This law notes on competition law has been written by Susanna Sharma. It is an extensive and easy-to-refer notes for understanding the Competition Act, 2002, with the help of case laws and illustrations.

It has been published by Rachit Garg.

Introduction

The Parliament of India introduced the Competition Act, 2002, with the aim of protecting the interests of consumers in the Indian market and promoting competition among market players. It also led to the formation of the Competition Commission of India. It aims to foster competition in the market and protect the Indian markets against anti-competitive practices to ultimately improve consumer welfare and motivate businesses to be fair and inventive. 

Before we read about competition law, let us understand why competition is important in the market.

Necessity of competition in the market 

Competition in the market is essential for the following reasons:

More choices for the consumers

In a market characterised by competition, consumers will have a wider range of products and services to choose from. For example- A seller selling ‘A’ product for 150 rupees in the market will face competition from other sellers to capture the market, who would either price the product at 145 rupees or make modifications to the product to make it better. This gives consumers enough choices as per their needs and promotes their interests. 

Allocative efficiency

Allocative efficiency follows the principle that “production responds to demand.” In perfect competition, the competitive producers will continue to produce goods and provide services as long as it is profitable for them and they will not limit the production to cause shortages and increase prices, which is usually done in a monopolist market. This way, in perfect competition, a consumer can purchase the goods and services at the price that they are willing to pay and this way the resources are allocated efficiently. 

Productive efficiency

In order to survive in a perfectly competitive market, the producers have to produce the product at the lowest price possible and cut all other extra charges. It is said that a market reaches productive efficiency when the producers do not sell above cost. If one producer increases the price, other producers will swoop in with lower prices to attract consumers.

Similarly, if a producer prices the goods too low, many would have to exit the market due to a loss, creating a shortage, which would again make the prices competitive, benefiting consumers.  

Dynamic efficiency

Another major benefit of competition in the market is that the producers will, in an attempt to compete and attract more customers, try to innovate. The older models will go out and the newer models will come. It will lead to growth in science and technology, more research and development and more efficient products on the market. 

Origin of Competition Law

Now that we understand the need for competition law in the market, it is important to know the origin of the law.

An overview

The early efforts to restrict monopoly in the market were made through the enactment of statutes such as the Statute of Monopolies, 1623. However, the first modern attempt to serve economic competition in the market was the introduction of the Anti-Combines Act, 1889, in Canada. The Act was passed for the purpose of preventing and suppressing combinations formed in restraint of trade in the market.

A year later, in 1890, the United States of America came up with their Anti-Trust Act, known as the Sherman Act of 1890. In the United States, around 1800, the economy saw rapid changes. There was mass-production by various big businesses called trusts. One giant trust would control the entire industry of one particular product; one of the most prominent trusts was established in Standard Oil. This led to a huge cry from the smaller businessmen and the public, as a result of which measures were taken by the then President Theodore Roosevelt to control and limit these ‘Trusts’. This led to the enactment of an antitrust law, the Sherman Act of 1890.

Subsequently, various countries all over the world began to adopt competition laws with different nomenclatures and variations to regulate their markets. The European Union started developing its antitrust law after 1950. The EU adopted competition regulations through various treaties, such as the Treaty on the Functioning of the European Union. Slowly, competition regulations developed in China as Anti-Monopoly Law, in Japan as Fair Trade law, etc. India first adopted competition regulations through the Monopolistic and Restrictive Trade Practices Act, 1969. 

An Indian perspective

The idea of securing and promoting the welfare of the people has been embodied in the Constitution of India under Article 38. Pursuant to this, the Indian Government took measures to control monopoly and prohibit unfair and restrictive trade practices in the market through the enactment of the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969. The MRTP Commission was established to look into the unfair trade practices of businesses and had the power to inquire and pass the appropriate orders.

