COMPETITION

LAW
IXth Semester
Unit 1 & Unit 3

-Akhila Rani
Asst.Professsor,RCL
What is meant by Competition?

Why enterprises compete each other?

Whether competition is inevitable?

What are the outcomes of Competition?

Competition Policy
Competition policy means the policy of government to
ensure fair dealings in the market by enacting the
concerned legislations.
 Thus competition law is the tool for the
implementation of competition policy as it prohibits anti
competitive practices of business entities only for
capturing the market.
Evolution of MRTP Act, 1969
• India adopted a centrally planned economic structure
known as ‘Nehruvian Socialism Model’ in the post
independent period.
• Nehruvian Socialism model was the mixed economy
model.
• Mixed economy model was adopted to implement the
concept of both the public sector and private sector.
• The main feature of Nehruvian Model of mixed
economy was “socialistic pattern of economic growth
with the object of achieving economic growth with
social justice.”
• The government policies implemented through five year
plans are in the nature of command and control
regarding the market economy.
• The First Five Year Plan was launched in 1951 which
mainly focused on the development of the primary
sector
• Five years later, on 14 May 1956, the Second Five Year
Plan, famously known as the Mahalanobis Model, was
announced. The emphasis of this plan was on
government-led industrialization. Mr. Nehru outlined
the central role of government when he said, “The
public sector must grow not only absolutely but also
relatively to the private sector”
• Thus started the License-Permit-Quota Raj in India,
wherein government control was so strong that it not
only decided which company would produce what,
but also the amount of production, as well as the
price of commodities.
• In short, license has been made as a mandatory
condition for carrying out the complete activities
related to a business So the period was known as
‘License –Raj’ as license is necessary for everything.
• As a result of License – Raj system, the freedom of
trade and easily access to market were restricted and
this type of extreme control resulted in the market
dominance.
• Market dominance means the ultimate control was
vested only in the hands of few individuals.
• This ultimately resulted into so many adverse effects
• After this ‘Mahalanobis Committee’ (in October 1960)
was appointed by Government to study on who was
benefitted by the first and second five-year plans, as the
per capita income of the people were not increasing.
• This committee is also known as “Distribution of Income
and Levels of Living”
• The committee report was due to the concentration of
economic power and market dominance in few hands,
big business houses were emerged and which was
ultimately the result of planned economy model which
was followed by the government
• Later, the government appointed a commission,
Monopolies Inquiry Commission in April, 1964.
• According to this committee report, there was
concentration of economic power in some hands and
restrictive and monopolistic practices of trade was
existed in the market
• By that time ‘Hazari Committee’ was also set up in
1965 to conduct the study of Industrial License
Procedure.
• The procedure under the Industries (Development &
Regulation) Act, 1951 was being studied by Hazari
Committee and the committee reported like the License
Raj System ultimately resulted into the concentration of
economic power only in the hands of few individuals and
only some businesses are grown in a disproportionate
manner
• Later, a bill for controlling monopolies and prohibition of
monopolistic and restrictive trade practices was drafted
by the ‘Monopolies Inquiry Commission’.
• As a result of that bill ‘The Monopolistic and Restrictive
Trade Practices Act’ was enacted in the year of 1969 and
it was enforced with effect from 1st June, 1970
• The main objectives of the Act is to ensure that the
operation of the economic system does not lead to the
vesting of economic power only in some individuals.
• Another important objectives of this Act was to control
monopolies and prohibit restrictive trade practices.
• MRTP Act, 1969 provides for the establishment of MRTP
Commission and MRTP Commission has the power to take
suo-moto action if it thinks fit.
• Salient Features of MRTP Act, 1969
• MTRP Act projects the following objectives as to be
achieved:-
• 1) Prevention of Concentration of economic power to the
common detriment
