4) of the Act. Thereafter, C.C.I. very
categorically goes on to identify ‘necessary and essential conditions’ in respect of

‘anti-competitive tying’, these being: (1) Presence of two separate products or services

capable of being tied; (2) For considerable restrain free competitions in the market for their

product, the seller must have sufficient economic power with respect to the tying product (3)

The tying arrangement must affect a not insubstantial amount of commerce,

5. COLLUSIVE BIDDING/BID RIGGING

Bid-rigging or collusive rigging is one of the horizontal agreements, it is an illegal

practice, occurs when two or more competitors or bidders collude and act in concert to

keep the bid amount at the pre-determined level and agrees that in reality, they will

not compete with each other for a particular tender.Bid rigging is a form of
anticompetitive collusion and is an act of market manipulation; when bidders

coordinate, it undermines the bidding process and can result in a rigged price

that is higher than what might have resulted from a free market, competitive

bidding process. Bid rigging can be harmful to consumers and taxpayers who

may be forced to bear the cost of higher prices and procurement costs.

Section 3 of The Competition Act of 2002 which deals with the concept of

anti-competitive agreements which empowers the Competition Commission of

India to prohibit any agreement between enterprises or persons engaged in

identical or similar trade of goods or services, directly or indirectly resulting in

bid-rigging or collusive bidding. These agreements effect the competition

prevailing in the market; hence they are prohibited by Law. In determining

whether the agreement has an appreciable adverse effect on competition, we

have to analyse various factors like creation of barriers to new entrants in the

market and foreclosure of market etc.

Forms of Bid- Rigging

It may involve many techniques, for example:

Cover bid or complementary bidding: Parties agreeing to submit

cover bids i.e. high bids that are intended not to be successful

where the unsuccessful bidders may get kickbacks.

Bid Suppression- Where the parties agree that only one of them will

submit a bid to win contracts.

Bid rotation - Where the parties to the agreement agree to take

turns to win contracts.

Subcontracting- Where one party refrains from bidding or submit a

losing bid frequently receives a lucrative subcontract from the

successful bidder.

Western Coal Fields Ltd. v. SSV Coal Carriers

Pvt Ltd.

Facts
Informant is one of the subsidiary companies of Coal India. It is a major

supplier of coal to Industries all over the country. A large number of power

stations are its customers. OP’S who are a group of coal transporters were

quoting identical bids in the transportation bids. The DG found evidence of

cartelization in their conduct.

Issue

Whether the quoting of identical bids by the transporters amounted to acting in

concert, and was a contravention of the Competition Act, 2002?

Judgement

The Commission held that repeated quoting of identical prices for different bids,

even at different costs of production is highly suspect. The Op’s claimed that the

prices quoted by them were benchmarked against earlier prices, however, no

evidence was lead in support of this. There were also business dealings with

each other, regular social meetings. They were held to be guilty of

collusive-bidding as per Section 3 of the Competition Act, 2002.

6.Social justice (Article 39A

Competition Law for India was triggered by Articles 38 and 39 of the Constitution of India. These
Articles are a part of the Directive Principles of State Policy., Articles 38 and 39 of the
Constitution of India mandate, inter alia, that the State shall strive to promote the welfare of the
people by securing social justice , iin particular, direct its policy towards securing.
1. That the ownership and control of material resources of the community are so distributed as
best to subserve the common good; and
2. That the operation of the economic system does not result in the concentration of wealth and
means of production to the common detriment.

That the resources and the ownership of those resources and materials shall be

distributed in such a way that it fulfils the common goal. [Article 39(b) of the Indian

Constitution]

That the economic system shall be executed in such a way that the concentration of

wealth and means of production shall not result in a common detriment. [Article

39(c) of the Indian Constitution.

Free Legal aid (Article 39A of the Constitution) is providing assistance to the people

who are unable to afford legal representation and access to the court system. It

guarantees to provide equal access to the justice system to persons who are not in

financial sound condition, by providing legal and professional assistance free of cost

or at lower fees.

Art. 38 was also amended by the Constitution (4 41h Amendment) Act, 1978, but

even prior to its amendment on 201h June, 1979, it provided that the State had to

strive to promote the welfare of the people by securing and protecting, as

effectively as possible, a social order in which justice, social, economic and political,

was to be taken into consideration by all institutions of national life. Similarly, Art.

