Anti Competitive Agreements

Lecture -2
 Anti competitive Agreements

 Wider meaning of agreement under competition law

 Agreement includes formal, informal arrangements and action in concert
 It must be an agreement: Horizontal or vertical
 Agreement must put unreasonable restraint on the freedom of trade and commerce
and competition
 It must causes appreciable adverse effect on competition
 Effect must be caused in the relevant market
 Two rules of interpretation
 Per se Rule and Rule of Reasons
 Sec 1 and 2 of Sherman Act
 Restraint unreasonably restrict competition are divided into two categories :
 Category -1 Conclusively presumed to be anticompetitive, Pernicious effect on competition
lacked redeeming virtue for example price fixation agreement, area allocation agreement .
Focused on form , market power of the enterprise is not important
 Category -2 Analysed under the test of reason, substance is more important, economic
benefit, justification , efficiency justification and evidences may be considered.
 Case law: Northern pacific railway co. case, Goldfrab case, Indiana federation of dentist
case ,Arizona v Maricopa med society case
 Case Law : Board of trade Chicago v US
 Horizontal Agreement

 Horizontal agreements: price fixation agreement including cartels; US v

Trenton Potteries Co.(20 Companies and 20 individuals were limiting sale
held as competitive , US v Socony Vaccum oil co. (Oil companies came
together to artificially raise and fix price, held as anti competitive
 Area allocation agreement :U.S. v Topoco Association, Inc., (Anti
competitive vilating section 1 of Sherman Act)
 Limiting sale, Productions and supply : American petroleum case (limiting
the output is anti competitive
 Sec 4, Clayton Act, 1914
 It shall be unlawful for any person engaged in commerce, in the course of such
commerce, to lease or make a sale or contract for sale of goods, wares, merchandise,
machinery, supplies, or other commodities, whether patented or unpatented, for use,
consumption, or resale within the United States or any Territory thereof or the District
of Columbia or any insular possession or other place under the jurisdiction of the
United States, or fix a price charged therefor, or discount from, or rebate upon, such
price, on the condition, agreement, or understanding that the lessee or purchaser
thereof shall not use or deal in the goods, wares, merchandise, machinery, supplies, or
other commodities of a competitor or competitors of the lessor or seller, where the
effect of such lease, sale, or contract for sale or such condition, agreement, or
understanding may be to substantially lessen competition or tend to create a monopoly
in any line of commerce.
 Vertical Agreements

 Vertical agreements : Generally procompetitive- Allocational efficiency and dynamic

efficiency , promoting business , Brand value and imaging exclusion of rivals increases
inter brand competition
 Anti-trust implication: If enterprise has market power, used to gain monopoly and
attempted monopolization, Market foreclosure, entry barrier, exclusion of rival
creating absence of competition
 Bundling and tie-up arrangements ; Contractual and technological :Standard oil co v
U.S. (Only undue restraints must be illegal ,Jefferson parish hospital v U.S. (anaesthesia
to be brought from the particular hospital held as not anti-competitive) , Eastman
Kodak v U.S. (Anti competitive because the manufacturer had significant market power
in the secondary market) had and Microsoft case
 Contd.
 Exclusive sale supply and distribution agreement : Sec 3 of clayton Act ;
Standard oil co v US, Tampa Electrical Co v Nashville, Barry wright corp. v
ITT grinnell corp. , Standard fashion co. v Magrane- Houston Co, US v
Arnold shwinn and Continental tv v GTE syvania
 Refusal to Deal : Fashion originators guild of america v FTC
 Resale price maintenencae agreement: Dr. Miles John D park Co. case,
Leegin creative leather, INC. v PSKS,INC, State oil Co v Khan
 Refusal to deal agreement: US v General Motor Corp.
 Continued

 Exclusive sale supply and distribution agreement : Standard oil co v U.S.

