Anti-Competitive

Agreements
 Section 3
Section 3 in the Competition Act, 2002

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 an appreciable adverse effect on competition within India.

(2) Any agreement entered into in contravention of the provisions contained in sub-section (1) 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;
(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.
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.
(4) 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. Explanation.—For the purposes of this sub-section,—
(a) “tie-in arrangements” includes any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some
other goods;
(b) “exclusive supply agreement” includes any agreement restricting in any manner 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;
(c) “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;
(d) “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;
(e) “resale price maintenance” 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.
(5) Nothing contained in this section shall restrict—

(i) the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any

of his rights which have been or may be conferred upon him under:

(a) the Copyright Act, 1957 (14 of 1957);

(b) the Patents Act, 1970 (39 of 1970);

(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);

(d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);

(e) the Designs Act, 2000 (16 of 2000);

(f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);

(ii) 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.

Relationship between section 3 (1) with
section 3(3) and section 3 (5)
Re: Ramakant Kini v Hiranandani Hospitals
Mrs. Jain, an expecting mother, seeking maternity services from the OP, entered into an agreement
with LifeCell India for umbilical cord stem-cellbanking services. Prior to the delivery, when her
husband sought OP’s support for getting the stem cell banking procedure done at the OP’s premises,
he was informed that the OP has an arrangement with Cryobanks India according to which no other
stem cell banker would be allowed in the OP‟s premises. In the event of the informant still being
desirous of opting for any other stem cell banking services other than the one with which the OP
had an arrangement, he was told that he should seek maternity services from elsewhere.
Consequently, the patient opted for another high-end multi-specialty hospital for maternity services.
It is alleged that the OP has indulged in anti-competitive practices and abused its dominant
position in the market for maternity services in high-end multi-specialty hospitals and
leveraging its dominant position to gain advantage in a related market for providing umbilical
cord stem cell banking services to high-end multi-specialty hospitals, where it is not present
itself, thereby, causing an appreciable adverse effect on competition in violation of sections
3(4) and 4 of the Act.
What is the relevant market in this case?
Hospitals, especially modern private hospitals such as Hiranandani Hospital, are business firms
organized to provide comprehensive medical services, involving various third party health care service
providers. Provision of medical services involves complicated. From an economic perspective, the
modern hospital can be seen as organizing the provision of medical services, using physician labour as
both a supply input and a distribution network for patients in terms of various verticals. In the new
paradigm, a hospital gets transformed as a platform to facilitate exchange of services between health
care specialists and consumers. These services (including consultant doctors) are provided on
commercial terms that are often packaged and offered to consumers (patients) by the hospital in different
combinations; and if required, tailor-made to suit their requirements. Consequently, majority
transactions in the health care industry are multilateral, involving various health care service providers,
patients and hospital itself - managerial and entrepreneurial functions are shared among firms supplying
different types of health care service / products. The benefit of such packaged services under one roof
reduces the transaction cost to all related market participants, including patients and diversity of package
enables patients to exercise their choice.
Issue: Is there is a vertical relationship between the OP and Cryobanks?
In the present case, while it is true that a hospital rendering maternity services does not require stem
cell banks, the stem cell banks do require the services of the hospital to the extent that stem cell of
the umbilical cord has to be collected within 10 minutes of delivery of a baby if the baby is delivered
in a hospital. However, it is important to note that collection of stem cell from the umbilical cord can
be done at home by a paramedic staff if delivery happens at home. It is important to note that
hospital, on its own, does not produce anything that is used by stem cell banks; rather, hospital comes
into the picture vis-a-vis stem cell value chain because delivery happens within the premises of
hospital.
The said vertical arrangement, given the nature of relationships between the two-sides of the
platform, there is an element of vertical incompleteness. A hospital acts as a coordinator of
transactions towards a common objective - this alters the nature of transactions and incentives in the
healthcare industry from normal market exchanges.
In the health care industry there are five basic classes of transactors. The patient or consumer of
health care services is the first transactor, followed by first-line providers - the doctors, specialist
consultants whom the patients contact directly. The second-line providers include imaging facilities,
scanning, blood bank, stem-cell bank etc. whose output is either used by patients under the direction
of first-line providers or supplied as intermediate products to first-line or patients. Insurers who
assume risk by selling health insurance policies are the next line of service providers followed lastly
by the government which regulates the health care market. These interactions are vertical in form and
breadth, but do not display the standard continuous vertical linkage to the end consumer as in the
manufacturing sector.
Although each entity in a health care industry is related to the other, the integration is not complete in
as much as there is a lack of independence while making decision for utilization of a particular
service. Maternity and stem cell banking services constitute one such incomplete integration.
Thus, health care industry displays some sort of vertical integration, although different from
conventional vertical relation. Further, this vertical integration is incomplete as objectives of
the transactors partly overlap and partly conflict with power to influence each other’s
behavior.
Issue: Was there a tie-in arrangement/agreement?