However, with the growing liberalisation and globalisation, the MRTP Act was not deemed enough to deal with the intricacies of the modern world and the modern market. Hence, in order to keep with the global market and the economy, the MRTP Act was repealed based on the SVS Raghavan Committee Report and was replaced by the Competition Act, 2002. This way, a dynamic Act to look after the competition in the Indian market was formulated. One must note that the Act is still in its nascent stages and it is very important to understand and utilise this law.

Important definitions and expressions in Competition Law

Agreement

Section 2(b) of the Act defines agreement. The Act defines the term ‘Agreement’ in a wide and inclusive manner and states the following-

1. Any arrangement between parties, or
2. Any understanding between the parties, or
3. Any action taken in concert by the parties. 
4. Such an arrangement, understanding or action may or may not be formal, or
5. May or may not be in writing, or
6. It may or may not be intended to be enforced by legal proceedings. 

This definition of the term brings a wide variety of acts by the parties into the ambit of agreement. It is often said that in Competition Law, even a ‘nod or a wink’ can constitute an agreement in the market. Hence, the Competition Commission of India is very liberal in its interpretation of the term agreement. 

Appreciable Adverse Effect on Competition (AAEC)

Any act or agreement by persons or enterprises that can cause a negative impact on the competition in a particular market is said to have an Appreciable Adverse Effect on Competition or AAEC. When competition is restricted, certain adverse or negative effects are felt in the market and by consumers; this is the subject matter of the Competition Law. 

Cartel

A cartel has been defined in Section 2(c) of the Act. It is a kind of horizontal agreement and can be understood as follows-

1. It is an association;
2. This association is made as a result of an agreement by producers, sellers, traders, distributors or service providers;
3. The purpose of this agreement is to limit the production, distribution, sale or price of goods or trade in goods and services; or
4. The purpose is to control the  production, distribution, sale or price of goods or trade in goods and services; or
5. The purpose is to attempt to control the  production, distribution, sale, or price of goods or trade in goods and services.

Cartels are presumed to be harmful for the market.

Goods and services

The Act defines “Goods” under Section 2(i). It states that goods under the Act would have the same meaning as defined in the Sale of Goods Act, 1930. Hence, goods means and include the following-

1. All kinds of moveable property, except actionable claims and money,
2. This includes growing crops, grass, and things that are attached to the land or form part of the land, and the same can be severed before sale or under the contract of sale.
3. It also includes products that are manufactured, processed or mined. 
4. Stocks, shares and debentures after allotment,.
5. Goods that are imported into India, when they are distributed, supplied, or controlled in India.

Similarly, Section 2(u) of the Act defines “Services” and includes any kind or description of service that is provided to the users. It may include a variety of services that may be in connection with business of any industrial or commercial nature. A few kinds of services under the Competition Act are banking, education, financing, communication, insurance, chit funds, material treatment, storage, transport, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or any information and advertisement. 

Parties to an agreement

The parties to an agreement under the Competition Law refer to any person, enterprise, group, or firm that has entered into any understanding, whether oral or written, with any other person, group, or enterprise that can affect the competition in the market. 

Relevant market

The concept of relevant markets is very important under the Competition Act. The Competition Commission of India gives due preference to the relevant market while determining anti-competitive agreements between players and their impact. 

Section 2(r) of the Act defines the term “Relevant Market.” Any market that is determined by the Competition Commission to be of relevance is a relevant market. It can either be the relevant product market or the relevant geographic market.

Relevant geographic market

Section 2(s) of the Act, defines “Relevant Geographic Market.” It is defined as the geographic area in which the competition between players in the market for the supply of goods and services is homogenous and different from the conditions in the neighbouring geographic areas.

Relevant product market

“Relevant Product Market” has been defined under Section 2(t) of the Act. It is defined as the market where goods that can be substituted are sold. These goods are substitutes for each other either through their characteristics, their prices, or their means of use. 

Turnover

The term “Turnover” has been defined under Section 2(y) of the Act. Turnover is the value of the goods and services of a business or enterprise in the market. 

