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Module 1: INTRODUCTION AND

GENERAL OVERVIEW TO
COMPETITION
LAW
11/07/23 12/07/23 13/07/23 17/07/23 3/07/23
ATTENDANCE
4/07/23 5/07/23

1.1. Basic Concepts of Market (Perfect, Monopolistic, Monopoly,


Oligopoly) 1.2. Relation between Competition Policy and
Competition Law–Objectives of Competition Law 1.3. History and
Development of Competition Law/ Antitrust Law 1.4. Competition
MODULE Law of USA, UK and EU- a brief overview 1.5. Evolution of
CONTENT Competition Law in India- Liberalization and Globalization -
Raghavan Committee Report, Competition Act 2002; 1.6.
Competition Act,2002 vis-a vis MRTP Act,1969 1.7. Competition
Act, 2002- Objectives, Salient features and Important Definitions
under the Competition Act, 2002.

Introduction

Competition Act 2002 —- enforced in 2009

Competition Law —-Three Pillars——- Anti-competitive agreements (s.3),


Abuse of Dominance (s.4), Combinations (anti-competitive mergers) (s. 5
and 6)

Nodal Body —- CCI —— after the 2017 amendment the appeal goes to NCLAT
—— prior to 2017 the appeal would go to COMPAT —— next court of appeal in
SC (S. 53T)

Competition Advocacy (s. 49)

Categories of Markets ——- Perfect Competition and Imperfect Competition

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Imperfect Competition ——- 3 types —- monopoly, monopolistic, oligopoly

Acc to Fali S Nariman— Competition law and economics go hand in hand —-


economics provides the theoritical basis for the law and the tools to analyze
markets and harms therein.

Definitions

Competition —— economic rivalry among the economic enterprises to control


greater market power, the act of endeavoring to gain what another endeavors to
gain at the same time.

Acc. to world bank —- Competition is a situation in market in which firms or


sellers independently strive for the buyers patronage in order to achieve a
particular business objective for example market share/profit share/sales.

Acc to UK Competition Commission —— Competition is the process of rivalry


b/w the firms seeking to win customers business over time.

Need for Competition

quality

R&D

pricing fairness

cheaper goods

variety

greater market efficiency

barriers to competition —-technological, technical, financial, IP

Markets

A market is a place where the buyers and sellers can meet to facilitate the
exchange or transaction of goods and services.

Features of Markets—- buying and selling transactions for goods , goods &
services, Buyers and sellers, Price differentiation, geographical Area/digital,
demand and supply

Types of Markets:

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1. Perfect Competition

Ideal markets that do not exist in reality

large no. of buyers and sellers

homogenous products

free entry and exit in market —— market barriers

consumer has perfect knowledge of price and technology

no transportation costs

single prevailing price

no govt interference / restrictions

seller is the price taker and not price maker

2. Imperfect Competition

a. Monopoly

only one seller

firm is itself is the entire industry

firm/seller is the price maker not price taker

extensive entry barriers —technical, financial, etc.

there are no close substitutes of the product

Example: Indian railways, electricity , and coal

b. Oligopoly

few sellers and many consumers

products are similar but significantly different

lot of entry and exit barriers

maximum competition law issues due to the interdependence of market players


—example cartels existing in this type of market

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some control over the pricing due to the interdependence of the firms in terms
of comparative pricing

need for advertisement

example—-aviation, telecom, cement , automobiles

c. Monopolistic

lies b/w perfect competition and monopoly

many sellers

product differentiation —-differentiation but close substitutes are available

advertising is very imp

free entry and exit

example—-clothing lines

Competition Law and Policy

Competition regime in India consists of competition law and competition policy

competition law policy envisages that all laws and policies enacted pertaining to
other sectors have to be competition law compliant.

competition policy addresses competition distortions in policy relating to trade ,


commerce , industry , business , investment, taxation, IPR, etc. —-it endeavors
to provide competition neutrality and level playing field—-ultimate goal of
competition policy is to enhance consumer well being, to ensure that markets
are free and fair (function effectively) which will give impetus to economic
efficiency and growth.