Explanation (a) to Section 3(4) of the Act defines tie-in as including any agreement requiring a
purchaser of goods, as a condition of such purchase, to purchase some other goods. It is evident that
3350 patients availed only maternity services during the period under reference and that these
patients were not compelled to avail stem cell banking services from its premises=> Not tie-in.
Neither do conditions of exclusive supply agreement appear hold true for the reason that OP does
not stop Cryobanks from enrolling patients from other hospitals. This is supported from the fact that
Cryobanks has exclusive tie-up with various hospitals across the country. In view of the aforesaid, it
is opined that there is no foreclosure and accordingly no violation of Section 3(4) of the Act.
Is there AAEC arising out of the agreement OP and Cryobanks?
The Commission referred to its duty to protect consumer interests and ensure freedom of trade, and noted that
the scope of Section 3(1) is not the aggregate of the scope of Section 3(3) and of Section 3(4), but
addresses agreements which adversely affect the interests of consumers, or hinder freedom of trade, or
are likely to cause AAEC in the market, even if such agreements do not fall within the ambit of Section
3(3) or 3(4).
The test for determining whether or not an agreement causes or is likely to cause an AAEC in the market is
based on factors set out in Section 19(3) that the Commission is required to take into account, and calls for
balancing negative and positive factors. In relation to negative factors, the Commission noted that there were
very few players in the market for provision of stem cell banking services, and held that the exclusive
contract could distort the market and lead to inefficiency, adversely impacting consumer interests. It
observed that such agreements could create entry barriers and foreclose competition in the stem cell
banking services market. In relation to positive factors, the Commission observed that the agreement did not
result in the accrual of benefits to consumers, and that the hospital had not been able to provide pro-
competitive justifications for the agreement.
Concluded that there was a violation of section 3 (1).
 Enterprise- Section 2 (h)
As per Section 2(h) of the Act, ‘enterprise’ means and includes a person or a department of Government, who or which is or has been
engaged in following activities:

(i) Production, storage, supply, distribution, acquisition or control of articles or goods;

(ii) Provisions of services of any kind;

(iii)Investing or acquiring of business, holding or dealing in shares or other securities of any other body corporate either directly or
through a subsidiary.
However, a department of Government carrying activity relating to sovereign functions of the government which includes activities
relating to atomic energy, currency, defence and space shall not be termed as an ‘enterprise’ for the purpose of the Act.
The CCI has adopted a functional approach while assessing whether or not an entity is an

enterprise under section 2(h) of the Competition Act. While analysing whether or not Indian

Railways was an enterprise under section 2(h) of Competition Act, the CCI was of the view that

various activities of the enterprise are to be considered individually and if some of the activities of

the enterprise are in the nature of sovereign functions that does not mean that all other activities of

the enterprise have to be considered non-economic. (Arshiya case)

Person: Section 2(l)

A ‘person’ includes following:

(i) An individual, Hindu undivided family, company or a firm;

(ii) An association of persons whether incorporated or not in India or outside India;

(iii) Any corporation established by Central or State government or a Government Company as defined under Companies Act.

(iv) Anybody corporate incorporated by or under the laws of a country outside India

(v) Any Cooperative Society, local authority or an artificial juridical person.

 Agreement- Section 2 (b)

 An “agreement” includes any arrangement or understanding or action in concert,—

(i) whether or not, such arrangement, understanding or action is formal or in writing; or

(ii) whether or not such arrangement, understanding or action is intended to be enforceable by

legal proceedings;
 Competition Commission of India v. Coordination
Committee of Artists and Technicians of West Bengal
Films and Television
Certain producers in Eastern India formed an association called Eastern India Motion Picture Association (for short, 'EIMPA').
Likewise, the artists and technicians of film and television industry in West Bengal formed an association known as
'Committee of Artists and Technicians of West Bengal Film and Television Investors (hereinafter referred to as the
'Coordination Committee').
Telecasting of serial ‘Mahabharat’ in Bangla after dubbing it in the said language from the original produced Hindi language
was not palatable to EIMPA or the Coordination Committee. In their perception, serials produced in other languages and shown
on the T.V. Channels after dubbing them in Bangla would affect the producers of that origin and, in turn, would also adversely
affect the artists and technicians working in West Bengal. The apprehension was that it may deter production of such serials in
Bangla because of the entry of serials produced in other languages and shown to the public by dubbing the same in their
language. Because of this reason, on 18th February, 2011 CTVN+ received a letter from the Coordination Committee to stop
the telecast of the dubbed serial ‘Mahabharat’.
Alleging that this was an anti-competitive agreement, an information was filed with the CCI.
The CCI, finding a prima facie case, ordered investigation by the DG. Both DG and CCI confirmed contraventions of the Act.
 At the Tribunal
The Tribunal affirmed the opinion of the dissenting member of the CCI on the question of 'relevant market' by holding that it
was not the ‘Film and Television Industry in the State of West Bengal’, but the ‘telecasting of the dubbed serial on television in
West Bengal’.
Thereafter, the Tribunal took note of the provisions of Section 3(3) of the Act and concluded that the Coordination Committee
was not trading in any goods, or provisions of any services, much less by the persons engaged in identical or similar trade or
provisions of services. Therefore, it could not be said that there was any 'agreement' as envisaged in Section 3 entered into.
According to the Tribunal, Section 3(3)(b) of the Act applies to the competitors who would be in the same line of commercial
activity and by their agreement tend to restrict the competition. No evidence to this effect was available in the instant case.
It was merely a protest of the Coordination Committee voicing its grievance for the benefit of its members and even if such a
move on the part of the Coordination Committee was wrong and even if its agitation was influenced by foul play in projecting
that exhibiting dubbed TV serial would affect their prospects of getting further work, that by itself would not become a
competition issue covered by the Act.
 At the Supreme Court
Two fundamental aspects which need determination are-
(i) What is the 'relevant market' for the purposes of inquiry into the impugned activity of the Coordination Committee? The
effect of the broadcast is not limited to the telecast or broadcast of the dubbed television serial. No doubt, the Coordination
Committee was against the ‘broadcast of the television serial ‘Mahabharat’ on the aforesaid two channels, in the dubbed form.
However, even as per the agitators, the said broadcast was going to adversely affect the TV and Film Industry of West Bengal
and the alleged purport behind the threats was to save the entire TV and Film Industry. The Coordination Committee itself
mentioned so in its letter.
The relevant market was, therefore, not limited to the broadcasting of the dubbed TV serials but entire film and television
industry of West Bengal.
(ii) Whether the action and conduct of the Coordination Committee is covered by the provisions of Section 3 of the Act?