The concept of turnover is very important in determining penalties by the Commission in cases of contravention of the provisions of this Act. The definition of the term is very wide and the Act does not indicate how to calculate it. 

Different types of anti-competitive agreements

The aim of the Competition Act, 2002, is to deter anti-competitive agreements between players in the market. All types of agreements that hamper competition in the market are called anti-competitive agreements. As stated earlier, agreement under the Act has been defined in a wide and inclusive manner, so as to include all those acts that can have a negative impact on the competition in the market. The types of anti-competitive agreements have been discussed here:

Horizontal agreement

Section 3(3) of the Act talks about horizontal agreements between competitors in the market. Horizontal agreements are made between market players who are at the same level of the supply chain. They are engaged in a similar kind of trade of goods and services in the market. For example- an agreement between a wholesaler of a product and a distributor of similar goods in the market. These types of agreements are horizontal in nature. 

Factors conducive to forming and maintaining horizontal agreements/cartels

The formation of horizontal agreements is a result of various conducive factors in the market. Some of them are:

• Few competitors

 If a market is characterised by very few producers or players, they are more likely to collude and form horizontal agreements with each other to continue their concentration in the market. Since there are few players, they can easily come to an agreement and influence the prices in the market to earn huge profits. 

• High entry and exit barriers

Horizontal agreements are more likely to be formed in a market with very high entry and exit barriers. Due to the entry barriers, the market has a very limited number of players and not much competition, who can easily collude and form agreements. Simultaneously, since there are exit barriers, producers have no choice but to collude and continue in the market. 

• Similar production costs

In a market where the players incur almost similar production costs, it can be difficult to compete with each other for profit since the products are almost similarly priced. In such a situation, players in the market may choose to make an agreement with each other to collude and price their products similarly, so that the consumers have no other choice but to buy the products at the price chosen by the producers since all the products are similarly priced. 

• High dependency of the consumers on the products

In a market where consumers are highly dependent on the products, it gives the producers in the market an edge to unilaterally form cartels and increase the price of the products. Since the consumers are highly dependent and have no other choice, they will continue to buy the same, and the cartel will continue to earn profit, for example-cement cartels. 

• Presence of trade association

Horizontal agreements are most likely to be formed in a market where there is an active trade association present. Due to their active participation in the trade association, the players in the market are in frequent contact with each other and may decide to form cartels and agreements to influence the competition in the market. The trade associations may act as platforms for the formation of horizontal agreements. 

Horizontal agreements as cartels

Cartels are horizontal agreements as defined in Section 2(c) of the Act. In a cartel, a group of firms, companies, or businesses that are engaged in providing goods and services enter into an agreement and manipulate the market. 

Ideally, in a free market, the players must compete to attract customers and make profits; however, when a cartel is formed, a few players in the market come together and agree to control the market, leading to similar high prices and limited production and supply to create an artificial shortage and hinder new businesses from entering the market. 

One of the famous examples of cartels in India is the cement cartel, which has been investigated by the Competition Commission of India and is discussed in detail in this blog. 

Formation and maintenance of cartels

Cartels are very attractive to the participants in the market because of their advantages. One of the main advantages of cartels is that the total profit of the enterprises and players who are a part of the cartel would be higher than their individual profit in a competitive market. 

For example, in a market for cement clinkers, if the players come together and form a cartel, they will collectively create shortages and increase the price. This will ensure that each of them gets higher profits than what they would earn in a competitive market. 

However, the maintenance of cartels is also a challenge. Two of the major challenges faced by a cartel are- 

1. Problem of Agreement: The first major problem in the formation of the cartel is the problem of agreement. In order to form a cartel, the players must come into an agreement with each other regarding the terms of the cartel. This would include an agreement on various factors such as product differentiation, the price schedule, and the difference in cost of various players, such as the huge difference in cost between big and smaller firms.