• 2) Control of monopolies
• 3) Prohibition of Monopolistic Trade Practices (MTP)
• 4) Prohibition of Restrictive Trade Practices (RTP)
• 5) Prohibition of Unfair Trade Practices (UTP)
• Prevention of Concentration of economic power to the
common detriment
• It means that MRTP Act 1969 focused on the prevention
of the concentration of economic power into some
individuals.
• Due to the misuse of the market power, one enterprise
can achieve the economic command over the concerned
market and which will adversely affect the fair
competition.
• So thus, Act mainly aimed to take steps for eradicating
the concentration of income, only in few hands, out of
the business or trading.
• Control of Monopolies
• Here Monopoly, means absolute power enjoyed by one
enterprise in the concerned relevant market.
• If a particular enterprise has monopoly in the
concerned market, then the other competitors will get
ousted out from the relevant market due to the
monopolistic practices adopted by the dominant
enterprise.
• MRTP Act has specific provisions to curtail these types
of monopolistic practices against the fair competition.
• Prohibition of Monopolistic Trade Practices (MTP)
• Three types of acts are being regulated by MRTP Act
such as Monopolistic Trade Practices, Restrictive Trade
Practices and Unfair Trade Practices.
• All these types of practices have adverse impact on the
public. So this Act was enacted to control all those kind
of practices.
• Monopolistic Trade Practice was defined in the Section
2(i) of the MRTP Act, 1969 and which can be recognized
and pointed out by the following characteristics :-
• (i) Price maintenance at an unreasonable manner
• (ii) Unreasonable prevention of competition in the market
• (iii) Limiting the technical development
• (iv) Allowing deteriorating quality
• (v) Increasing cost of production
• (vi) Increasing the prices and profits
• The above mentioned category of practices are
commonly referred as ‘Monopolistic Trade Practices’.
• Prohibition of Restrictive Trade Practices
• Restrictive Trade Practices are defined under Section 2(o)
read with Sec. 33(1) of the Monopolistic and Restrictive
Trade Practices Act.
• As per the sections, Restrictive Trade Practice means an
Act which distorts or restricts competition in the relevant
market.
• There are some more types of restrictive trade practices
are narrated in the MRTP Act like refusal to deal, tie-up
sales , price discrimination, resale price maintenance
etc.
• Sachar Committee
• By the passing of time, after the enactment of MRTP Act,
1969 it was noticed that the Act does not achieving the
object in its full spirit.
• So on the basis of this observation, a High Powered
Expert (Sachar) committee was formed by the
Government in June 1977
• Sachar Committee recommended to include the term
‘unfair trade practices’ (UTPs) to the MRTP Act to widen
the scope of the Act. As a result of the report submitted
by the Sachar Committee the MRTP Act was amended in
1984. By that amendment ‘unfair trade practice’ was
also added to this Act.
• Before 1984, there are no provision in the MRTP Act for
the protection of the right of consumer against false or
misleading advertisements or other similar kind of
unfair trade practices and the necessity to protect the
right of the consumers led to the inclusion of the
provision of ‘unfair Trade Practices’ into the MRTP Act.
• A separate chapter of unfair Trade Practices had been
included in the Act
• The committee also found out that the exemption clause
for the Government undertakings regarding the
monopolistic and restrictive trade practices was not at all
justifiable.
• The committee recommended for widening the role and
power of MRTP Commission.
• As a result of the MRTP Amendment Act 1984, the
power to temporary information order‟ was also vested
to the MRTP Commission
 Unfair Trade Practices (UTP)
• The term Unfair Trade Practice was introduced into the
MRTP Act in the year of 1984 as a result of the
recommendation of Sachar Committee
• Mainly ‘Unfair Trade Practices’ deals with the issues
regarding the consumer protection.
• For example, like the misleading advertisements,
misleading sale promotion etc.
• But later, as per the notification of Ministry of Corporate
Affairs (MCA) the cases which are pending regarding the
issues of unfair trade practices were got transferred to
the National Commission was established under the
consumer Protection Act, 1986.
• Emergence of ‘New Economic Policy’(‘Liberalization,
Privatisation and Globalization’) in India