Section 3 covers the acts of any ‘enterprise’ or ‘group of enterprises’ The term enterprise has been defined under section 2 (h)
of the Act.

Any entity, regardless of its form, constitutes an 'enterprise' within the meaning of Section 3 of the Act when it engages in
economic activity. An economic activity includes any activity, whether or not profit making, that involves economic trade.

The notion of enterprise is a relative one. The functional approach and the corresponding focus on the activity, rather
than the form of the entity may result in an entity being considered an enterprise when it engages in some activities, but not
when it engages in others. The relativity of the concept is most evident when considering activities carried out by non- profit-
making organisations or public bodies. These entities may at times operate in their charitable or public capacity but may
be considered as undertakings when they engage in commercial activities. The economic nature of an activity is often
apparent when the entities offer goods and services in the marketplace and when the activity could, potentially, yield profits.
If the Coordination Committee was a trade union acting by itself, and without conjunction with any other, it would not be
treated as an ‘enterprise’ or the kind of 'association of persons' described in Section 3. A trade union acts as on behalf of its
members in collective bargaining and is not engaged in economic activity. In such circumstances, had the Coordination
Committee acted only as trade unionists, things would have been different.

However the Coordination Committee (or for that matter even EIMPA) are, in fact, association of enterprises (constituent
members) and these members are engaged in production, distribution and exhibition of films. They joined together in giving
call of boycott of competing members i.e. the informant in the instant case and, therefore, matter cannot be viewed narrowly by
treating Coordination Committee as a trade union, ignoring the fact that it is backing the cause of those which are ‘enterprises’.
The constituent members of these bodies take decision relating to production or distribution or exhibition on behalf of the
members who are engaged in the similar or identical business of production, distribution or exhibition of the films.
The CCI rightly observed that the protection in the name of the language goes against the interest of the competition, depriving
the consumers of exercising their choice. Acts of Coordination Committee definitely caused harm to consumers by depriving
them from watching the dubbed serial on TV channel; albeit for a brief period. It also hindered competition in the market by
barring dubbed TV serials from exhibition on TV channels in the State of West Bengal. It amounted to creating barriers to
the entry of new content in the said dubbed TV serial. Such act and conduct also limited the supply of serial dubbed in
Bangla, which amounts to violation of the provision of Section 3(3)(b) of the Act.
 Surinder Singh Barmi v BCCI
Mr. Surinder Singh Barmi, filed a complaint under Section 19(1) (a) of the Act, against BCCI alleging anti-
competitive activities in relation to operation of IPL. He alleged irregularities in the grant of franchise rights
for team ownership, irregularities in the grant of media rights for the coverage of the league as well as
irregularities in the award of sponsorship rights and other local contracts related to the organisation of the IPL.
On the basis of the report submitted by the DG, it was observed that the process for grant of franchisee
agreements for infinitum tenure was unfair and discriminatory, as also the mechanism of awarding the media
rights for a period of 10 years caused appreciable adverse effect on the market. Fine and cease and desist order
(from any practice of denying market access to potential competitors through inclusion of one-sided clauses in
any agreement in the future, deletion of certain clause in media agreements as well as usage of its regulatory
powers in the process of deciding matters relating to its commercial functions) issued by the CCI.
The Competition Appellate Tribunal stayed the penalty as well as the directions issued by the Commission
and thereafter allowed the appeal, setting aside the order of the Commission due to breach of principles of
natural justice.
In appeal before the Supreme Court.
BCCI’s first contention was that it was not an ‘enterprise’ under section 2 (h); i.e.
that BCCI is a not-for-profit society registered under the Tamil Nadu Societies
Registration Act, 1975, established to promote the sport of cricket in India. BCCI
is not engaged in any commercial activity with the objective of earning profits.
Thus, BCCI cannot be equated with business organisations and is not an
'enterprise' within the meaning of Section 2(h) of the Act.
Decision on BCCI as an ‘enterprise’
The definition of 'enterprise' is wide enough to include within its purview any economic activity carried on by any entity. As per this
definition, an entity which is engaged in an activity relating to production, storage, supply, distribution, acquisition or control of any
article or goods, or provision of services is an enterprise. Activity in question only needs to be an economic activity. An activity
can be considered as an economic activity if an entity is operating in some market and where there are buyers and sellers.
BCCI is a society registered under the Tamil Nadu Societies Registration Act, 1975 and is, hence, a 'person'. In terms of its
Memorandum of Association, BCCI has been, inter alia, established to control the game of cricket in India and give its decision on
all matters including women's cricket, which may be referred to by any of its member association in India. In addition to being the
custodian of cricket in India, BCCI also organizes different formats of cricket matches/ tournament. By organizing such
matches/tournament, it generates income. For instance, in case of IPL, details of the financial statements of BCCI provided with its
submission dated 27th March, 2017 show that it grants media rights to broadcasters, enters into franchisee arrangements with business
houses, raises sponsorship, etc. Revenues generated from these activities run into hundreds of crore. No doubt, these may be
ploughed back into cricket and allied activities; but that does not imply that the said activities of BCCI are not economic in
nature.
If a person is engaged in any economic activity, no matter with or without profit motive, it would be considered an enterprise
as it interfaces with the market and hence, with other alternatives for the product or service in question. The engagement of
sports federation in regulatory activities such as framing rules and undertaking measures to preserve the integrity of the sport
does not alter its status as an enterprise if it is pursuing income generating economic activities alongwith.
 Rajat Verma v PWD, Haryana
The information in the present case has been filed by Shri Rajat Verma (Informant) under
Section 19(1)(a) of the Competition Act, 2002 (Act) against Public Works (Building and
Road) Department, Government of Haryana (OP-1/ Haryana PWD (B&R)), Secretary,
Haryana PWD (B&R) (OP-2) and Superintending Engineer, Haryana PWD (B&R), Karnal
Circle, Haryana (OP-3) alleging contravention of the provisions of Section 4 of the Act.
As per information, the Government of Haryana, through OP-1, had invited online bids for
the construction of Rail-Over-Bridges for which the Informant had also bid. The Informant
alleged that certain clauses of the bid document of the said tender are unfair and
discriminatory.
The Commission observed that OP-1 was not covered under the definition of an ‘enterprise’
as it was not directly engaged in commercial activities. In appeal, the COMPAT ruled that the
PWD, Haryana fell within the definition of ‘enterprise’ and remitted the matter to the
Commission.
The first contention raised by the OP was that it does not fall under the definition of an
‘enterprise’
Ruling-