It is only when the firms can enter into an agreement about all these factors that a cartel can be effectively formed. 

2. Problem of adherence: Merely the formation of a cartel is not enough. The cartel also faces the problem of adhering to the terms agreed upon by the participants.

For example- if a cartel is successfully formed and the prices are raised, a single firm can cheat the cartel by lowering the price a little and attracting all the customers in the market. So, cartels are very unstable.

Thus, it can be summarised that for the successful formation and maintenance of cartels, two things are extremely important:

1. Agreement or consensus between the parties,
2. Adhering to and sustaining the agreement. 

Game Theory

One of the theories that is of great importance in understanding the maintenance of cartels is the Game Theory. One of the branches of Game Theory deals with the prisoner’s dilemma, which is related to the behaviour of two competing oligopolists. 

There are two criminals, namely Joan and Graham, who are arrested for robbery and the only way to prove their guilt is through confession. The police keep them separately and question them. The police have very little evidence, which is only enough to send them to prison for 1 year. 

If one of the criminals confesses and testifies against the other, then the one confessing will not get any jail time, and the other person will be behind bars for 10 years. 

If both criminals confess, each will be entitled to 5 years in jail. If none confess, then each will go to jail for 1 year. 

This perfectly sums up the dilemma of the players engaged in a cartel, each has the choice to reveal information about the cartel to escape liability or continue in the cartel and constantly risk the possibility of other members revealing the cartel. This is the problem of adherence. 

Why are cartels prohibited

The most simple fact in a market is that competitors are supposed to compete with one another; they are not meant to cooperate with each other and disturb the competition in the market. Hence, horizontal agreements are prohibited. More so, cartels are prohibited by almost all the systems of competition law in and around the world. It is believed that cartels have no redeeming effect at all. Once a cartel is established, it is presumed to have an adverse effect on competition. Hence, they are subject to strict penalties.

Adam Smith wrote in “The Wealth of Nations”  that people who are engaged in the same trade do not meet very often, but when they do, it often ends up being a conspiracy against the public or some contrivance to raise the prices in the market.

Specific horizontal agreements

Horizontal agreements are formed in various ways, while their ultimate goal is to affect the competition in the market and earn extra profit. The Competition Act deals with four categories of horizontal agreements. They are-

Price fixing

Players in the market can enter into a horizontal agreement to fix similar prices in the market and not compete with each other. It is the most recognised form of horizontal agreement and is inherent in cartels as well. Section 3(3)(a) of the Act deals with this category of horizontal agreement. Any direct or indirect effect on the price of any goods or services in the market because of any action or coordination between the competitors in terms of prices leads to this type of agreement.

For example-A and B are sellers of umbrellas in a small market. Both decide to price the umbrellas at Rs. 250 instead of Rs. 200 during the rainy season. So that both can earn equal profits since customers have no other choice.  

Limiting supply

Another kind of horizontal agreement that producers and firms engage in in the market is an agreement to collectively limit the supply of products and services in the market. Section 3(3)(b) of the Act deals with these agreements. Here, the firms try to limit the supply through hoarding, as a result of which they can fix higher prices.

For example-Some firms may decide not to sell product B for some time and hoard it, so that it creates an artificial shortage. This way, the firms can raise the price of the products and earn higher profits.

Sharing markets

Firms and producers in the market can also enter into an agreement to allocate or divide the market among themselves. This is called the sharing of the market. Here, firms divide the market and agree to not encroach on the market allocated to the other player. This way, each form will have full control over one market and will earn supernatural profits without any competition. Markets can be divided on the basis of products, a geographical area, types of services, or other similar fashions. 

For example-Players may decide that Firm A will sell in one area and no other firm will sell there, so A will have full control over the market with no competition. This way, sellers may divide the market and earn exclusive profits.