39 provided for certain principles of policy to be followed by the State.Although, all

the clauses of Art. 39 are designed to benefit citizens of India in general, clauses 2

(b) and (c) indicate how the Government should direct its policy to ensure that the
ownership and control of the material resources of the community are so distributed

as best to subserve the common good and that the operation of the economic

system does not result in the concentration of wealth and means of production to

the common detriment.

on account of monopolistic and restrictive trade practices, the Government of India

appointed the Mahalanobis Committee to look into the distribution of incomes and

levels of living. The said Committee submitted its report in 1960 giving a clear

insight into the inequalities in income levels.' This led to the constitution of the

Monopolies Inquiry Committee which submitted its report on 311 October, 1965. It

is, therefore, the mandate of Art. 39 of the Constitution which is considered to be

the genesis of competition laws in India.

The Competition law is meant to provide a bridge between those two aforesaid

groups and the same can be achieved through innovative ideas, both of the

executive and the persons entrusted with the implementation and realisation of the

objects of the Competition Act, 2002, in order to meet the mandate of the

Constitution to provide justice, social, economic and political and to ensure that the

ownership and control of the material resources of the community, are so

distributed so as to subserve the common good and that the operation of the

economic system does not result in the concentration of wealth and means of

production in the hands of a few to the common detriment.

7. RAGHAVAN COMMITTEE AND SACHAR COMMITTEE

Raghavan committee
In October 1999, the Government of India constituted a High Level Committee
under the Chairmanship of Mr. SVS Raghavan [‘Raghavan Committee’] to advise
a modern competition law for the country in line with international
developments and to suggest legislative framework, which may entail a new law
or suitable amendments in the MRTP Act, 1969.

The Raghavan Committee in its report inter alia submitted to the Government in
May 2000, observed that the Government needs to address the pre-requisites
for a Competition Policy as it is an instrument to achieve efficient allocation of
resources, technical progress, consumer welfare and regulation of concentration
of economic power. It also noticed that the MRTP Act is limited in its sweep and
in the present competitive milieu it fails to fulfil the needs of a competition law.
This Committee went into the modalities of bringing into existence a law and a
law enforcement authority in the form of the Competition Act and the CCI
respectively.

The Raghavan Committee Report states that the essence and spirit of
competition should be preserved positioning the competition policy and laid
stress on the need to harmonize the conflict between the competition policy and
other government policies.

It also highlighted that the Competition Policy has, as its central economic goal,
the preservation and promotion of the competitive process, a process which
encourages efficiency in the production and allocation of goods and services,
and over time, through its effects on innovation and adjustment to technological
change, a dynamic process of sustained economic growth. In conditions of
effective competition, rivals have equal opportunities to compete for business on
the basis and quality of their outputs, and resource deployment follows market
success in meeting consumers’ demand at the lowest possible cost. The report
also emphasised that the formulation and implementation of government
policies should take into account competition principles.

The Salient points of their recommendations are:

(i) Setting up of competition commission and winding up of MRTP commission.

(ii) Government monopolies, foreign companies will be covered by competition law.

(iii) Government should make a specific rule on mergers above a threshold

investment limit and predatory pricing as an abuse if any dominant undertaking

engages in it.

(iv) Competition law should cover all kinds of consumers for the purpose of

protection of interest.

(v) Small scale sector should not enjoy any protection or reservation if the products

of any SSI fall in the OGL category, for the purpose of imports.

(vi) BIFR should be closed-

(vii) Urban Land Ceiling Act, Industrial Dispute Act should be repealed.

(viii)All pending cases of MRTPC should be transferred to competition commission of

India.

SACHAR COMMITTEE

the Government appointed a High-Powered Expert (Sachar) Committee in June

1977, which recommended widening the scope of the MRTP Act to include unfair
trade practices (UTPs) like misleading and deceptive advertising. Subsequently,
the MRTP Act was amended in 1984 to bring unfair trade practices within its
ambit.

the Sachar Committee, which was constituted by the Govt. of India under the
Chairmanship of Justice Rajinder Sachar in the year 1977.
The Sachar Committee pointed out that advertisements and sales promotions
having become well established modes of modern business techniques,
representations through such advertisements to the consumer should not
become deceptive. The Committee also noted that fictitious bargain was another
common form of deception and many devices were used to lure buyers into
believing that they were getting something for nothing or at a nominal value for
their money. The Committee recommended that an obligation is to be cast on
the seller to speak the truth when he advertises and also to avoid half truth, the
purpose being preventing false or misleading advertisements.