Referred to the observations of the Hon'ble COMPAT in Appeal no. 45/2015 (supra) wherein it was
observed as follows:
"17. .....if a department of the Government is engaged in any activity relating to construction or repair, then
it will fall within the definition of the term 'enterprise'. ... there is nothing in Section 2(h) and (u) from
which it can be inferred that the definitions of 'enterprise' and 'service' are confined to any particular
economic or commercial activity. The only exception to the definition of the term 'enterprise' relates to
those activities which are relatable to sovereign functions of the Government and activities carried by the
four departments of the Central Government, i.e., atomic energy, defence, currency and space."
Further: "19. .... the Public Works Department is a provider of service to the public and from that
perspective it clearly falls within the ambit of term 'enterprise' ..... 20. Whether the activity of procuring
construction services is with a view to make profit is not the concern of the Act. ... Therefore, there is no
escape from the conclusion that it is an enterprise within the meaning of Section 2(h) of the Act….”
The same would be the position qua Public Works Departments of the other States as also the
Central Public Works Department.
The activity is “procurement of services for construction of roads and bridges by tendering‟. The procuring
entity is PWD of Haryana, the OP1. It is operating in the market for procurement of services for
construction of roads and bridges through tendering.
The subsequent use of such purchase is an economic activity. In the instant case, the activity being
procurement of services for construction of approach roads and ROB. Vehicles and passengers passing that
way need not wait for the train to pass once the ROB is ready and is open for access. It does not matter
whether any toll is collected or not. In case toll is collected, it may become a commercial activity. If not, it
would be an economic activity providing benefits to the users of the approach road. It results in economic
benefits. It may not be a commercial activity in the sense that it results in profit to the PWD, the OP1 or to
the Government of Haryana directly. Here we need to differentiate between “economic‟ viability and
“commercial‟ viability‟ of a project or activity. The activity/project for which tender is floated may not be
commercially viable. But once we take into account the saving in time of passengers, saving in inventory
cost of assets waiting at the rail crossing in commercial vehicles, reduction in pollution from waiting vehicles
etc., substantial benefits accrue to the economy.
Government Departments could be engaged in activities relatable to sovereign functions and/or activities non relatable
to sovereign functions. OP1 is a Department of the Government of the State of Haryana, entrusted with the
responsibility of planning and implementing public works like construction and maintenance of roads and bridges in the
State of Haryana. These activities the Department can do on its own or delegate to other persons
In the Landmark case of Bangalore Water Supply & Sewage Board v A. Rajappa (1978) 2SCC 213, a seven judge Bench
of the Supreme Court while interpreting the term “Industry‟ as defined in Section 2(j) of the Industrial Disputes Act
1947 exempted only sovereign functions from the ambit of industrial law. In that case the Apex Court observed:
“Sovereign functions can only be discharged by the State and not by a private person. If the State's inalienable
functions are excepted from the sweep of the definition contained in section 2(j), one shall have it is the nature of
the activity is an industry. Indeed, in this respect, it should make no difference whether on the one hand, an
activity is undertaken by a corporate body in the discharge of its statutory functions or, on the other, by the State
itself in the exercise of its inalienable functions."
“Sovereign functions, strictly understood, alone qualify for exemption, not the welfare activities or economic
adventures undertaken by the government or statutory bodies. In other words only primary, inescapable,
inalienable and non-delegable functions of a government should qualify for exemption within the meaning of
‘sovereign functions’ of the government and welfare, commercial and economic activities are not covered within
the meaning of ‘sovereign’ function.”
PWD is an ‘enterprise’.
 ‘Agreement’?
Re: Bengal Chemist and Druggist Association [Suo moto case 2 of 2012,
CCI]
BCDA, an association of wholesalers and retail sellers of drugs affiliated to All India
Organization of Chemist and Druggist, was a registered company. Had approximately
34000 members.
Alleged that the BCDA’s Executive Committee directed its retailer members not to give
discount on the MRP in the sale of medicines to consumers. The directives issued by the
BCDA have been minuted in its Executive Committee meeting dated 23.06.2012 and the
same are available on the website of BCDA.
Also alleged that in order to ensure strict compliance of its directives, BCDA has been
carrying out vigilance operations to identify the retailers defying the directions issued by
it, and has even forced the defiant members to shut their shops as a punishment measure.
Alleged that the BCDA’s circular and consequent acts resulted in direct/indirect
determination of price, and limiting/controlling supply.
DG’s investigation report concluded that the BCDA was guilty.
 Contentions by BCDA