Bid rigging

Another type of horizontal agreement that firms may enter into is an agreement to rig the bids by collaborating over their responses to invitations to tender. In case of any type of bid or tender in the market, the players may decide not to compete with others and rotate the bid. So, players simply put up a show of bidding and let one firm win the bid at a predetermined price between them. This way, the rotation of bids continues and each firm can profit from the bids.

Evidence of cartels

As discussed earlier, cartels are a result of agreements between the firms in the market; however, these agreements are not necessarily written and documented. It is not always possible to find direct evidence of cartels, such as a drafted agreement duly signed by the parties or documents of collusion. Hence, in order to investigate cartels, authorities have to often rely on circumstantial evidence.

Circumstantial evidence

The OECD, in its working paper, in 2006, opined that it is very difficult to prove cartels through direct evidence. There may not be any paper trails, so agreement is inferred in cartels. Participants in cartels are very well aware of the consequences of cartels and, hence, are very careful of their involvement.

Due to the absence of direct proof of cartels, it is opined that a nod and a wink can make cartels. Simple coffee meets, code names, and attendance at frequent and same trade associations are some of the indicators or parts of circumstantial evidence in the investigation of cartels. The Competition Commission of India has opined that even circumstantial evidence can be relied upon to prove cartels in the absence of direct evidence. This absence of direct evidence is the reason why the term “Agreement” in the Competition Act, 2002, has been defined so widely, so that any act of the parties that suggests any harm to the competition in the market could be considered an agreement under the Competition Act.

The standard of proof of cartels has shifted from the concept of beyond reasonable doubt to the balance of probabilities since it is a civil offence. Hence, circumstantial evidence is of great importance to start the investigation into cartels. Any evidence that does not expressly identify the terms of the agreement or the parties can be included as circumstantial evidence.

Sunshine Pictures Ltd. v. Central Circuit Association (2012)

In this case, it was alleged that the Central Cine Circuit Association was acting as a platform for the collusive activities of the film distribution industry. The distributors of films had been involved in distributing circulars and letters among themselves to restrict the exhibition of certain films in the market. The Competition Commission of India (CCI) looked into the matter and held that the competitors in the market were indulged in a cartel under the garb of the association and imposed a penalty on them.

Builders Association of India v. Cement Manufacturers Association (2012)

This is one of the most significant cases in the cartel investigation and evidence in India. The Competition Commission of India investigated a cartel in the cement industry. It was alleged by the Builders Association of India under Section 19 of the Act that cement manufacturers were indulging in monopolistic and restrictive trade practices to control the price of cement under the umbrella of their trade association, namely the Cement Manufacturers Association. It was alleged that the cement manufacturers were engaging in collusive price fixing and had divided India into 5 zones to control the supply and fix high prices of cement by forming a cartel. 

The CCI investigated the cartel by looking into the following circumstantial evidence-

• Economic evidence- The cement manufacturing units are located in different places in India, so the availability and cost of raw materials such as coal, power, etc., would also be different. However, the prices of cement across the whole country were identical.
• Low level of capacity utilisation- It is a well known fact that when the housing and real estate sectors boom, the cement industry also booms; however, despite the growth in the real estate sector and increasing demand, the utilisation of the installed capacity of production was reduced by the members of the cartel. 
• Price Parallelism- The CCI, in its investigation of the cement cartel, closely investigated the parallel behaviour of the firms engaged in the cartel. The firms had exhibited parallel behaviour, such as parallel pricing. Normally, in a competitive market, the pricing is responsive to the other competitors but here, the prices are parallel to each other.  

This way, the CCI took into consideration the circumstantial evidence to detect the cartel and their meeting of minds in the absence of direct evidence to impose a hefty penalty, which was one of the highest penalties for cartels in India.

Dyestuffs Case (1972)

In the Dyestuffs case, the European Court of Justice held that although the parallel behaviour of the firms in itself  may not be strong evidence of such concerted practice of cartels, it has to be given due importance to start the investigation. The circumstantial evidence has to be considered as a whole and not in isolation. 