competition policy refers to the body of rules/governmental measures that


govern the extent and the ability to which the commercial undertakings can
economically compete and thereby restrict practices that remove competition in
the market,

competition law is a subset of competition policy——governed by Competition


Act 2002 —-frowns upon the activities of the enterprises which affect the
competition adversely

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💡 Para 18 - Benefits of Competition Policy —- Excel Crop Care Ltd. v.
CCI, AIR 2017 SC 2734

History

MRTP Act, 1969 —- monopolies and restrictive trade practices act ——aims of
the act—— first to ensure that the economic system does not result in the
concentration of economic power—-second to provide for control of monopolies
—- third to prohibit monopolistic, restrictive and unfair trade practices

LPG 1991 —-need to shift from prohibiting monopolies towards promoting


competition—-major trigger

1999—- Raghavan Committee Report——Competition Bill in 2001

💡 Competition Act 2002 —- came into effect in 2009 —— Brahmdutt v.


UOI, 2005 2 SCC 431 —— Constitutionality of the composition and
appointments of CCI was challenged—-held that CCI is a quasi judicial
body ——composition was not unconstitutional ——- the Selection
appointment rules empowered the central govt to appoint —this was
challenged since the appointment of judicial officers is under the purview
of CJI —-held that the CCI was a quasi judicial body and hence the
appointment by CG was not unconstitutional.

Indian Competition Act borrows from:

US - Sherman Act, 1890; Clayton Act, 1914; Federal Trade Commission Act,
1914

EU — TFEU (Treaty on functioning of European Union —- Art.101-109——


relevant to Indian Art. 101 and 102)

UK ——Competition Act 1998 , Enterprises Act 2002

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Difference between MRTP and competition

1. MRTP focuses on prohibiting monopolies while CA focuses on promoting


competition and preventing abuse of dominance

2. In MRTP Act, dominance itself is bad whereas in CA only abuse of dominance


is prohibited

3. CA introduces the concepts of competition advocacy and combination


regulations —-not present in the MRTP act

4. MRTP Act was reformatory in nature whereas the CA is punitive in nature

5. Extraterritorial Jurisdiction/Application

absent in MRTP

present in s. 32 of CA

the CCI has the jurisdiction to take cognizance of matters outside India if they
affect the Indian Market

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💡 EFFECTS DOCTRINE:

1. USA CASE: United States v. Aluminium Corporation of America,


1945

[Effects doctrine was evolved and incorporated —-this doctrine envisages


that even if the corporation is situation outside US, but the effect of their
actions is faced in the US market then the US regulatory authority will
have the jurisdiction to take action against the corporation]

2. Haridas Exports v. All India Float Glass Manufacturers


Association,

[Effects Doctrine incorporated under the Indian Law —- MRTP


Commission given the power to take action against the corporations
incorporated outside India if effect is felt in the Indian Market——this
doctrine is not applicable now as the CA explicitly provides for the
extraterritorial jurisdiction of the CCI]

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💡 Section 32:

The Commission shall, notwithstanding that,—

(a) an agreement referred to in section 3 has been entered into outside


India;
(b) any party to such agreement is outside India;
(c) any enterprise abusing the dominant position is outside India;
(d) a combination has taken place outside India;
(e) any party to combination is outside India;
(f) any other matter or practice or action arising out of such agreement or
dominant position or combination is outside India,

have the power to inquire in accordance with the provisions contained in


sections 19, 20, 26, 29 and 30 of the Act into such agreement or abuse of
dominant position or combination if such agreement or dominant position
or combination has, or is likely to have, an appreciable adverse effect
on competition in the relevant market in India and pass such orders
as it may deem fit in accordance with the provisions of this Act.]

6. MRTP Act the agreement need to be registered whereas the agreement need
not be registered under CA —-the comprehensive definition of agreement under
CA is to ensure that cartelization can be prevented and mere a tacit
understanding that is anti-competitive can be brought under the purview of the
Act.

Preamble

An Act to provide, keeping in view of the economic development of the country,


for the
establishment of a Commission to prevent practices having adverse effect
on
competition, to promote and sustain competition in markets, to protect the
interests
of consumers and to ensure freedom of trade carried on by other participants

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in
markets, in India, and for matters connected therewith or incidental thereto.