and Tampa electrical co v U.S.
 Resale price maintenance agreement : Dr. Miles medical John D Park AND
Sons case , Leegin creative leather products, Inc. v PSKS
 Refusal to deal : U.S. v general motor corporation , Fashion originators
guild of U.S. v FTC
 Anti competitive agreements in E.U.
 1. The following shall be prohibited as incompatible with the internal market:
all agreements between undertakings, decisions by associations of
undertakings and concerted practices which may affect trade between
Member States and which have as their object or effect the prevention,
restriction or distortion of competition within the internal market, and in
particular those which:
 (a) directly or indirectly fix purchase or selling prices or any other trading
conditions;
 (b) limit or control production, markets, technical development, or
investment;
 (c) share markets or sources of supply;
 (d) apply dissimilar conditions to equivalent transactions with other trading
parties, thereby placing them at a competitive disadvantage;
 Contd.
 (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary
obligations which, by their nature or according to commercial usage, have no connection with the
subject of such contracts.
 2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void.
 3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
 - any agreement or category of agreements between undertakings,
 - any decision or category of decisions by associations of undertakings,
 - any concerted practice or category of concerted practices,
 which contributes to improving the production or distribution of goods or to promoting technical or
economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:
 (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of
these objectives;
 (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of
the products in question.
 Contd.
 Market Definition in E.U. , Relevant Product Market and Relevant Geographical market
 LA hoffman Roche v Commission, United Brands case, Michelin NV v Commission
 Harvard school, Chicago school and Post Chicago school
 There must be an agreement between the undertaking or Decision of association of
undertaking
 Agreement, decisions or the concerted practices should have an object or effect of
restricting, preventing and distorting competition in the relevant market
 Per se rule and rule of reason is not applicable
 Agreement of minor importance
 Exemptions under Art 101(3)
 Case Laws
 Wouters v Algemene Raad van de Nederlandse Orde van Advocaten
 Viho v Commision
 AKZO Nobel v Commision
 Bayers AG v Commision : held not anti competitive
 AEG Telefunken v Commision
 Ford v Commision
 Glaxosmithkline services unlimited v Commision : overruled Bayers
 T mobile v Commision : Anti competitive
 Delitimitis v Commision
 Meteropole Television v Commision
 Sec 3, Competition Act, 2002
 Sec 3(1) says that “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.
 Sec 3(2) declares “(2) Any agreement entered into in contravention of
the provisions contained in sub-section (1) shall be void”
 Sec 3(3) deals with Horizontal agreements “(3) Any agreement entered
into between enterprises or associations of enterprises or
 Contd.
 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.
 Continued
Sec 3 (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;
 prices may be charged.
 Contd.

 (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
 Continued
 Sec 3(5) says “(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);
 Section 19(3)- Agreements determining f they have adversial effect on
competition or not - creation of entry barriers, driving existing competitors off
the market, foreclosure by hindering entry in to the market, accrual benefits to
the consumers, improvement in production or distribution of goods,
promotion of technical and scientific development.
 Contd.

 (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.
 Case laws India
 Govind Aggarwal v ICICI bank and others ,CCI case
 Consumer online foundation v TATA Sky Limited
 Neeraj Malhotra v Deutsche Post Bank Finance
 FICCI multiplex Association of India v United producers
 Builders association of india v Cement Manufacturers Association of India
 Jindal steel v SAIL
 Consumer guidance society v Hindustan coca cola beverages
 Shamsher Kataria v. Honda Siel Cars India Ltd
 Exclusive Motors Pvt. Limited v. Automobile Lamborghini S.P.A
 Amir Khan Production v. Union of India (Anti- competitive)
 Power of CCI with respect to anti competitive
agreements

 Under sec 27 of the act , CCI is empowered to Direct for discontinuation

of the agreement, impose penalty, modification of the agreement other
orders as it deem fit.
 Under sec 53 N , Appeal is available before Competition Appellate
Tribunal/ NCLAT