COMPETITION LAW: 3RD INTERNAL ASSESSMENT

COMPETITION LAW
3RD INTERNAL ASSESSMENT
ANTI COMPETITIVE AGREEMENT WITH FOCUS
ON SPECIFIC HORIZONTAL AGREEMENTS
Submitted to Prof. Shweta Singh

KUSHAGER RELHAN
16010125160
BA.LLB (HONS.)
WORD COUNT: 1164 (WITHOUT BIBLIOGRAPHY AND FOOTNOTES) DIVISION- ‘B’
 TABLE OF CONTENTS
INTRODUCTION.................................................................................................................... 2

SPECIFIC HORIZONAL AGREEMENTS.......................................................................... 3

PRICE FIXING ...................................................................................................................... 3

RESTRICTING OR LIMITING PRODUCTION, SUPPLY, MARKETS, TECHINCAL

DEVELOPMENTS, INVESTMENT OR PROVISION OF SERVICES .................................. 3

SHARING MARKETS ............................................................................................................ 4

BID RIGGING ....................................................................................................................... 4

CONCLUSION ........................................................................................................................ 5

BIBLIOGRAPHY .................................................................................................................... 6

1
INTRODUCTION
According to sec. 3(1)1, an anti-competitive agreement is one which causes or is likely cause
an appreciable adverse effect on competition (AAEC) collusion and sec. 3(2)2 states that such
agreements shall be void. These agreements are further classified into horizontal and vertical
agreements.

Vertical agreements are those between undertakings operating at different levels of the
production chain. Unlike horizontal agreements, vertical agreements don’t involve a
combination of market power. They affect competition in the market only when the firm
imposing vertical restraint already has market power.

Horizontal agreements are agreements between two or more firms operating at the same
level of production or distribution in the market. Any agreement/decision/practice between
enterprises engaged in identical or similar trade of goods or services with respect to price
fixing, limiting supply, dividing markets or bid rigging is anti-competitive. Such agreements,
if entered into shall be presumed to have an AAE on competition. In horizontal agreements in
India, the rule of presumption is followed where complainant merely has to prove the
existence of a horizontal agreement and if proved CCI raises the presumption of AAEC.3

Firms do tend to restrict competition by entering into collusive agreements to fix prices and
outputs, and they often take exploitative and exclusionary steps as means to achieve this
vicious end and it may even happen that some major players in the market join hands and
enter into a joint venture or some other form of combination to prevent new players from
coming up while they rule the roost. As per the definition of an ‘agreement’ in the
competition act, the commission has to find sufficiency of evidence on the benchmark of
preponderance of probabilities4. It is a prerequisite for the formation of a cartel. It includes
any arrangement or understanding or action in concert, whether or not, such arrangement,
understanding or action is formal, in writing or intended to be enforceable by legal
proceedings5. It is thus evident that an agreement is not restricted to be of written form only.

1
Section 3(1), The Competition Act, 2002, No.12, Acts of Parliament, 2002 (India).
2
Section 3(2), The Competition Act, 2002, No.12, Acts of Parliament, 2002 (India).
3
RICHARD WHISH, COMPETITION LAW (London, Lexis Nexis UK, 5th edn. 2003) 734.
4
Director General (Supplies and Disposals) v. M/s Puja Enterprises Basti, Ref. Case No. 01.
5
Express Industry Council of India v. Jet Airways, Indigo, SpiceJet, Case No. 30 of 2013.

2
SPECIFIC HORIZONAL AGREEMENTS
PRICE FIXING
Price fixing is an agreement between business competitors to sell the same product or service
at the same price. The agreement may be express or implied. The main aim being increase of
profits, it can also involve any agreement to fix, peg, discount or stabilise prices. According
to s.3(3)(a) of the act6 any agreement, which directly or indirectly determines purchase
prices, shall be presumed to have an appreciable adverse effect on competition.

It is not illegal for a firm to copy the price movements of a de facto market leader called price
leadership. This is known as conscious parallelism. Parallel pricing occurs if firms change
their prices simultaneously, in the same direction, and proportionally. Parallel behaviour is
taken as the first clue for suspecting the presence of collusion. The US and European courts
have adopted a ‘parallelism plus approach’ to deal with price fixing. It requires the showing
of existence of ‘plus factors’ beyond merely the firms' parallel behaviour, in order to prove
that an antitrust violation has occurred.7 The CCI in All India Tyre Dealers8 emphasised it is
important to differentiate between rational conscious parallelism arising out of the
interdependence of the firm's strategic choices or parallelism stemming from purely
concerted action and additional evidence i.e., plus factors in addition to the mere price pattern
are required.

RESTRICTING OR LIMITING PRODUCTION, SUPPLY, MARKETS, TECHINCAL

DEVELOPMENTS, INVESTMENT OR PROVISION OF SERVICES
Apart from price fixing, cartel can be formed through other methods also, which earns the
colluding members supra-competitive profits, i.e. by way of restricting members output. An
example of such an agreement is the one, which exists amongst the OPEC countries
(Organization of the Petroleum Exporting Countries), who do not fix prices but determine the
quota or quantity each member country will export. Section 3(3)(b) of the Competition Act9
provides that an agreement for limiting or controlling production, supply, markets, technical
development, investment or provision of services shall be presumed to have appreciable
adverse effects on competition in India.

6
Section 3(3)(a), The Competition Act, 2002, No.12, Acts of Parliament, 2002 (India).
7
Pamela Samuelson & Suzanne Scotchmer, The Law and Economics of Reverse Engineering, 111 YALE LAW
JOURNAL 1575 (2002).
8
All India Tyre Dealers, 2013 Comp LR 92 CCI: MANU/CO/0097/2012.
9
Section 3(3)(b), The Competition Act, 2002, No.12, Acts of Parliament, 2002 (India).