That, the prices of scheduled drugs are fixed under the DPCO order by the government and for non-scheduled
drugs by the manufacturers and hence, passing of resolutions by BCDA allegedly to the effect asking retailers not
to sell medicines below Maximum Retail Price (MRP) is not covered within the mischief of Section 3(3)(a) read
with Section 3(1) of the Act. According to BCDA, it is not fixing the sale price of the medicine either directly or
indirectly.

That, the acts were committed in ignorance of law. Due to the heavy discounts offered by big retailer, the
business of small retailers is being wiped out. Consequently, around 15 to 20 per cent of small retailers in
different districts/villages in the state of West Bengal are forced to close their business. It is in this context that
the alleged resolutions were passed under a bona fide belief that there is no violation of any law.
 Judgment
Issue: Whether BCDA and its District and Zonal Committees were engaged in anti-
competitive practices in violation of the provisions of section 3 of the Act?

Section 3(3) of the Act not only covers agreements entered into between enterprises or
associations of enterprises but also the practice carried on or decision taken by any
association of enterprises engaged in identical or similar trade of goods or provision of
services. Thus, all actions and practices of BCDA including those relating to issues such as
alleged fixation of trade margins, issuing circulars directing its retailer members not to
give discount on the MRP in the sale of medicines to consumers, conducting raids in
order to ensure strict compliance of its directives, carrying out vigilance operations to
identify the retailers defying the direction issued by it, forcing the defiant members to
shut their shops as a punishment measure etc. would fall squarely as ‘practice carried on’
or ‘decision taken by’ an 'association of enterprises’ under Section 3(3) of the Act.
 Builders Association of India vs. Cement manufacturers Association of India and Others [2012
CompLR 629 (CCI)]
As per the informant, the respondent cement manufacturers indulge directly and
indirectly into monopolistic and restrictive trade practices. In particular-
• They have divided the territory of India into five (5) zones so as to enable
themselves to control the supply and determine or fix exorbitantly high price of
cement by forming a cartel in contravention of provisions of section 3 of the Act.
The price of cement has been increased in all the five zones (North, East, West,
South and Central), in which they are operating, without any direct link or
correlation to increase in input costs in the respective zones.
• The cement manufacturing units had deliberately reduced their production and
produced much less than their installed capacity to create an artificial scarcity and
raise the prices to earn abnormal profits.
• Despite various concessions and stimulus packages announced by the government in
the wake of financial crisis of 2008 in form of reduction in excise duties, reduction in
the price of coal, petrol and diesel, instead of reducing the price as was anticipated and
expected by the government and consuming industries such as construction and real
estate, the cement industry through an agreement caused an increase in the price per
bag by Rs. 5/- between December, 2008 and February, 2009.
• Cement manufacturers admittedly have been continuously increasing production of
PPC and reaping benefits available to them by using 'fly-ash' in production which
meant that the quantity of production of cement increased manifold without any
increase in the cost of production or input costs. The 'fly-ash' is being provided to the
cement manufactures by the thermal power plants, which are primarily owned or
controlled by the government or semi government undertakings, at zero cost. The
cement manufactures use around 15-20% fly-ash as raw material to produce cement,
amounting to direct reduction of 15-20% in the cost of raw material used for production
of cement.
 Contentions of the OP
• The DG’s conclusion of the existence of an ‘anti-competitive
arrangement’ was based solely on circumstantial evidence.

• The finding of cartelization can result in very serious penal,

commercial and reputational consequences and when such harsh
penal consequences are provided, the degree of proof applicable
should be stringent and beyond any reasonable doubt.
• Mere suspicion of collusive behavior, or of a "tacit agreement", or of "collusive price
leadership" cannot be the basis for taking steps under section 3 of the Act. Nor can
findings of alleged "Price Parallelism" or "Dispatch Parallelism" establish the
existence of an "Agreement" or “Understanding”. Cement is a homogenous
commodity, the product is standardized with BIS markings, and the companies
operate in the same industry/markets, using same or similar raw material inputs,
electricity, technology, among other factors. According prices would be broadly
similar and would broadly move in the same direction. Such correlation in prices also
exists in intensively competitive industries or markets.