AAEC —- Appreciable Adverse effects on competition

Art. 38,39,19(1)(g)

Definitions

section 2 (a) —- acquisition ———[ Section 5 —-Explanation (a) defines control


——- (b) group ]

section 2 (b) agreement—- inclusive definition [ the definition of the agreement


under CA is wide to include under its ambit such agreements that are not in
writing or even if not intended to be enforceable by legal proceedings —— this
differs from the definition under the contract act] —-the wide definition of
Agreement under the Act is intended to bring the cartels under the scope of the
CA—- difficulty to identify cartels. [Note: There is a leniency regime envisaged
under the competition regime which provides for whistleblowers] [Q. Why is the
definition of agreement under the Act widely worded—-SO THAT CARTELS
CAN ALSO BE COVERED]

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💡 Landmark Judgment for Cartels ——— Builders Association of India v.
Cement Manufacturers Association (CCI Case No. 29 of 2010) [Cement
Cartel Case]

[Para 182 —— definition of agreement——” Further, it may be noted that


the definition of ‘agreement’ as given in Section 2(b) of the Act requires
inter alia any arrangement or understanding or action in concert whether
or not formal or in writing or intended to be enforceable by legal
proceedings. The definition, of being inclusive and not exhaustive, is a
wide one. The understanding may be tacit
and the definition covers situations where the parties act on the basis of a
nod or a wink. There is rarely any direct evidence of action in concert and
in such situations, the Commission has to determine whether those
involved
in such dealings had some form of understanding and were acting in
cooperation with each other. In light of the definition of the term
‘agreement’,
the Commission has to assess the evidence on the basis of benchmark of
the preponderance of probabilities.”]

💡 Tyre Cartel Case —- All India Tyre Dealers Federation v. Tyre


Manufacturers , (2013 COMP LR 92]

SECTION 2(C) —-Cartel

Section 2(f) consumer —— under the CA act the consumer includes person
buying goods/services for personal and commercial purpose —— the
consumer protection act, 2019 under section 2(7) explicitly excludes person
who obtains such goods for resale or for any commercial purpose.

AMENDED section 2(h) Enterprise ——- “enterprise” means a person or a


department of the Government, including units, divisions , subsidiaries ——
engaged in any economic activity, relating to the production, storage, supply,
distribution, acquisition or control of articles or goods, or the provision of

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services, of any kind, or in investment, or in the business of acquiring, holding,
underwriting or dealing with shares, debentures or other securities of any other
body corporate, either directly or through one or more of its units or divisions or
subsidiaries, whether such unit or division or subsidiary is located at the same
place where the enterprise is located or at a different place or at different
places, but does not include any activity of the Government relatable to the
sovereign functions of the Government including all activities carried on by the
departments of the Central Government dealing with atomic energy, currency,
defence and space.

[case under the CA can only be brough against an enterprise—-first condition to


institute a case under the Act]

[After 2023 Amendment —— the term economic activity has been inserted under
section 2(h) definition of enterprises]

💡 Reliance Big Entertainment v. KFCC (Karnataka Firm Chamber of


Commerce), (2012) 108 CLA 116
[Whether KFCC is an enterprise] [KFCC is an enterprise]

💡 Surinder Singh Barmi v. BCCI , (2013) 118 SCL 226


[Whether BCCI is an enterprise — to ascertain first determine whether
they are person/govt dept. and second whether there is an economic
activity —look into the functions——held that BCCI is a person and
performs economic activity (dimension of revenue)

💡 In re: Shivam Enterprises & Kiratpur Sahib Truck Operators


cooperative society ltd. , (2015) Comp LR 232.