Re:alleged Cartelisation in Flashlights Market in India (2017)

In this case, the CCI looked into the allegations of the formation of cartels in the flashlight market in India. It was held that the simple exchange of information, which may be commercially sensitive, cannot be the sole determinant in establishing cartels. There was no agreement or implementation of a cartel between the parties.

Plus factors

While the parallel behaviour of the firms is a good and strong indicator of anti competitive strides among them in the market, it might not always be enough, depending on the type of market. Hence, the concept of Parallelism Plus comes into the scenario. 

In Rajasthan Cylinders & Containers Ltd. v. Union of India (2018), the Competition Commission of India imposed a hefty penalty on 45 companies for bid rigging, depending on circumstantial evidence such as identical prices. The decision was also upheld by the Competition Appellate Tribunal (COMPAT). However, the Supreme Court of India decided that price parallelism does not necessarily mean that these firms have engaged in a cartel by rigging the bid. The cylinder market is an oligopsony; hence, there are fewer buyers and the bidding process is thus very repetitive. So, price parallelism is quite expected in the market. 

Thus, it was held that parallel behaviour in itself is not enough; the CCI must also look at other factors, such as market conditions, while deciding each case. 

Hub & Spoke Cartel : a hybrid

The Competition Act, 2002, prohibits anti-competitive agreements in the market. These anti-competitive agreements are primarily of two types, as discussed earlier – Horizontal and Vertical Agreements. However, we are discussing a different kind of agreement, which is a hybrid of both. This is known as the “Hub and Spoke Cartel.” The concept of hub and spoke cartel has been incorporated through the Competition Amendment Act, 2023, under Section 3. 

The major components of a hub and spoke cartel are:

• Hub- A facilitator (vertical player),
• Spoke- Horizontal players in the market,
• Rim- Vertical agreement that keeps the spokes bound to the hub. 

In this kind of cartel, a facilitator exists, which is mostly a vertical player enjoying significant market power who creates an arrangement with each of the various horizontal competitors in the market. This agreement of one vertical component with various horizontal players in the market leads to indirect coordination between the competitors in the market. This will help the hub as well as the spokes to earn supernormal profits.

The competitors in the market provide important information about the prices and sales in the market to the hub. This exchange of information is completely legal, as it is between a supplier and a distributor. However, the problem lies in the fact that the same hub has other spokes too with whom they share such information about the market, leading to indirect coordination between the horizontal competitors in the market.

These hub and spoke cartels are further evolving with the help of digital platforms and algorithms, through which competitors are able to easily coordinate with each other. The hub transmits instructions and the spokes respond to them. The detection of hub and spoke cartels is very difficult and a thorough assessment of the market and the economic factors is required.

Samir Agarwal v. Competition Commission of India (2020)

It was alleged by the informants in the case that cab aggregators, namely Ola and Uber, were making use of the algorithms of demand for cabs in and around an area to facilitate price fixing between the cab drivers. The drivers were then fixing the prices amongst themselves without considering the other transportation service providers.

Ola and Uber contended that no such act or agreement had taken place between them and the drivers. Ola and Uber are at a different stage in the market than other transport service providers. The surge in pricing is simply a result of the demand and supply forces of the market.

The Supreme Court held that no prima facie case has been established of any such agreement between the two can aggregators. Since, when a ride is requested by a customer, the identity is anonymous and the driver accepts, there is not enough time for coordination between the drivers through the hub. 

The Court also held that in a hub and spoke cartel, mens rea, or intention, is an extremely important component. It is a sine qua non (an absolute necessity) in a hub and spoke cartel.

Vertical agreements

Section 3(4) of the Act deals with Vertical Agreements. These agreements are made between persons or enterprises who are at different stages of the supply chain in different markets. It affects the intra-brand competition in the market. 

For example- an agreement between a manufacturer of a good and its retailer to only deal with each other in the market is a vertical agreement between players who are at different stages of production in different markets.