3
In Reliance Big Entertainment Ltd10, film bodies/associations were involved in anti-
competitive activities in terms of film distribution and exhibition in territories under their
control. Moreover, their rules and regulations for its members, especially not letting them
deal with the non-members and prescribed even stringent punishment was also stated to be
anti-competitive. The CCI concluded that this is a case wherein the members of the body
entered into horizontal agreement, in the form of decisions and practices carried on by the
associations, not to deal with non-members. This non-dealing in effect limits the supplies and
distribution of the films in the territories under control of various associations, which is
violative of s.3(3)(b) of the Competition Act.

SHARING MARKETS
Market sharing division agreement may be either to share market geographically or in
respect of consumers or particular categories of consumers or of types of goods services or in
any other way. An example of geographic market sharing would be agreement between
manufacturer ‘A’ and manufacturer ‘B’ (both manufacturers of product ‘P’) to agree that 'A'
will sell product ‘P’ in a certain geographic area, while ‘B’ will sell product ‘P’ in another
area, and ‘A’ will not sell product in the area allotted to ‘B’ and vice versa. RRTA v
Crompton India Ltd. and Rallies (India)11 is an example of market sharing on the basis of
product where both agreed not manufacture certain products to create monopoly in market.

BID RIGGING
Bid rigging generally implies collusion amongst the bidders in order to keep the bid money
at the predetermined levels. It is a practice whereby firms agree amongst themselves to
collaborate over their response to invitations to tenders.12 Through bid rigging, bidders
surrender their autonomy and independence to file bids. The bids become non-competitive as
everything is stage managed. Bid rigging is a form of fraud and almost always results in
economic harm to the agency, which is seeking the bids and to the public, who ultimately
bear the costs as taxpayers or consumers.

Basic types of Bid Rigging13: In Bid suppression, a competitor is asked to refrain or if

already bid, asked to withdraw it. In Complementary bidding, unrealistic bids are submitted

10
Reliance Big Entertainment Ltd. v Karnataka Film Chamber of Commerce and Ors., (2012) 108 CLA 116
(CCI).
11
RRTA v Crompton India Ltd. and Rallies (India): MANU/CO/0277/2003.
12
G.R. Bhatia, Abdullah Hussain and Ravisekhar Nair, Law In Focus: Competition Law In India, 1 IND J INT
EC L [181] 2008.
13
NIAMH DUNNE, COMPETITION LAW AND ECONOMIC REGULATION - MAKING AND MANAGING
MARKETS 14 (Cambridge University Press, 2015).

4
to give effect of genuine competitive bidding. In Bid rotations, bidders take turn being the
designated successful bidders on different occasions. In subcontracting, competitors who
didn’t bid or submitted a losing bid receive subcontracts of various varieties from the
successful bidder. In price bid rigging, bidders collude and keep the bid amount at a
predetermined level. Such predetermination is by way of intentional manipulation by
members of the bidding group.

In Re Alleged Cartelisation14, a case involving price fixing through bidding, court observed it
is normal that anti-competitive agreements or practices take place in a secret fashion, for
meetings are held in secret and with minimum documentation. Direct or explicit evidence
showing unlawful conduct is normally fragmentary and sparse. So, it is necessary to
reconstruct certain details by deduction.

CONCLUSION
Conclusively, it is understood that Section 3 of the Competition Act prohibits certain kinds
of agreements that causes or is likely to cause an appreciable adverse effect on competition
(“AAEC”) within India. Hence, for either dispelling the presumption under section 3(3) or for
satisfying the anti-competitive nature of a vertical agreement under section 3(4), it is
necessary for the parties to establish the presence of an AAEC in the agreement.15

14
Re, Alleged Cartelization, 2014 Comp LR 170 (CCI): MANU/CO/0015/2014.
15
Section 3(4), The Competition Act, 2002, No.12, Acts of Parliament, 2002 (India).

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BIBLIOGRAPHY
STATUTES:

• Section 3(1), The Competition Act, 2002, No.12, Acts of Parliament, 2002 (India)
• Section 3(2), The Competition Act, 2002, No.12, Acts of Parliament, 2002 (India)
• Section 3(3)(a), The Competition Act, 2002, No.12, Acts of Parliament, 2002 (India)
• Section 3(3)(b), The Competition Act, 2002, No.12, Acts of Parliament, 2002 (India)
• Section 3(4), The Competition Act, 2002, No.12, Acts of Parliament, 2002 (India)

JOURNAL ARTICLES:

• Pamela Samuelson & Suzanne Scotchmer, The Law and Economics of Reverse
Engineering, 111 YALE LAW JOURNAL 1575 (2002)
• G.R. Bhatia, Abdullah Hussain and Ravisekhar Nair, Law In Focus: Competition Law
In India, 1 IND J INT EC L [181] 2008

CASES:

• Re, Alleged Cartelization, 2014 Comp LR 170 (CCI): MANU/CO/0015/2014

• All India Tyre Dealers, 2013 Comp LR 92 CCI: MANU/CO/0097/2012
• Reliance Big Entertainment Ltd. v Karnataka Film Chamber of Commerce and Ors.,
(2012) 108 CLA 116 (CCI)
• RRTA v Crompton India Ltd. and Rallies (India): MANU/CO/0277/2003

BOOKS:

• RICHARD WHISH, COMPETITION LAW (London, Lexis Nexis UK, 5th edn. 2003)
734
• NIAMH DUNNE, COMPETITION LAW AND ECONOMIC REGULATION -
MAKING AND MANAGING MARKETS 14 (Cambridge University Press, 2015)