Horizontal Agreement

Section 3(3) of the Act states that- Any agreement entered into between enterprises or associations of enterprises or
persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by,
any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of
goods or provision of services, which—

(a) Directly or indirectly determines purchase or sale prices;

(b) Limits or controls production, supply, markets, technical development, investment or provision of services;

(c) Shares the market or source of production or provision of services by way of allocation of geographical area of
market, or type of goods or services, or number of customers in the market or any other similar way;

(d) Directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse
effect on competition.[4]

There is direct or indirect determination of prices, it is between competitiors presumed and anti-competitive. Sharing
of
• Prices,
• Input costs,
• Price/cost components,
• Profit margins,
• Cost structure and price calculation,

Atypical cartel- also known as HUB and SPOKE- is the exchange of sensitive information between competition and
third party. There is no direct cartel and they channelize themselves through hub.

Vertical Agreements
Vertical agreements are agreements that are entered amongst enterprise or persons at different stages of the
production chain say for e.g. an agreement between an input supplier and a manufacturer of a product using the input
or agreements between principals and dealers etc. These are agreements that operate at different levels of trade.

Section 3 of the Clayton Act governs inter-brand restraints involving the sale of goods. And, Section 2 of the Sherman
Act governs restraints entered by monopolists.

The difference between Horizontal and Vertical Agreements is that in Horizontal Agreements there is same level of
competition whereas in Vertical Agreement there is different level of competition.

Section 3(4) states that any 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, including:
(a) Tie-in arrangement;
(b) Exclusive supply agreement;
(c) Exclusive distribution agreement;
(d) Refusal to deal;
(e) Resale price maintenance,
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.[7]

Essential ingredients of Section 3(4) are:-

# There must exist an agreement amongst enterprises or persons,
# Parties to such agreement must be at different stages or levels of production chain, and
# The agreement should cause or should be likely to cause an AAEC( adverse effect on competition