The Sherman Antitrust Act (Sherman Act) is a
landmark federal statute on United States
competition law passed by Congress in 1890.
2. It prohibits certain business activities which
the. federal government regulators consider
them as anti competitive.
Such suspected anti competitive business
activities carried on by trusts, companies, and
organizations require the federal government
to investigate and take necessary action.
SHERMAN ANTITRUST ACT - FIRST FEDERAL
STATUTE TO LIMIT CARTELS AND
MONOPOLIES:
Sherman Antitrust Act was the first federal
statute to limit cartels (an association of
manufacturers or suppliers with the purpose of
maintaining prices at a hich level and
restricting competition) and monopolies (the
exclusive possession or control of the supply
of or trade in a commodity or service]
The Sherman Antitrust Act is named after its
author,
Senator John Sherman.
Though the title has the name of Trust, the Act
has nothing to do with "trust".
Around the world, the Sherman Anti trust Act is
known as "competition law."
wh.
The purpose of the Act was
"To protect the consumers by preventing
arrangements designed, or which tend to
advance the cost of goods to the consumer.The purpose of the Act was
"To protect the consumers by preventing
arrangements designed, or which tend to
advance the cost of goods to the consumer.
5. The Act has been used to oppose the
combination of entities which could (potentially
harm competition,
such as monopolies or cartels
The law attempts to prevent the artificial
raising of prices by restriction of trade or
supply.
The purpose of the ISherman Act is not to
protect businesses from the working of the
market; it is to protect the public from the
failure of the market to create competition)
has the focus of U.S. competition law is on the
protection of competition rather than the
competitors in businessThe Federal Trade Commission Act of 1914 was enacted to
prohibit unfair methods, unfair acts, and unfair practices of
competition in interstate commerce.
The Federal Trade Commission acts as a police to check
the violations of the Act. It is provided with the power to
investigate corporate conduct, hold hearings, and issue
‘cease-and-desist' orders.
Investigation: The FTC is empowered and directed to
investigate the organization, business, conduct, practices,
and management of any person, partnership, or
corporation engaged in or whose business affects
commerce,
PROCEEDING BY COMMISSION IN UNFAIR
COMPETITION: ( just read this if ask for 12m)
1. If any person, partnership, or corporation has been using
any unfair method of competition or unfair or deceptive
act or practice affecting commerce, the Federal Trade
Commission issues and serves a complaint stating its
charges. It also encloses a notice of hearing upon a fixed
day and at a fixed place at least thirty days after the
service of the said complaint.
The person (proprietorship), partnership, or corporation
against which the complaint has been made has the right
to appear at the fixed place and time and show cause why
an order should not be issued by the Commission requiring
such person (proprietorship, partnership, or corporation to
cease and desist from the violation of the law so charged
in the said complaint.Finality of order
a. An order of the Commission to case and desist shall
become final-.
Any person, partnership, or corporation required by an
order of the Commission to cease and desist from using
any method of competition or act or practice may obtain a
review of such order in the Court of Appeals of the United
States within sixty days from the date of the service of
such order. He may file a written petition praying that the
order of the Commission be set aside.
The findings of the Commission as to the facts, if
supported by evidence, is conclusive.
If the order of the Commission is affirmed by the Court of
Appeal, the court thereupon issues its own order
commanding obedience to the terms of such order of the
Commission.
4. The judgment and decree of the Court is final, but it is
subject to review by the Supreme Court.
J. PENALTIES (PUNISHMENTS UNDER THE ACT:
Any person, partnership, or corporation who violates an
order of the Commission after it has become fina, forfeits
and pays to the United States a civil penal of not more
than $10,000 for each violation.
The Commission may commence a civil action to recover a
civil penalty in a District Court of the United States against
any person, partnership, or corporation which violates any
rule regarding unfair or deceptive acts or practices. In
such action, such person, partnership, or corporation is
liable for a civil penalty of not more than $10,000 for each
violation.MVMETINOEULIUIT PAU, LU LS
WHAT ARE ANTI-COMPETITIVE
AGREEMENTS
One of the main objectives of Competition Act, 2002 is to
promote a fair and healthy competition in the market and
prevent anti-competitive practices/agreements that cause
or are likely to cause appreciable adverse effect on
competition.
Section 3(1) of Competition Act, 2002 prohibits such Anti-
Competitive Agreements relating to production, supply,
distribution, storage, acquisition or control of goods or
provision of services, which cause or are likely to cause an
Appreciable Adverse Effect on Competition (hereinafter
referred to as “AAEC") within India.
According to Section 32 of the Act even if an agreement
has been entered into outside India, the CCI has power to
enquire into such an arrangement if such an agreement
has an AAEC in India.