• Production and dispatch parallelism, much like price parallelism is natural in any
industry and does not indicate any cartelization. When demand is more, production
and dispatch will correspondingly be more and similarly, when demand is less,
production & dispatch would be lower.
• The report of DG relies on alleged low capacity utilization. However, factually there is no
general reduction in capacity utilization. The capacity utilization depends on various factors
such as monsoon, weather condition, festive season, seasons of cultivation and harvesting of
various crops, availability of railwagons/trucks, labour, coal, power availability, plant
shutdown, storage capacity etc. Most important among the factors influencing capacity
utilization is the gestation Period required (one to three years) to achieve full/optimal capacity
utilization when new plant and capacities are added. Thus, where there has been 50% increase
in installed production capacity in the last four years, total capacity utilization is bound to
decrease.
• The aforesaid factors can be decisions taken by a prudent businessman for profit
maximisation. Do not necessarily mean that they came through an agreement/mutual
understanding.
 Judgment
Whether there exists an agreement or arrangement among the cement companies
named as the Opposite Parties under which they share details of cement prices,
production and capacities with each other using the platform of CMA?
Chief objection of the OP- That, the DG has found infringement of the provision of
section 3(3) of the Act based only upon economic analysis and market behaviour to
prove some kind of meeting of minds and there is no direct evidence to support any
cartelization or anti-competitive agreement among them.
The definition of the term 'agreement' is an inclusive definition in the Act. It inter-alia includes
any arrangement, understanding or action in concert irrespective of whether it is written/
formal or otherwise or intended to be legally enforceable. Thus there is no need for explicit
agreement and the existence of an 'agreement' within the meaning of the Act. The same can
be inferred from the intention or conduct of the parties. In the cases of conspiracy or
existence of any any competitive agreement, proof of formal agreement may not be available
and may be established by circumstantial evidence alone. The concurrence of parties or
the consensus amongst them can, therefore, be gathered from their common motive and
concerted conduct.
Existence of a written agreement is not necessary to establish common
understanding, common design, common motive, common intent or
commonality of approach among the parties to an anticompetitive agreement.
These aspects may be established from the activities carried on by them, from
the objects sought to be achieved, evidence gathered from the anterior and
subsequent relevant circumstances. Circumstantial evidence concerning the
market and the conduct of market participants may also establish an
anticompetitive agreement and suggest concerted action.
Parallel behavior in price or sales is indicative of a coordinated behavior among participants in a
market. The firms often tend to justify the parallel behaviour in prices, production, dispatch or supplies
conduct in prices, as has been done in the instant matter also, by explaining the fundamentals of the
market forces such as demand, increasing cost of production and other economic factors.
However, it also remains a fact that parties to an anti- competitive agreement will not come out in open
and reveal their identity to be punished by the competition agencies. This is also the reason that the
legislature in its wisdom has made the definition of 'agreement' inclusive and wide enough and not
restricted it only to documented and written agreement among the parties. Thus, the Commission is
not impeded from using circumstantial evidences for making inquiries into act, conduct and
behaviour of market participants- to prove that a particular set of action and conduct of market
participants cannot be explained but for an anti-competitive arrangement and concerted action .
Referred to the OECD Policy Roundtables Prosecuting Cartels without Direct Evidence 2006

“Available evidence for proving cartel agreements 2.1 Categories of evidence Evidence used
to prove a cartel agreement can be classified into two types: direct and circumstantial.

Circumstantial evidence, in turn, consists of “communication” evidence and economic

evidence, which include firm conduct, market structure, and evidence of facilitating practices.

Economic evidence identifies primarily firm conduct that suggests that an agreement was
reached, but also conduct of the industry as a whole, elements of market structure
which suggest that secret price fixing was feasible, and certain practices that can be
used to sustain a cartel agreement.
Conduct evidence is the single most important type of economic evidence. As noted earlier,
observation of certain, suspicious conduct frequently triggers an investigation of a possible
cartel. The conduct of parties is important to identify behaviours that can be characterised
as contrary to the parties’ unilateral self-interest and which therefore supports the
inference of an agreement.

Conduct evidence includes, first and foremost: - Parallel pricing – changes in prices by
rivals that are identical, or nearly so, and simultaneous, or nearly so. It includes other
forms of parallel conduct, such as capacity reductions, adoption of standardised terms
of sale, and suspicious bidding patterns, e.g., a predictable rotation of winning bidders.
Industry performance could also be described as conduct evidence. It includes: -
abnormally high profits; - stable market shares - A history of competition law violations.
Evidence related to market structure can be used primarily to make the finding of a
cartel agreement more plausible, even though market structure factors do not prove the
existence of such an agreement. Relevant economic evidence relating to market
structure includes: - high concentration; - low concentration on the opposite side of the
market; - high barriers to entry; - high degree of vertical integration; - Standardised or
homogeneous product. The evidentiary value of structural evidence can be limited,
however.