[Whether Kiratpur Sahib Truck Operators is an enterprise —-involved in


freight activity —-held to be enterprise]

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Section 2(i) —goods ”means goods as defined in the Sale of Goods Act,1930
and includes— (A) products manufactured, processed or mined; (B)
debentures, stocks and shares after allotment; (C) in relation to goods supplied,
distributed or controlled in India, goods imported into India

Section 2(u) —- Service

Section 2(ka)—— party —--

Read only ——section 2(r) —-“relevant market” means the market which may
be determined by the Commission with reference to the relevant product
market or the relevant geographic market or with reference to both the
markets

Relevant market ——- to file a case under the act it is essential to ascertain the
relevant market

💡 Sonam Sharma v. Apple, 2011

Relevant product market are demarcated based on consumer preference , utility


and

section 2(s) r/w s. 19(6)——“relevant geographic market” means a market


comprising the area in which the conditions of competition for supply of goods
or provision of services or demand of goods or services are distinctly
homogenous and can be distinguished from the conditions prevailing in the
neighbouring areas;

Section 2 (t) r/w s. 19(7) "relevant product market" means a market comprising
of all those products or services—
(i) which are regarded as inter-changeable or substitutable by the consumer, by
reason of
characteristics of the products or services, their prices and intended use; or
(ii) the production or supply of, which are regarded as interchangeable or

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substitutable by
the supplier, by reason of the ease of switching production between such
products and
services and marketing them in the short term without incurring significant
additional costs or risks in response to small and permanent changes in relative
prices;

[After amendment the relevant product market from the perspective of supplier is
also considered]

CHAPTER II——-PROHIBITION OF CERTAIN AGREEMENTS, ABUSE OF


DOMINANT POSITION AND REGULATION OF COMBINATIONS

not necessary to demarcate the relevant market for violation u/s 3 —- CCI v.
Coordination Committee of Artists and Technicians of W.B. Film & Television,

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💡 Section 3 ——-Anti-competitive agreements.—

(1) 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 (possibility) an
appreciable adverse effect on competition within India.

(2) Any agreement entered into in contravention shall be void.

(3) 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 geographical area of market, or type of goods or
services, or number of customers in the market or any other similar way;
[geographically allocating market]
(d) directly or indirectly results in bid rigging or collusive bidding, shall
be presumed to have an appreciable adverse effect on competition:
Provided that nothing contained in this sub-section shall apply to any
agreement entered into by way of joint ventures if such agreement
increases efficiency in production, supply, distribution, storage, acquisition
or control of goods or provision of services.

Provided further that an enterprise or association of enterprises or a


person or association of persons though not engaged in identical or
similar trade shall also be presumed to be part of the agreement under
this sub-section if it participates or intends to participate in the furtherance

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of such agreement.

Explanation.—For the purposes of this sub-section, “bid rigging” means


any agreement, between enterprises or persons referred to in sub-section
(3) engaged in identical or similar production or trading of goods or
provision of services, which has the effect of eliminating or reducing
competition for bids or adversely affecting or manipulating the process for
bidding

AAEC —-Appreciable adverse effect on Competition

price distortion

Two types ——Horizontal Anti-Competitive (s. 3(3)) and Vertical Anti-


competitive (s. 3(4))

After 2023 Amendment —— Hub and Spoke Cartel—- although not part of
cartel such persons that facilitate will also fall under the ambit of CA post the
amendment —— https://www.mondaq.com/india/cartels-
monopolies/963074/uber-and-ola-win-antitrust-case-in-india---no-hub-and-
spoke-cartel-with-drivers--nclat-dismisses-appeal-on-grounds-of-lack-of-locus-
standi

AAEC

section 3(1) r/w Section 19(3) ——— to establish AAEC —-guiding factors
to determine if competition is affected——- CCI while determining whether
an agreement has an appreciable adverse effect on competition shall have
due regard to——
(a) creation of barriers to new entrants in the market; [entry barriers]
(b) driving existing competitors out of the market;
(c) foreclosure of competition
(d) [benefits or harm] to consumers;
(e) improvements in production or distribution of goods or provision of
services;

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(f) promotion of technical, scientific and economic development by means
of production or distribution of goods or provision of services.

if positives exceed the negatives then CCI will allow otherwise not

Horizontal Anti-competitive Agreements —-MID SEM —-FOCUS ON 3(3)

Cartel is an example of Horizontal Anti-Competitive Agreement ——through


Hub-and spoke the vertical anti competitive agreements have also been
included

Section 2(c)———“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.