• 5:30 PM, 24 July 1991: The finance minister of India, Dr.

Manmohan Singh presented the budget. He ended his
speech with the historic lines: “But as Victor Hugo once
said, ‘no power on earth can stop an idea whose time
has come.’ I suggest… that the emergence of India as a
major economic power in the world happens to be one
such idea. Let the whole world hear it loud and clear.
India is now wide awake. We shall prevail. We shall
overcome.”
• Evolution of Modern Competition Law in India
• The policy of government of India had been changed
from the concept of ‘Command and Control’ to the
modern concept of ‘Liberalization, Privatisation and
Globalization’.
• All other countries have the competition Laws and at
the same time India’s MRTP Act was inadequate for
promoting the healthy competition in the market by
regulating the anti-competitive practices in India both in
the Domestic and International Trade.
• In the backdrop of the new economic policy adopted by
Government of India in 1991, market based economy
has become necessary for the development of the
nation.
• A high Level Committee on Competition Law and Policy,
known as Raghavan Committee, was constituted by the
Government of India in 1999 for framing the modern
competition Policy of India.
• A basic frame work for the modern competition law was
provided by the above said high level committee and
objectives of competition Law was also suggested by the
committee in its report.
• As a result of the Raghavan Committee Report,
Competition Act, 2002 was enacted with a view to
promote fair and healthy competition and to protect
and safe guard the interest of the consumers by
eradicating the anti competitive practice from the
concerned relevant market.
• The modern competition Law was drafted meticulously to
satisfy all the requirement and needs of new market
based economy
• It carries on the policies by synchronizing with other
norms and policies like Trade Policy, FDI norms and
regulations, FEMA etc.
• The main focus of the competition Act, 2002 is to
promote fair and healthy competition for the economic
development of the country.
• Constitutional Provisions Regarding Freedom Of Trade
and Competition legislations
• Article 38
• Article 39
• Article 19(1)(g)
• Article 301 to Article 307
• Article 38
• State to secure a social order for the promotion of
welfare of the people
• (1) The State shall strive to promote the welfare of the
people by securing and protecting as effectively as it may a
social order in which justice, social, economic and political,
shall inform all the institutions of the national life
• (2) The State shall, in particular, strive to minimize the
inequalities in income, and endeavor to eliminate
inequalities in status, facilities and opportunities, not only
amongst individuals but also amongst groups of people
residing in different areas or engaged in different vocations
• Article 39
• Certain principles of policy to be followed by the State:
• The State shall, in particular, direct its policy towards
securing(a) that the citizens, men and women equally,
have the right to an adequate means to livelihood;
• (b) that the ownership and control of the material
resources of the community are so distributed as best to
subserve the common good;
• (c) that the operation of the economic system does not
result in the concentration of wealth and means of
production to the common detriment;
• (d) that there is equal pay for equal work for both men and
women;
• (e) that the health and strength of workers, men and
women, and the tender age of children are not abused and
that citizens are not forced by economic necessity to enter
avocations unsuited to their age or strength;
• (f) that children are given opportunities and facilities to
develop in a healthy manner and in conditions of freedom
and dignity and that childhood and youth are protected
against exploitation and against moral and material
abandonment
• Article 19(1)(g)
• Art.19(1)(g)under Part III provides the freedom to
practice any occupation, trade or business in the
interest of the general public
• The right under Article 19(1)(g) is fundamental and can
be claimed only by citizens.
• Article 301 to Article 307
• Article 301 under Part XIII empowers the free flow of
the stream of trade throughout the country
• Article 301 which gives the right to both citizens and
non-citizens to move the court if their right has been
infringed. 
• Article 302-307 which lay down the restrictions to the
free flow of trade in the country ensures that trade is
conducted in a lawful manner throughout the states
and the country.
• All these provisions together ensure the provision of
Constitutional status to the freedom of trade,
commerce, and intercourse.
• Now at least there would be no unreasonable
interference with trade and commerce based upon
geographical variations or any other such barriers. 
COMPETITION LAW 2002
Definitions
Sec. 2(a) :- Acquisition
• “Acquisition” means, directly or indirectly, acquiring or
agreeing to acquire—
• (i) shares, voting rights or assets of any enterprise; or
• (ii) control over management or control over assets of
any enterprise
Sec.2(b)
• “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
• The Act has a wide and inclusive definition of an
“agreement”.
• It is an arrangement/understanding or action in
concert.
• It includes both written and oral agreements. It need
not to be enforceable by law.
• Any communication among competitors, either in
person or by telephone, letters, e-mail or through any
other means even a wink or a nod can be construed as
an agreement.
[(ba) "Appellate Tribunal" means the National Company
Law Appellate Tribunal referred to in sub-section (1) of
section 53A;]