Thus, even in the absence of proof of concluded formal agreement, when there are indicators
that there was practical cooperation between the parties which knowingly substitute the risk
of competition, that would amount to anti-competitive practices.
Applying the OECD Guidelines, the Commission also observed that CMA has several publications
like 'Executive Summary-'Cement Industry', 'Cement Statistics' -Interregional movement of cement'.
These publications giving details of the details of production, dispatch of each company are
circulated only among the members. Therefore, the Opposite Parties not only get information about
their prices, but also about the details of their production and dispatch.This sharing of information
facilitates coordination. There were also multiple meetings held at hotels were such information was
discussed.
In addition to communicative evidence which strongly indicate anticompetitive conduct and
behaviour on part of the Opposite Parties, the Commission also looked at economic evidence to find
out and test the veracity of the Opposite Parties that they are acting unilaterally in accordance, with
the normal market forces and not under an agreement to collude and coordinate their behaviour. The
Commission placed price parallelism in the context of the structural factors in the cement industry
such as cost of production to conclude that price movement of all the companies in the same range
and direction is not possible unless there is pre-discussion on the price movement.
 Neeraj Malhotra v Deustche Post Bank Home Finance [(2011) 106 SCL 62 (CCI)]

Information filed by Neeraj Malhotra against banks and financial institutions regarding
the levy of pre-payment charges on prepayment of loan taken.
As per the informant the said practice of levying of prepayment charges discourages/
prevents the borrower from switching over to another enterprise which is offering loan at
lower rate of interest. The informant also alleged that the said banking and non-banking
financial institutions are charging penal interest towards prepayment charges on the entire
loan amount and not only on the outstanding loan amount- resulting in increasing the
effective rate of interest on which the loan was earlier availed by the borrower.
Upon investigation of facts, the DG concluded that:The allegations regarding
violation of Section 3(1), (2) read with Section 4(1), (2) (a) (i) are found to be
untrue. Also with regard to allegation that the entities are levying pre-payment
charges on the entire loan amount and not on the outstanding loan amount is found
to be untrue as all the entities mentioned by the information provider are charging
pre-payment penalty on the outstanding principal at the time of pre-payment and not
on the entire loan amount ii. The allegation that the banks are imposing pre-payment
penalty/charges are found to be true. Further, with regard to allegation for violation
of Section 3(3)(a) & (b) made by the information provider, violation of Section 3(3)
(b) of the Act is found to be true.
The CCI:
The banks perceive the issue more as a business issue in which they have to look after the interest of
all the stake holders, including the depositors, and not only of the home loan borrowers. At any
point of time, therefore, their interest regime, and consequential contractual obligations for loans
advanced at that time, relate to their own internal financial calculations for asset liability match etc.,
over a medium/long term time horizon. Any transaction which deviates from the scheme of things,
on the basis of which contractual loan agreements have been arrived at, is perceived as a cost by
them and, therefore, they consider it a legitimate business requirement to recover in full or part such
transaction fee for that particular transaction; transaction in the present instance being prepayment.
Home-loans channelize savings into real assets directly, fuelling growth in other sectors through
forward and backward linkages and thus ensuring growth in employment. It helps other sectors like
steel, cement, brick, etc. to grow. People engaged in construction work largely belong to the lower
pyramid of the economy. Hence, it provides employment to a larger section of the society, thereby
contributing to achievement of the goal of inclusive growth and employment generation.
Whether there is any agreement to impose prepayment charges among the opposite parties who are, in effect,
supplying the service of home loans?
For an agreement to exist there has to be an act in the nature of an arrangement, understanding or action in
concert including existence of an identifiable practice or decision taken by an association of enterprises or
persons. An agreement is a conscious and congruous act that has to be associated to a point in time.
According to the report of the DG, the reference point for the alleged agreement is a meeting of the Indian Banking
Association held on 28.07.2003 which resulted in a communication dt. 10.09.2003 from IBA to its members. In this
context, the DG has observed, "The advent of prepayment penalty/charges in India on mass scale is traced to the
meetings of banks on 28.07.2003 and 28.08.2003 convened by the IBA with regard to prepayment charges.
However, it is noted for LIC Housing Finance that prepayment penalty is mentioned in their loan agreement since
1995. It was deliberated in the meeting of IBA by member banks to have a common approach in fixing prepayment
charges on loan. Accordingly, a circular dated 10.09.2003 was issued which specifically spelt out levying of 0.5%-
1% prepayment charges as reasonable and the decision in this regard was left to banks to decide. It is noted that for
banks augmenting fee based income through prepayment charges was seen as significant consideration in
competitive market with pressure on interest spreads. It is noted from the meeting of IBA that the group of banks
have come together and taken a collective decision to limit market competition and to generate fee based income."
Various banks in their replies filed before the DG and later before this Commission
have contested the above observation. For instance, HDFC Ltd. in its letter dt.
07.06.2010 stated that it is not a member of IBA at present nor has it been a member for
at least the past two decades. Moreover, it did not attend the alleged meeting of IBA and
had never received the alleged IBA circular dated 10.09.2003. LIC HOUSING
FINANCE LIMITED in its letter dt. 29.01.2010 said that it had been charging
prepayment charges since 1995. Similarly, more than one bank has informed that Axis
Bank does not charge any prepayment charges/penalty even today. This Commission
has not found any material on record in the report of the DG that would negate the
averments made by these banks on this issue.
The word "agreement" for the purposes of the Act has wide connotations as defined under
Section 2 (b). However, it is imperative that existence of such an "agreement" is unequivocally
established. The European Court of Justice has clearly laid down this principle with respect to
infringements of Article 81 (1) of the EC Treaty in Cases-204, 205, 211, 213, 217 and 219/00 P,
and cases 29 & 30/83, Compagnie Royale Asturienne des Mones SA and Rheinzink GmbH v.
Commission wherein that Commission has said that precise and coherent proof must be
produced by the party or authority alleging infringement. In this case, the existence of any
"agreement" cannot be conjectured or even circumstantially adduced. Mere fact that the IBA
issued a circular dated 10.09.2003 mentioning concern of some member banks cannot in itself
be said to form a basis for or evidence of an agreement between banks.
It is apparent from a plain reading of the contents reproduced above that the meeting of
the IBA was actually to discuss the growing practices of corporate borrowers who
would avail of committed lines of credit by banks for working capital but would first
look at other market options such as CPs, bonds etc. for funding and use line of credit
only as a fallback. This put adverse pressure on asset-liability management by banks. It
was only in the context of those discussions that some banks raised the issue of
prepayment on housing loans also. The discussion on the subject was consequential and
not initial. Even then, it merely resulted in a clear decision that it "should be left to the
banks to decide." The lack of imperative voice and intent is evident from the language
and content of the said circular of IBA.
There is no evidence on record which suggests that above mentioned Banks/HFCs have
formed any internal and discrete association for the purpose of charging prepayment
penalty. In the present case as mentioned earlier the above mentioned Banks/HFCs are
not charging the same rate of prepayment penalty. Thus congruence of action, which is
an integral part of any agreement does not get established by the investigation of the
DG.
In view of the foregoing discussion, the Commission came to the conclusion that there
is no agreement among the banks and HFCs investigated by the DG, for levy of
prepayment charges that can be termed as action in concert. Whereas it has been found
that some banks / HFCs are imposing prepayment charges there is no evidence to
establish that this practice is a result of some action in concert or emerges from a
collusive decision. Rather, it is a manifestation of individual, though similar business
decisions.
 Delhi Jal Board vs. Grasim Industries Ltd. and Ors [Case no. 03 & 04 of 2013, CCI]