Factors which give rise to cartel —— oligopoly , lack of government


interference , homogenous substitutable products, high entry and exit
barriers, geographically concentrated market

💡 Tyre Cartel Case —- All India Tyre Dealers Federation v. Tyre


Manufacturers , (2013 COMP LR 92] ——Factors which give rise
cartels [Case dismissed due to “lack of evidence”] *****imp

💡 Cement Cartel Case —-Builders Association of India v. Cement


Manufacturers Association (CCI Case No. 29 of 2010) [Cement
Cartel Case]*****imp

[11 cement companies —- June 2012 a 6000 crore penalty ——- the
builders association alleged that there was price increment after
every meeting of the CMA——section 3 —-anti-competitive
agreement and section 4 - abuse of dominance ——- evidence —-
email communications , visible pattern of price increment —-held that
the direct evidence not required —circumstantial evidence obtained
during the investigation was sufficient evidence of cartelization

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FICCI Multiplex —-factors that give rise to cartelization

💡 FICCI Multiplex Association v. United Producer Forum (2011) Comp


LR

Onion Cartel Case

💡 bid rigging or collusive bidding—-reducing or eliminating


competition for bids —-forms —bid rotation , bid suppression , etc.

Pooja Enterprises (Ref. Case No. 1/2012) *****imp Para


35,43,44,46,47

Neeraj Malhotra v. Deutsch Bank (read)

diff b/w section 3(3) and 3(4) ———-under section 3(3) “shall be
presumed”—-per se rule will be applicable whereas the burden of proof is
on the accused —-as cartels are gravest form of violation under the CA —-
under 3(4) there is no direct rule of presumption and the burden of proof is
on the complainant.

💡 Rajasthan Cylinders v. Union of India [2018 SCCOnline SC 1718]


*****imp

[CCI —COMPAT — SC——- landmark case for mere price


parallelism is not indicative of cartels—monopsny (limited number of
buyers)]

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💡 CCI v. Coordination Committee of Artists and Technicians of W.B.
Film & Television, [AIR 2017 SC 1449] (see Misc. App. No. 490/2017
in Civil application No. 6691/2014)
[is the demarcation of relevant market essential for section 3 violation
—-(note only for 4 and 5 is mandatory; concept of enterprises;
section 3(3) violation]

Vertical Anti-Competitive Agreements

Any other agreement amongst enterprises or persons including but not


restricted to agreement amongst enterprises or persons 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 shall be an agreement in contravention of sub-
section (1) if such agreement causes or is likely to cause an appreciable
adverse effect on competition in India—— burden of proof is on the
complainant ——- per se rule not applicable —-CCI will interrogate the
complainant first.

Types of Vertical Anti-competitive agreements —-mere happening of these


agreements is not anti-competitive —- the complainant has to establish
AEC

(a) tie-in arrangement—— tying in the product that is in less demand with a
product that is in higher demand —— Bundling and Tying —-has to be proven
that the competition has to be affected —not every tie-in arrangement is anti-
competitive

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💡 Sonam Sharma v. Apple , (CCI Case No. 24 of 2011) [Para 66-69]

Para No. 69 —
Generally, the following
conditions are necessary and essential in respect of anti-competitive
tying:

1. Presence of two separate products or services capable of


being tied:
In order to have a tying arrangement, there must be two products
that the
seller can tie together. Further, there must be a sale or an
agreement to sell one product or service on the condition that the
buyer purchases another product or service (or the buyer agrees
not to purchase the product or service from another supplier). In
other words, the requirement is that purchase of a commodity
was conditioned upon the purchase of another commodity.

2. The seller must have sufficient economic power with respect


to the tying product to appreciably restrain free competition
in the market for the tied product:
An important and crucial consideration for analyzing tying
violation is the
requirement of market power. The seller must have sufficient
economic power in the tying market to leverage into the market
for the tied product. That is, the
seller has to have such power in the market for the tying product
that it can force the buyer to purchase the tied product.

3. The tying arrangement must affect a “not insubstantial”


amount of commerce:
Linked with the above requirement, tying arrangements are
generally not
perceived as being anti-competitive when substantial portion of
market is not
affected.