Sec 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;
• Sec.2(d) “Chairperson” means the Chairperson of the
Commission appointed under sub-section (1) of section 8
• Sec.2(e) “Commission” means the Competition
Commission of India established under sub-section (1) of
section 7
Sec.2(f)“consumer” means any person who—
(i) buys any goods for a consideration which has been paid
or promised or partly paid and partly promised, or
under any system of deferred payment and includes any
user of such goods other than the person who buys
such goods for consideration paid or promised or partly
paid or partly promised, or under any system of deferred
payment when such use is made with the approval of
such person, whether such purchase of goods is for
resale or for any commercial purpose or for personal
use;
• (ii) hires or avails of any services for a consideration
which has been paid or promised or partly paid and
partly promised, or under any system of deferred
payment and includes any beneficiary of such
services other than the person who hires or avails of
the services for consideration paid or promised, or
partly paid and partly promised, or under any system
of deferred payment, when such services are availed
of with the approval of the first-mentioned person
whether such hiring or availing of services is for any
commercial purpose or for personal use;
• The Act defines “consumers” as any person who
purchase goods either for personal use or for resale or
for any commercial purpose and includes any user of
such goods
• It also includes those consumers who hires or avails
any service either for personal or commercial purpose
And includes any beneficiary of such services
• Sec2(g) “Director-General” means the Director-
General appointed under sub-section (1) of section
16 and includes any Additional, Joint, Deputy or
Assistant Directors General appointed under that
section
• Sec.2(h) “enterprise” means a person or a department of
the Government, who or which is, or has been, engaged in
any activity, relating to the production, storage, supply,
distribution, acquisition or control of articles or goods, or
the provision of 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.
• Explanation .—For the purposes of this clause,—
• (a) “activity” includes profession or occupation;
• (b) “article” includes a new article and “service” includes a
new service;
• (c) “unit” or “division”, in relation to an enterprise, includes
—(i) a plant or factory established for the production,
storage, supply, distribution, acquisition or control of any
article or goods;
• (ii) any branch or office established for the provision of any
service;
• Sec.2(i) “goods” means goods as defined in the Sale of
Goods Act, 1930 (8 of 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;
• Sec.2(j) Member" means a Member of the Commission
appointed under sub-section (1) of section 9 and
includes the Chairperson;
• Sec.2(k) "notification" means a notification published in
the Official Gazette
• Sec.2(l)“person” includes
• (i) an individual;
• (ii) a Hindu undivided family;
• (iii) a company;
• (iv) a firm;
• (v) an association of persons or a body of individuals,
whether incorporated or not, in India or outside India;
• (vi) any corporation established by or under any Central,
State or Provincial Act or a Government company as
defined in section 617 of the Companies Act, 1956 (1 of
1956);
• vii) any body corporate incorporated by or under
the laws of a country outside India;
• (viii) a co-operative society registered under any
law relating to co-operative societies;
• (ix) a local authority;
• (x) every artificial juridical person, not falling
within any of the preceding sub-clauses;
• Sec.2(m) “practice” includes any practice relating to
the carrying on of any trade by a person or an
enterprise;
• Sec.2(n) “prescribed” means prescribed by Rules made
under this Act;
• Sec.2(o) “price”, in relation to the sale of any goods or
to the performance of any services, includes every
valuable consideration, whether direct or indirect, or
deferred, and includes any consideration which in effect
relates to the sale of any goods or to the performance
of any services although ostensibly relating to any other
matter or thing;
• Sec.2(p) “Public financial institution” means a public
financial institution specified under section 4A of the
Companies Act, 1956, (1 of 1956) and includes a State
Financial, industrial or Investment Corporation;
• Sec.2(q) “Regulations” means the regulations made by
the Commission under section 64;
• Sec.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;
• Sec.2(s) “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;
• Sec.2(t) “Relevant product market” means a market
comprising all those products or services which are
regarded as interchangeable or substitutable by the
consumer, by reason of characteristics of the products
or services, their prices and intended use;
• Sec.2(u) “service” means service of any description
which is made available to potential users and
includes the provision of services in connection
with business of any industrial or commercial
matters such as banking, communication,
education, financing, insurance, chit funds, real
estate, transport, storage, material treatment,
processing, supply of electrical or other energy,
boarding, lodging, entertainment, amusement,
construction, repair, conveying of news or
information and advertising
• Sec.2(v) “shares” means shares in the share capital of a
company carrying voting rights and includes—
• (i) any security which entitles the holder to receive
shares with voting rights;
• (ii) stock except where a distinction between stock and
share is expressed or implied;
• Sec.2(w) “statutory authority” means any authority,
board, corporation, council, institute, university or any
other body corporate, established by or under any
Central, State or Provincial Act for the purposes of
regulating production or supply of goods or provision
of any services or markets therefore or any matter
connected therewith or incidental thereto;
• Sec.2(x) “trade” means any trade, business, industry,
profession or occupation relating to the production,
supply, distribution, storage or control of goods and
includes the provision of any services;
• Sec.2(y) “turnover” includes value of sale of goods or
services;
• Sec.2(z) words and expressions used but not defined in
this Act and defined in the Companies Act shall have the
same meanings respectively assigned to them in that Act
Prohibition of Anti-competitive Agreements (Section 3)
• Section 3 provides that any agreement which restricts
• the production, supply, distribution, acquisition or
control of goods or provision of services,
• which causes or is likely to cause an Appreciable
Adverse Effect on Competition (AAEC) within India , is
prohibited
• and void.
• Anti-competitive agreements may include Horizontal
and Vertical Agreements.
• Horizontal agreements (Section 3(3))
• “Horizontal Agreement” means an agreement between
enterprises, each of which operates at the same level in the
production or distribution chain including Cartels , engaged
in similar trade of Goods or Provision of Services
• Defined under Section 3(3) of the Act, horizontal
agreements include agreement which:
• a) Directly or indirectly determine purchase or sale prices:
• Fixing of prices by competitors is an Anti-competitive
agreement wherein competitors conspire to raise ,
decrease, fix or stabilize prices in a specific market
• The prices in a competitive market should be
determined freely on the basis of demand and supply
and not as a result of an agreement between the
competitors.
• An understanding between the competitors under
which the competitors agree to take actions to raise,
decrease, fix or stabilize prices would be
anticompetitive.
• Such agreements are often done in secret but can be
unearthed through circumstantial evidence
• Example :
• Businessman 1: Every shop in the mall is slashing their
prices.
• Businessman 2:Now we have to lower our prices too.
• Businessman 1: Look, we'll all end up making less if we go
on like this. Why don’t we talk to other owners and stop the
price war? Let's fix the prices together. Then we can keep
our margin.
• Businessman 2: That sounds like a smart plan. Let's talk to
other owner
• Businessman 3: Smart Plan? If you’re smart, you'll know this
is against the Competition Law
• Businessman 1: Come on! No one cares about small
businesses like us.
• Businessman 3: That’s not right! It's got nothing to do
with the business size. Price fixing is wrong. I am not
going to do anything illegal.