In 1984, a High- Powered Expert Committee (Sachar Committee) was set up to

consider and report on changes necessary in the MRTP Act, 1969, so as to make
it more effective. The Sachar Committee noticed the small number of references
to the Monopolies and restrictive Trade Practices Commission (MRTPC) under
provisions dealing with monopolistic trade practices and recommended that
certain types of cases should be compulsorily referred to the MRTPC, which
could pass final orders in such cases. But this was not accepted by the
government.

The Sachar committee sought to include unfair trade practices like misleading
and disparaging advertisement into the existing law since it was convinced that
consumers had no protection against such practices. The committee suggested
the introduction of the concept of deemed illegality to a host of specific trade
practices. The Sachar committee sought to include unfair trade practices like
misleading advertisement into the existing law since it was convinced that
consumer had no protection against such practices. The committee was
categorical in providing power to the Monopolies & Restrictive Trade Practise
Commission (MRTPC) to compensate against injury on account of unfair trade
practices. Power to grant interim injunction sought to incorporated was to
safeguard consumers against irreparable loss during the pendency of inquiry.
Further, the MRTPC was to be provided with power of contempt as well as power
to try offences against itself. These measures were found necessary to provide
teeth to the body in order to make it more effective. The Sachar Committee
desired to transform the MRTPC from an advisory body into an adjudicating one.
The Committee also recommended combining the position of Registrar and
Director into a Director General of Trade with power to conduct dawn raids and
limited civil court powers to summon witnesses as well as documents. The law
was amended in 1984 on the basis of the Sachar Committee report though
these amendments also made significant departure from the recommendations.
 8. Horizontal - vertical agreements

Anti- Competitive Agreements are those agreements that have their object in furtherance of or

prevent, restrict or distort competition in India.The Competition Act, 2002 defines

anti-competitive agreements as such in section where it states, “No enterprise or association of

enterprises or individuals or association of individuals may enter into an agreement regarding

production, supply, distribution, storage, acquisition or control of goods or provision of services

which may adversely affect the competition in the Indian market”.

Such agreements are termed as AAEC agreement, which means the Appreciable Adverse

Effect on Competition agreements. The Act expressly states that such an agreement shall be

void. AAEC includes the negative effect that it creates on the market players and healthy

competition in the market.An AAEC agreement is classified as any agreements that result in:

● Directly affects purchase or sale prices.

● Indirectly affects purchase or sale prices.

● Limits production.

● Limits supply.

● Limits technical development.

● Limits service provision in the market.

● Leads to the rigging of bids.

● Leads to collusive bidding.

Section 3 of the Act deals with anti-competitive agreements. Anti-competitive

agreements can be categorized into horizontal agreements and vertical

agreements.

Horizontal agreement

Horizontal agreements are arrangements between enterprises at the same stage of the

production chain and that is generally between two rivals for either fixing prices or for limiting

production or for sharing markets. In all such agreements, there is a presumption in the Act

that such agreements cause AAEC.

Cartel is also a horizontal agreement. This is generally between producers of goods or providers

of services for price-fixing or sharing of market, and is generally regarded as the most

pernicious form of anti-competitive agreement.Essentially, horizontal agreements are

agreements between competitors. These competitors are at the same stage in

the production chain and exist in the same market.

Section 3(3) provides that an agreement would have AAEC if there is a practice that is carried

on, or a decision that has been taken, between any of the parties mentioned above, including

cartels, engaged in identical or similar trade of goods or provision of services, that can either –

1. Directly or indirectly determine the purchase or sale prices;

2. Limits or controls production, supply, markets, technical development, investment or

provision of services;

3. 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;

 4. Directly or indirectly results in bid rigging or collusive bidding (effect of eliminating or

reducing competition for bids or adversely affecting or manipulating the process for

bidding).

Vertical Agreements
Vertical agreements are between enterprises at different stages of the production chain, like an

arrangement between the manufacturer and a distributor. The presumptive rule does not apply

to vertical agreements. The question whether the vertical agreement is causing AAEC is

determined by rule of reason. When rule of reason is employed, both positive as well as

negative impact of competition is analyzed. In order to determine whether any agreement is in

contravention of section 3(4) read with section 3(1) of the Act, the following five essential

ingredients of section 3(4) have to be satisfied:

1. There must be an agreement amongst enterprises or persons;

2. The parties to such agreement must be at different stages or levels of production chain,

in respect of production, supply, distribution, storage, sale or price of, or trade in goods

or provision of services;