These anti-competitive agreements are declared void by
Section 3(2) of the Act.APPRECIABLE ADVERSE EFFECT ON COMPETITION
The term APPRECIABLE ADVERSE EFFECT ON
COMPETITION used in section 3(1) has not defined in the
act
Factors Determining Appreciable Adverse Effect
On Competition
Section 19(3) of competition act states that While
determining whether an agreement is anticompetitive and
has AAEC under Section 3, the CCI takes into account the
following factors:
+ Creation of barriers to new entrants in the market;
+ Driving existing competitors out of the market;
+ Foreclosure of competition by hindering entry into the
market;
- Accrual of benefits to consumers;
+ Improvements in production or distribution of goods or
provision of services;
+ Promotion of technical, scientific and economic
development by means of production or distribution of
goods or provision of services.
The first three point relate to the negative effects on the
competition while the remaining three points relate to
beneficial effects
Automobiles DealersAssociation v. Global
Automobiles Limited & Anr.,
The Competition Commission of India held that it would be
prudent to examine an action in the backdrop of all the
factors mentioned in Section 19(3).
The agreement should be the cause of the adverse effect
on the competition. Even if such a consequence is
probable, the agreement is anti-competitive.TYPES OF ANTI-COMPETITIVE AGREEMENTS
Anti-competitive agreements can further be categorized
into:
Horizontal Agreements [Section 3(3)]
Vertical Agreements[Section 3(4)]
HORIZONTAL AGREEMENTS [Section 3(3)]
Horizontal agreements are agreements/arrangements
between enterprises/persons at the same stage of
production and hence generally take place between rivals.
For example, agreement between two or more
manufacturers of same product or; between two or more
service providers of same service.
Section 3(3) of the Act provides that horizontal
agreements are agreements between enterprises/persons
engaged in identical or similar trade of goods or provision
of services.
Horizontal agreements are subject to the adverse
presumption of being anti-competitive. This is known as
‘per se rule’ which implies that the agreements (here,
horizontal agreement), acts or practices specified by the
Competition Act as deemed or presumed to have
appreciable adverse effect on competition (AAEC) are by
themselves void.
Types of Anti-Competitive Horizontal Agreements:
As per Section 3(3) of the Act any horizontal agreement of
either of the following kinds shall be presumed to have
AAEC and hence is anti-competitive and void:
Cartel- A serious type of anti-competitive agreement is
cartel. Cartel is defined in Section 2(c) of the Act as 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, price or trade of goods/services.
There are four main types of cartel agreements: Price
Fixing; Limiting Production or Supply; Market Sharing and;
Bid Rigging/Collusive Bidding.There are four main types of cartel agreements: Price
Fixing; Limiting Production or Supply; Market Sharing and;
Bid Rigging/Collusive Bidding.
In Builders Association of India v. Cement Manufacturers
Association and Ors.[1] (Cement Cartel Case) it was held
that existence of written material is not necessary to prove
a common understanding or agreement and it is sufficient
if the activities of the companies imply the existence of
such an agreement. The Commission also gave the
concept of parallelism-plus that parallel behaviour in
prices, dispatch, supply, accompanied with some other
factors indicating coordinated behaviour among firms may
become a basis apart to determine the existence of cartels
in the market.
Price Fixing- [sec 3(3)(a)]
Agreements that directly or indirectly determine purchase
or sale prices are void. Price fixing can either be direct (by
maintaining actual prices) or indirect (by offering same
discounts, credit terms etc.).
Limiting Production or Supply— [sec3(3) (b)]
Agreements that either limit or control production, supply,
markets, technical development, investment or provision
of services are void.
Sharing of Market- [sec 3(3)(c)]
Under Market Sharing Agreements the competitors divide/
allot the market amongst themselves in various ways
[geographically, goods/services wise, customer wise or in
any other way] and agree to deal only in their allotted
segment of the market. Hence, the competitors agree not
to compete with each other by not dealing in each other
other's allotted area. Such agreements result in creation of
monopoly of enterprises in their allotted area; less number
of choices of goods/services for consumers; decrease in
supply of products/services to customers; increase in
prices etc. Therefore, these agreements are presumed to
be void.Bid Rigging/Collusive Bidding- sec3(3) (d)
Agreements that directly/indirectly eliminate or reduce
competition for bids or manipulate the process for bidding
are known as Big Rigging Agreements. Under these
agreements competitors agree and take turns to be the
winner of the tenders by not competing with each other in
the tender.
In the landmark judgment Rajasthan Cylinders and
Containers Ltd. v. Union of India[2] the Supreme
Courtestablished a law on price parallelism for oligopolies
that price parallelism by itself is not conclusive of
arrangement of bid rigging.
VERTICAL AGREEMENTS [Section 3(4)]
Agreement between enterprises operating at different
levels of production is known as Vertical Agreement.
These agreements operate at different levels of trade.
For example, agreement between supplier and
manufacturer or; between supplier and dealer.
As per Section 3(4) of the Act Vertical Agreement is an
agreement between enterprises/persons at different
stages of the production chain in different markets.