• Inference: Price-fixing is serious anti-competitive

conduct under the Competition Law. No business, big or
small, should agree with their competitors to fix prices.
Don’t cheat. Compete.
• b) Limit or control output, technical development,
services etc:
• Production control involves competitors agreeing to
limit the quantity of goods or services available in the
market.
• Competitors agreeing to specialize in certain products,
ranges of products or in particular technologies could
also be deemed to be anticompetitive.
• Example :
• Producer 1: None of us have really been doing well
recently. We must think of something to boost the profit.
I've been thinking to reduce the supply together.
• When there's less supply, we can raise the price. Things
are only precious when they are rare.

• Producer 2: Ok. You are right. Things are only precious

when they are rare.
• You're the industry leader. We'll take our cue from you.
• Producer 3: Have you considered the implication of such
agreement? This is an illegal act and in contravention of
the competition laws

• Inference: Output restriction agreed between

competitors is serious anticompetitive conduct under
the Competition Law. Businesses should make
independent commercial decisions and never collude
with each other to restrict output.
• c) Share or divide markets:
• This could include competitors agreeing to allocate
customers between themselves or agreeing to stay out of
each other's geographic territory or customer base
• Example
• Businessman 1: let's split the districts between us. I'll send
you the list when it's done
• Businessman 2: Yes. Then we can avoid competition and can
retain the customers
Inference: Such agreement is in contravention of the law and
is considered as a serious anti-competitive conduct under
the Competition Law.
• d) Indulge in bid-rigging or collusive bidding:
• Taking turns to win competitive tender contracts is an
example of bid-rigging. This could include:
• • bid suppression where parties agree that only one of
them will submit a bid for the contract;
• bid rotation where the parties to the agreement take
turns to win contracts.
• More than one of these bid-rigging practices can occur
at the same time.
• For example, if one party to the agreement is
designated to win a particular contract, the other
parties could avoid winning either by not bidding (”bid
suppression”) or by submitting a high bid (”cover
bidding”).
• There is another instance whereby an arrangement
between competitors, one of them agrees to refrain
from bidding, in exchange of acting as a sub-contractor.
• Example :
• Company XYZ: Let's invite bids. We need to procure
pipes.
• Employee XYZ: All the bids are in! It is so strange… They
all have similar prices and they're all very high too. We
have compared all the tender submissions. Only ABC
Enterprises quoted the lowest price.
• Company XYZ: Alright then, we'll go for ABC
Enterprises!
• Employee XYZ calls ABC Enterprises and informed that
he had won the tender!
• ABC Enterprises call other bidders: It is celebration
time! We won the bid. Thanks guys for jacking up your
prices; we'll be making a huge profit from this contract.
• Other bidders: Don't be silly! We are partners – we all
win from this!
• ABC Enterprises: That's right; it'll be your turn to win
next time! I will not submit my bid next time. We're in
this together, and we'll all make profit from this!
• Newspaper headlines: CCI Fined ABC Enterprises and
other companies for Bid-Rigging. Directors Disqualified.
• Inference: Bid rigging is a violation of the Competition
Law. Businesses might appear to win by not competing
with each other, but they too can become victims
• Vertical Agreements (Section 3(4)
• Vertical Agreements are agreements between firms at
different levels of the manufacturing or distribution
processes.
• For example, an agreement between the manufacturer
and a distributor is a vertical agreement.
• Defined by Section 3(4) of the Act, vertical agreements
include:
• a) Tie-in arrangements- Tying occurs when customers buy a
product they want (the tying product) but are required
(forced) to buy a product (the tied product) from a different
market that they may not want.
• Tie-in arrangements are anti-competitive.
• Example :
• Hospital XYZ: Our new contract negotiation with ABC
Enterprises is under way.
• But they request for an additional clause specifying that
if we want to buy the medical device that only ABC
Enterprises makes, we must buy other medical supplies
including medical masks, gloves, syringes etc. as well.