3. The agreeing parties must be in different markets;

4. The agreement should cause or should be likely to cause AAEC;

5. The agreement should be of one of the following nature as illustrated in section 3(4) of

the Act:

1. Tie-in arrangement (includes any agreement requiring a purchaser of goods, as a

condition of such purchase, to purchase some other goods);

 2. Exclusive supply agreement (includes any agreement restricting in any matter the

purchaser in the course of his trade from acquiring or otherwise dealing in any

goods other than those of the seller or any other person);

3. Exclusive distribution agreement (includes any agreement to limit, restrict or

withhold the output or supply of any goods or allocate any area or market for the

disposal or sale of the goods);

4. Refusal to deal (includes any agreement which restricts, or is likely to restrict, by

any method the persons or classes of persons to whom goods are sold or from

whom goods are bought);

5. Resale price maintenance (includes any agreement to sell goods on condition

that the prices to be changed on the resale by the purchaser shall be the prices

stipulated by the seller unless it is clearly stated that prices lower than those

prices may be changed).

9. Section 19(3) and 19(4)- adverse and appreciable effect on

market
Section - 19 (3)
The Commission shall, while determining whether an agreement has an appreciable adverse effect on
competition under section 3, have due regard to all or any of the following factors, namely:—
(a) creation of barriers to new entrants in the market;
(b) driving existing competitors out of the market;
(c) foreclosure of competition by hindering entry into the market;
(d) accrual of benefits to consumers;
(e) improvements in production or distribution of goods or provision of services; or
(f) promotion of technical, scientific and economic development by means of production or
distribution of goods or provision of services.

section 19(4)
The Commission shall, while inquiring whether an enterprise enjoys a dominant position or not
under section 4, have due regard to all or any of the following factors, namely:—
(a) market share of the enterprise;
(b) size and resources of the enterprise;
(c) size and importance of the competitors;
(d) economic power of the enterprise including commercial advantages over competitors;
(e) vertical integration of the enterprises or sale or service network of such enterprises;
(f) dependence of consumers on the enterprise;
(g) monopoly or dominant position whether acquired as a result of any statute or by virtue of
being a Government company or a public sector undertaking or otherwise;
(h) entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of
entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of
substitutable goods or service for consumers;
(i) countervailing buying power;
(j)market structure and size of market;
(k) social obligations and social costs;
(I) relative advantage,by way of the contribution to the economic development, by the enterprise
enjoying a dominant position having or likely to have an appreciable adverse effect on
competition;
(m) any other factor which the Commission may consider relevant for the inquiry.

Adverse appreciable effect on market

Any agreement which limits or controls supply, markets, technical development,

production, or provision of services will be deemed to have an appreciable

adverse effect on competition as per Section 3(3)b of the Competition Act,

2002.When some practices restrict competition in market, they are said to have AAEC.

Specifically, Section 19(3) of the Act states that the Competition Commission of

India shall take into consideration all or any of the following factors in

determining whether an agreement has an appreciable adverse effect on

competition under Section 3:

● New entrants in the market are confronted with barriers;

● Excluding existing competitors from the market;

● The elimination of competition by hindering entry to the market;

● The accrual of consumer benefits;

● Production, distribution, or service improvements;

 ● Promotion of technical, scientific, and economic development using

production or distribution of goods or provision of services.

There can be AAEC in 3 ways:

1. Anti-competitive agreement

2. Abuse of dominance

3. Combinations

1. Anti-competitive agreement

(i) No one 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 AAEC.

(ii) Agreements entered by enterprises involved in identical business including

cartels which

(iii) Vertical and Horizontal agreements

2. Abuse of Dominance

When an industry grows to such an extent that it practically rules out all other

competitors in the market and acquires complete control over the market and
consumers it is said to have acquired dominance. When ituses position of

strength, in the relevant market to:

1. Operate independently of competitive forces prevailing in the relevant market,

2. Affect its competitors or consumers or the relevant market in its favor, it is said to

have abused its dominant position

3. Combinations

Combination includes merger, amalgamation, and acquisition of shares and

acquiring of control. Enterprises entering into combinations have to notify the

CCI, which has to decide within 90 working days either to permit or deny such

combination else combination is deemed to have been approved.

The CCI checks combinations on following factors:

a. Likelihood of increase in prices or profit margins

b. Effective competition before and after combination

c. Market share

d. Removal of competitors from market

e. Contribution to economic development