Per se Rule’ does not apply in case of Vertical Agreements,
that is, they are not per se presumed to be anti-
competitive. Legality of Vertical Agreement is assessed on
the basis of ‘Rule of Reason’. The Rule of Reason is a legal
approach where in order to decide whether or not a
practice/agreement should be prohibited an attempt is
made to evaluate the pro- competitive features of the
practice/agreement against its anti-competitive effects. In
short, a vertical agreement is declared void only if it
causes or is likely to cause AAEC.
US Supreme Court in Chicago Board of Trade v. United
States[3] explained Rule of Reason in examining the
legality of restraint of trade as “Any restraint is of essence,
until it merely regulates and promotes competition. To
determine this question, the Court must ordinarily
consider the facts peculiar to the business to which
restraint is applied, its condition before and after the
restrain was imposed, the nature of restrain and its actual
or probable effect.”
——EEEE—EEEEEEeeTypes of Vertical Agreements:
Tie-in Arrangement [sec3(4)(a)]
— Under this arrangement, the seller ties the desirable
good that he is selling with another good and makes a
precondition that in order to purchase the desired good
the purchaser has to also purchase the second good (the
tied good) irrespective of the fact whether the purchaser
wants to buy the second good or not.
In Shri Sonam Sharma v. Apple Inc.[4], the CCI held that
the following ingredients must be present in a Tie- in
Arrangement:
1. Presence of two separate products or services capable
of being tied.
2. The seller must have sufficient market power with
respect to the tying product to appreciably restrain free
competition in the market for the tied product.
3. The tying arrangement must affect a “not insubstantial”
amount of commerce.
Exclusive Supply Agreement-— [sec3(4)(b)]
These agreements restrict the purchaser in the course of
his trade from acquiring or dealing in any goods other than
those of the seller. For example, a supplier of goods of one
seller is prohibited from dealing with other sellers of the
same goods.
Exclusive Distribution Agreement-— sec3(4)(c)
These agreements limit, restrict or withhold the output or
supply of any goods or allocate any area or market for the
sale of goods.
Refusal to Deal—- sec3(4) (d)
According to the Act these agreements restrict the
persons or classes of persons to whom the goods are sold
or from whom goods are bought.
SJRefusal to Deal- sec3(4) (d)
According to the Act these agreements restrict the
persons or classes of persons to whom the goods are sold
or from whom goods are bought.
In Shri Shamsher Kataria v. Honda Siel Cars India Ltd.[5]
(Spare Parts case) the genuine spare parts of automobiles
were not made freely available in the market and
agreements were made between the OEMs (Original
Equipment Manufacturers) and the authorized dealers
requiring the latter to source spare parts only from the
OEMs or their authorized vendors only.
CCI held that these agreements allowed the OEMs to
become monopolistic players in the market for their model
of cars, create entry barriers, foreclose competition from
the independent service providers, and seek exploitative
prices from consumers besides having potential long term
anti-competitive structural effects on the automobile
market in India. These agreements were held to be of the
nature of vertical agreements including exclusive supply
agreements, exclusive distribution agreements and refusal
to deal under Section 3(4) and held them to have AAEC in
India.
Resale Price Maintenance- sec3(4) (e)
This includes any agreement to sell goods on 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.
In Fx Enterprise Solutions India v. Hyundai Motor India
Limited[6] CCI imposed penalty on Hyundai for violation of
Section 3(4)(e) [Resale Price Maintenance] for monitoring
maximum permissible discount level through a Discount
Control Mechanism whereby dealers (who were mandated
to procure all automobile parts and accessories from
Hyundai) were only permitted to provide a maximum
permissible discount and were also not authorized to give
discount beyond a recommended range.EXEMPTIONS FROM ANTI- COMPETITIVE AGREEMENTS
[Section 3(5)]
According to Section 3(5) (i), a person exercising his right
to prevent infringement or imposing reasonable conditions
to protect his Intellectual Property Rights (hereinafter
referred to as “IPRs"), that is, Copyright, Patent,
Trademark, Geographical Indications and Designs shall
exempted from forming anti-competitive agreement under
Section 3.
In Shri Shnamsher Kataria v. Honda Siel Cars India Ltd.[7]
CCI rejected the exemption claimed under Section 3(5)(i)
of the Act and held that:
“4€!.. though registration of an IPR is necessary, the same
does not automatically entitle a company to seek
exemption under section 3(5) (i) of the Act. The important
criteria for determining whether the exemption under
section 3(5)(i) is available or not is to assess whether the
condition imposed by the IPR holder can be termed as
“imposition of a reasonable conditions, as may be
necessary for the protection of any of his rights”.” [Para
9.1.13]
As per Section 3(5) (ii), anti-competitive agreement under
section 3 shall not restrict the right of any person to export
goods from India to the extent to which the agreement
relates exclusively to the production, supply, distribution
or control of goods or provision of services for such
export.