• Employee XYZ: But our current suppliers of these

equipment offer lower prices and better quality.
• There's no reason for us to switch to ABC Enterprises.
• Hospital XYZ: “But if we do not agree, ABC Enterprises
will not sell us their medical device and we can't provide
proper care without this device. That leaves us no
choice at all”.

• Employee XYZ: “Calm down. This tying clause might

contravene the Competition Law. ABC Enterprises
cannot make such request.”

• Inference: Tie-in agreement are anti-competitive as per

Section 3 (4) of the Competition Act and thereby
punishable with penalty under Section 27
• b)Exclusive Supply Agreement
‘Exclusive supply agreement’ includes any agreement
which restricts the purchaser from acquiring or
otherwise dealing in any goods other than those of the
seller or any other person in the course of his trade
• JSW Paints Private Limited v. Asian Paints Limited, Case
No. 36 of 2019
• In 2020, the CCI ordered an investigation into Asian
Paints, a leading paints manufacturer in India, after
finding that it had coerced its dealers to not associate
with JSW Paints, a new entrant in the Indian paints
market.
• The CCI prima facie found that Asian Paint’s action of
barring its dealers from procuring products from JSW
Paints at lower prices amounted to a vertical restraint, in
the nature of an exclusive supply agreement under
Section 3(4) of the Competition Act.
Further, given that Asian Paints was dominant in the
Indian organized decorative paints market, the CCI held
that its action could cause an AAEC, having the
potential to create entry barriers and hamper
consumer choice
• c) Exclusive distribution agreements- In an exclusive
distribution agreement, the supplier agrees to sell his
products only to one distributor for resale in a
particular territory. At the same time, the distributor
is usually limited in his active selling into other
exclusively allocated territories.
• Example : Enterprise X is a producer of laptops who
distributes throughout India through its distributors.
However, it gives only one distributorship for East,
West, North and South India each and it does not
allow distributors to sell in each other's territory.
• Such an arrangement by enterprise X will prevent
competition among distributors

• Inference: Exclusive distribution agreement are

considered to impinge on competition.
• d) Refusal to deal- It means restricting by any method,
any person/classes of persons to whom goods are sold.
Businesses have the right to use their discretion in
choosing whom to do business with. However, if this
choice is made through a conspiracy with another
competitor, business, or individual, they will likely be in
contravention of the law. A refusal to deal is a violation
of competition law because it harms the boycotted
business by cutting them off from a facility, product
supply, or market. By harming the boycotted business in
this way, the competing businesses controls or
monopolizes the market by unreasonably restricting
competition
• Example : Enterprise A is an enterprise in the market for
lead which is used to make pencils. Enterprise B is a
major manufacturer of pencil in the market but its
production is dependent on supply of lead by enterprise
A. Enterprise A suddenly refuses to supply lead to B
because a new company, C has entered the pencil
market in direct competition to B and though A can
supply to both B and C, A refuses to deal with B on entry
of C in market. In such situation B can approach the
Commission with information filed under Section 3 (4).
• Inference: Refusal to deal is Anti-competitive
• e) Resale price maintenance- It means selling goods
with condition on resale at stipulated prices. It
generally occurs when an upstream seller (Producer)
imposes a fixed or a minimum price that a downstream
buyer (Distributor or Retailer) must resell.
• For example, a manufacturer sets the price for which
its products are sold at the retail level. The result is that
resellers (e.g. retailers) do not compete on price. This is
considered to be anti-competitive
• Example :
• Producer: What brings you here? Is there any problem
with my products?
• Chain Store Owner: It’s not about your products. I'm just
not happy with the small competitors! If I sell something
for Rs.500 in my chain stores, smaller retailers sell the
same for Rs.400, then my customers all ask me for
discount.
• Producer: Why don't you fix a resale price for each
product and make sure that all the retailers will sell
your products at your fixed prices. So everyone can
make a profit, the customers don't have to shop around
and we don't have to get into a price war.
• Chain Store Owner: My business is built on reputation
and integrity. I won't play dirty tricks to get business.