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Tying and Bundling —— Para 65-67 ——-
Types of Bundling —- Pure and Mixed Bundling —- para 67

[the terms have been used interchangeably in several cases]

💡 Ajay Devgan Films v. Yash Raj Films, Case No. 68/2012

[Allegation — 3(4) a, b, d ——- Ajay devgan film and 2 films of


Yash Raj Films —— Yash Raj films entered into agreement with
single screen theaters which stipulated the condition that both
films have to be released ——- court observed that 65%
multiplex theaters + no coercion on the single screen theaters
(their sole discretion , commercial decision) —-there is no
foreclosure of competition —- no. abuse of dominance ]

💡 FX Enterprises Solutions India Pvt. Ltd. v. Hyundai Motor India


Ltd., Case No. 36/2014(Hyundai Motors Case)

[FX enterprises (vendor) alleged — 3(4)(a), (b) , (e) —upheld for a


and e and dismissed for b——tie in arrangement, exclusive supply,
rpm, refusal to deal —— NCLT order in 2017 —- Para 24—-due to
lack of evidence dismissed all allegations and overturned the decision
of CCI —— the ground of “lack of evidence” was a significant
addition to the jurisprudence of competition law in india

(b) exclusive dealing/supply agreement —selling on the condition that the


buyer only sells the goods supplied by them

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💡 Ajay Devgan Films v. Yash Raj Films, Case No. 68/2012

💡 Jindal Steel v. SAL, (2012) 107 CLA 278 CCI

💡 ******Imp —- Shamsher Kataria v. Honda Siel, 2014 Comp LR 1


CCI

[In a first major Order passed under section 3(4) of the Competition
Act,2002, CCI had imposed penalty of more than Rs.2500 Crores
upon 14 major car manufacturers for violating a the Act. It was held
that all the major auto manufactures were not allowing its spare parts
and diagnostic tools to be sold in the open car market and forcing the
consumers to buy it from their authorized dealers/distribution
channels —- affecting the freedom to trade of independent traders
——- exclusive supply agreement ; exclusive distribution
agreement ; refusal to deal were made out in this case ——
section 3(4) (b), (c) (d)—- fixed channel of sourcing

[OEM —-original equipment manufacturer ; OES]

(c) exclusive distribution agreement -

💡 ******Imp —- Shamsher Kataria v. Honda Siel, 2014 Comp LR 1


CCI

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💡 FX Enterprises Solutions India Pvt. Ltd. v. Hyundai Motor India
Ltd., Case No. 36/2014(Hyundai Motors Case)

💡 Exclusive Motors Pvt. Ltd. v. Automobili Lamborgini SPA, (2014)


121 CLA 230 [Doctrine of single economic entity —- two entities part
of the same group of companies (reliance jio and digital)—-
agreement that is between two entities of the same group cannot be
anti competitive —they are considered as one economic entity -
similar economic interests]

[Doctrine evolved in the EU —- Mausegatt v. Haute]

(d) refusal to deal —- in most cases where there is exclusive dealing and
exclusive distribute it is presumed that refusal to deal exists

💡 Jindal Steel v. SAL, (2012) 107 CLA 278 CCI

💡 ******Imp —- Shamsher Kataria v. Honda Siel, 2014 Comp LR 1


CCI

💡 Ajay Devgan Films v. Yash Raj Films, Case No. 68/2012

(e) resale price maintenance ——- fixing the price of resale —- ex. by
restricting discounts

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💡 Jasper Infotech v. KAFF (Case No. 61/2014) [Snapdeal]
[Held in favor of KAFF —- has right to selected the effective
distributive channels —-no foreclosure of competition —-KAFF did
not refuse to deal , merely gave the condition of removal of warranty
—- held not to be resale price maintainence]

💡 FX Enterprises Solutions India Pvt. Ltd. v. Hyundai Motor India


Ltd., Case No. 36/2014(Hyundai Motors Case)

Q.

SM Dugar
Varsha Vahini
Abir Roy

[Issue —-definition of control is differing across diff. legislations]

[Section 19 ——- Suo Moto when the CCI takes cognizance itself
when the govt. refers then [Ref. Case No.]
when the informant files [Case No.]

[Project Topic——-

Cartelization in Aviation Industry (AAYUSHI)

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Interface between IPR and Competition

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