Alleged that the opposite parties are the only manufactures of Poly Aluminium Choline
and liquid choline of prescribed standards and they quoted identical or near identical
price in tender documents, indulged in collusive price setting during negotiation and thus
indulged in price cartelization and collusive tendering.

Directed investigation by the DG.

Found contraventions.

Contention- Having failed to gather or adduce any direct or circumstantial evidence to

support the allegation of a bid rigging agreement between the PAC Case OPs, DG has
relied on economic evidence, statements made by various deponents and other additional
evidence to come to the conclusion that the PAC Case OPs have acted in violation of
Section 3(3)(d) of the Act. It was argued that even the “additional evidence” relied upon
by the DG does not support the finding of bid-rigging against the PAC Case OPs.
Price competition is the keystone of an effective and well-functioning market. Any
agreement that restricts such activity is bound to come under the scrutiny of the Act. An
enterprise’s conduct in the market should be a reflection of its independent
commercial decision by intelligently adapting to the market conditions and
understanding the conduct of its competitors. If such a conduct was a result of
confidential and sensitive information being exchanged between the enterprises
whether directly or indirectly with the objective of influencing the market, then the
market condition will be a staged one. Exchange of sensitive information such as
price may make the price competition still and have negative effects on the market.

Parallel pricing is not per se violative of the Act. There have to be plus factors i.e.
some additional evidence tangible enough to come to the conclusion that prices
have been quoted as a result of concerted action or as a result of meeting of minds.
In this scenario, GIL and ABCIL have been continuously and throughout these tender processes, exchanging all vital information with each
other whether it is sharing of the bid documents, prices to be quoted and later, even the negotiated prices to be offered. The Commission
finds it paradoxical that notwithstanding ABCIL and GIL claiming to be one economic entity, they continued to submit separate bids, after
exchange of information, which were purportedly and supposedly to be competitive. Their credibility comes into question since admittedly
they have exchanged all the information including the pricing strategy before submitting their separate bids as competitors to DJB.

In the instant case, Commission could not find any economic rationale behind the behaviour of quoting similar rates by the bidders
despite having their plants located at different locations. Further, when examined on the methodology arrived at for pricing of PAC,
none could give a concrete answer and could only offer a general response. In addition, GACL’s prolonged supra-competitive pricing
for five continuous years and then the bid rotation by the parties for three years from FY2012-13 to FY 2014-15, with no plausible
economic rationale offered for it, strengthens the possibility of a concerted behaviour. Added to this, the similarity in the behavior of
the dealers of GIL and GACL in the tenders floated by other municipal corporations and the behavior of the Opposite Parties in the tenders
floated by DJB as well as the exchange of vital information relating to the bids including sensitive information such as the price of bid
between GIL and ABCIL bolster the circumstances of price manipulation in the tenders floated by DJB. These factors and
circumstances taken in totality are sufficient enough as ‘plus factors’ and these affirm the fact that prices have been quoted as a
result of concerted action as well as meeting of minds.

Standard of Proof under section 3 is that of ‘preponderance of probabilities’; not of ‘beyond reasonable doubt’

Penalised.