• Inference: Resale price maintenance may restrict

competition by preventing businesses setting their
prices independently
• Exceptions
• Section 3(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.
Elements affecting Fair Competition

1) There must be an AGREEMENT

( Horizontal ,Vertical )

2) AGREEMENT must result into an Appreciable

Adverse Effect on Competition (AAEC)
Elements to Check whether there is an Appreciable
Adverse Effect on Competition (AAEC) (Sec.19(3))
Section 19(3)
The Commission shall, while determining whether an
agreement has an appreciable adverse effect on
competition under section 3, have due regard to all or
any of the following factors
a) creation of barriers to new entrants in the market;
b) driving existing competitors out of the market;
c)  foreclosure of competition by hindering entry into the
market;
d) accrual of benefits to consumers;
e) improvements in production or distribution of goods or
provision of services;
f) promotion of technical, scientific and economic
development by means of production or distribution of
goods or provision of services.
a) creation of barriers to new entrants in the market

• Barriers means obstacles or hindrances

• Usually barriers are there in Industry – either Naturally
or Created by government
• Barriers by government are in the form of Laws and
Regulations to regulate the firms, Companies etc
• Some barriers evolve naturally such as Technological
advancement, Brand identity, Customer brand loyalty
etc.
• All the Barriers are not Anti-Competitive
• Barriers which are created by Enterprises involved , in
order to prevent competition amongst themselves or
from any future entrant to the market are condemned
by Competition Law
b) Driving existing competitors out of the market
• This refers to the Act (behavior) or Agreement or
Understanding between the enterprises involved in
agreement is to drive those Persons or other competitors,
who do not belong to their association or group , out of the
Market
• A tool which may be used is to Squeeze the Price or Profit
margins. This will make Other Competitors especially small
firms to feel pressure on the sales and will make them exit
the market.
• This tool, if adopted by a Dominant firm, becomes ‘Abuse
of Dominant Position’, but if used by few through uncanny
agreement becomes Cartel Activity
c) Foreclosure of competition by hindering entry into the
market
• This factor is similar to the previous factor
• Preventing the entry of New Enterprise is Anti-
competitive
• Where the existing firms join hands to prevent the entry
of other firms in the market is Anti-competitive
• In US v. Griffith Amusement Co.(1949)334US 100
The US Supreme Court held that the use of monopoly
power , however lawfully acquired to foreclose
competition or to destroy competitors, is unlawful
d) Accrual of benefits to consumers
• This factor is to be taken into consideration for
assessment of an AAEC
• This factor is applicable to both Horizontal and Vertical
agreements.
• The defendant of the alleged anti-competitive
agreement may show that how their acts or agreements
benefit the consumers in the form of either low price or
better quality of the product.
• For instance, in response to an allegation of the reduced
price, the cartel members may show that low prices will
benefit the consumers
(e) &(f) Improvement in Production or Distribution or
Promotion of Technical, Scientific and Economic
Development
• This factor also indicates the positive aspect that has
the potential to mitigate the allegation of Anti-
competitive agreements
• CCI will take into account if the defendants will be
able to prove the Improvement in Production or
Distribution or Promotion of Technical, Scientific
and Economic Development in favour of the
consumers
• Per se Rule is applicable to Horizontal Anti-Competitive
Agreement
• The Act treats horizontal agreements differently when
compared with vertical agreements.
• There is a presumption in the Act that the four types of
horizontal agreements mentioned in the Act are
presumed to have adverse effect on competition which
is similar to per se rule.
• In other words, they are per se illegal and the burden
of proof will be on the defendant to prove that the
agreement in question is not causing an appreciable
adverse effect on competition.
 Rule of Reason is applicable to Vertical Anti-Competitive
Agreement
• The presumptive rule is not applicable to vertical
agreements which are subject to the rule of reason
• The positive as well as the negative impact of such
agreements on competition will have to be taken into
account before coming to any conclusion.
• This also applies to agreements entered into by way of
joint ventures that increase efficiency in production,
supply, distribution, storage etc
• Adam Smith: Remarked in Wealth of Nations(1776)

• “People of the same trade seldom meet together,

even for merriment and diversion, but the
conversation ends in a conspiracy against the public,
or in some contrivance to raise prices”
Sec 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
• Section3(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) Limit or control output, technical development,
services etc
• c) Share or divide markets
• d) Indulge in bid-rigging or collusive bidding
• Section3(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
• In other words, a cartel is a collection of otherwise
independent businesses or countries that act together
as if they were a single entity and thus can fix prices for
the goods they produce and the services they render,
without competition.
• a situation where a single group or company owns all or
nearly all of a given product or service's market.
• A cartel is a collection of independent businesses or
organizations that collude in order to manipulate the
price of a product or service.
• Cartels are competitors in the same industry and seek
to reduce that competition by controlling the price in
agreement with one another.
• Tactics used by cartels include reduction of supply,
price-fixing, collusive bidding, and market carving.
• In the majority of regions, cartels are considered
illegal and promoters of anti-competitive practices.
• A cartel can be a result of either explicit agreements or
implicit collusion.
• Explicit agreements occur when the cartel members actually
meet to decide how to control the market.
• Because such collusion is illegal in jurisdictions with effective
competition laws, such a formal agreement is likely to be
highly secret and would be a result of covert meetings,
which might involve nothing more than a "casual" lunch
among company presidents, a "chance" meeting at a
conference of industry executives, or company decision-
makers
• Implicit collusion, also termed tacit collusion, occurs when
the members through their actions show their willingness to
engage in collusive behaviour.
• An example of tacit collusion is price leadership where
one firm takes the lead of setting a price that will boost
profits for the entire industry and other firms then go
along with this price, knowing that they stand to benefit
by doing so.

• Our Competitors Are Our Friend, Our Customers Are the

Enemy
• If all the competitors in a market announce on the same day
that their prices will increase by exactly the same amount, it
is suspicious behavior.
• It leads one to suspect that they all agreed to raise their
prices.
• But there are other possible explanations, such as an input
price increase that affected all of them equally, or a sudden
change in demand for their product, or a sudden change in
the price of a substitute product.
• Further investigation may eliminate the other impossible
explanations.
• “when you have eliminated the impossible, whatever
remains . . . must be the truth”.
• INVESTIGATION TOOL TO FIND OUT CARTELS
• Outsider firms (that were approached - but did not
join the cartel) - Often willing to provide truthful
information.

They were given complete information in order to be

convinced to join.
As an investigative tool - it is useful to have the
authority to promise such people or firms that they
will not be punished if they tell the truth about what
happened ( LENIENCY Programme like Whistle
blowing mechanism)
Lesser penalty – Sec.46, Competition Act
Dawn Raids: -
Unannounced visit to the offices of suspected cartel
operators for the purpose of seizing documentary or
electronic evidence of a cartel agreement.
Listen to telephone conversations;
To maintain surveillance, for example, of office
premises to monitor who is attending meetings there;
&
To require staff to attend meetings of a cartel & to
report back to the competition authority of what had
taken place.
Builders Association of India v. Cement Manufacturers',
Case No. 29/2010, CCI
• Information filed by the Builders’ Association of India on
26 July 2010 against the CMA, Gujarat Ambuja Cements
Limited (now Ambuja Cements Limited), Ultratech
Cements, Grasim Cements (now merged with Ultratech
Cements), JK Cements, India Cements, Madras Cements,
Century Textiles & Industries Limited, Binani
Cements, Lafarge India and Jaiprakash Associates Limited.  
• The CCI took note of the fact that cement prices increased
immediately after the High Power Committee Meetings of
the CMA which were attended by the cement companies
in January and February 2011
• The Penalty has been imposed at the rate of 0.5% times the
net profit of such manufacturers for the past two years.
• Additionally, CMA was fined 10% of its total receipts for the
past two years.
• The respondents have been directed to pay the above
penalties within 90 days of the receipt of the CCI order.
• The CCI also directed the Companies to ‘Cease and Desist’
from indulging in an agreement or understanding on prices,
production and supply of cement in the market.
 ANTI-COMPETITIVE AGREEMENTS Sec.3

VERTICAL AGREEMENTS Sec.3(4) HORIZONTAL AGREEMENTS

INCLUDING CARTELS Sec.3(3)

RULE OF REASON PER SE RULE-It is presumed that it

causes AAEC
and burden of
TIE IN REFUSA proving will be on defendant
ARRANG EXCLUSI EXCLUS L TO RESALE
EMENT VE IVE DEAL PRICE
SUPPLY DISTRI MAINTEN
AGREE BUTIO ANCE PRIZE MARKET BID OUTPUT
MENT N FIXING RIGGIN LIMITATION
SHARING
AGREE G
MENT
• WHEN THE COMMISSION MAY INITIATE INQUIRY
INTO ANTI- COMPETITIVE AGREEMENTS?
• On its own(Suo-moto)
• on the basis of information and knowledge in its
possession, or
• On receipt of an information, or
• On receipt of a reference from the Central
Government or a State Government or a statutory
authority.
• WHO CAN PROVIDE INFORMATION?
• Any person, consumer, consumer association or trade
association can provide information relating to
anticompetitive agreements and abuse of dominant
position.
• A person includes an individual, Hindu undivided family
(HUF), company, firm, association of persons (AOP), body
of individuals (BOI), statutory corporation, cooperative
society, artificial juridical person, local authority and
body incorporated outside India.
• A consumer is a person who buys products (goods
and services) for personal use or for other purposes.
• Intermediate customers can also provide information
• This information is to be fixed as per prescribed
format and accompanied with prescribed fees