Vertical agreements are not per se anti-competitive, and the view of the Competition Commission towards these agreements is quite lenient; however, when these agreements cause an appreciable adverse effect on the competition in the market, they are a cause of a problem. 

Specific vertical agreements

The Competition Act, 2002, deals with some specific types of vertical agreements between players in the market. They have been discussed briefly here:

Tying/tie-in arrangement

Section 3(4)(a) of the Act deals with tie-in arrangements between players in the market. A tie-in arrangement is a type of vertical agreement that requires the purchaser of a good to purchase some other goods as a condition to such a purchase; otherwise, they will not be able to buy the first product or the guarantee for the product will be withheld. The main product is known as the tying product and the secondary product is known as the tied product. 

For example- while buying a shaving foam named A, the customers have to compulsorily take the shaving brush named C. It is a compulsory condition, while the second tied product may or may not be free. 

While dealing with tie-in arrangements, great importance is given to the market power of the tying product. If the main product does not have market power, then customers will not be bothered to buy it. However, if the tying main product, which in this case is the shaving foam, has huge market power, then the shaving brush industry will suffer a huge loss because consumers will continue to buy the shaving foam and will have to compulsorily buy the shaving brush from them as a tied product. 

International Salt v. U.S (1947)

In this case, International Salt had patented machines to process, dissolve and inject salt. The Company would lease these machines on the condition that they have to buy and use the salt manufactured by International Salt only. A complaint was filed alleging that the Company was restraining the market for other salt products. The Company argued that such a condition has been imposed to maintain the quality of the machines since low-quality salt could damage the machines. It was held by the Court that the company can specify the standards of salt that can be used but it cannot promote only their product. It cannot throw others out of the market.

EuroFix-Bauco v. Hilti  (1989)

Hilti was a manufacturer of nail guns. It had a contractual requirement that when buying the nail guns, the consumers must also buy the nails and cartridges from them. Hilti argued that the reason for such a condition is to protect consumers because the other nail guns may not be good. 

The Court held that such an arrangement is a tie and is hampering the market for the nails. 

In India, while determining tie-in arrangements, the CCI looks into the market power of the main tying product and applies the rule of reason and the same has been discussed under the heading “Legality Principles: Presumption, Rule of Reason and Per se Rule” in the upcoming paragraphs. 

Exclusive supply and distribution agreement

Section 3(4)(b) and (c) of the Act deal with this kind of vertical agreement. Here, players who are at different levels in the supply chain come into an agreement where one player restricts the other from dealing in goods with any other producer except them, or there might be a restriction or limitation on supplying goods in any particular area of the market. This is the exclusive supply or distribution agreement. 

For example- One wholesaler of a fruit, such as an apple, might come into an agreement with one of the retailers in the market and make an agreement, thereby restricting the retailer from dealing in tomatoes with any other wholesaler. This will restrict other wholesalers from entering the market and will foreclose the market. 

DGIR v. Bayer India Ltd. (1988)

In this case, it was held that while entering into an agreement between the manufacturer and the distributor, the distributor will not supply the products to any chemist, doctor or any private or government institute, which is an anti-competitive practice. It is a form of exclusive distribution agreement. 

Refusal to deal

Section (3)(4)(d) of the Act states the arrangement of refusal of deal. In this type of vertical agreement, one powerful and dominant firm in the market refuses to deal with other players except one, and only sells at one price, which may be expensive. This refusal to deal can take different forms, such as:

• Refusal to supply to non-competitors,
• Refusal to supply to competitors,
• Refusal to supply to third parties,
• Deny to supply product which are not accessible in the market,
• Deny granting licences of intellectual property rights, etc. 

Resale price maintenance

Another type of vertical agreement is dealt with in Section 3(4)(e) of the Act, which is resale price maintenance. Here, one dominant firm sells goods on conditions such as that the prices charged on resale shall be stipulated by the seller, unless it has been stated that it can be sold at lower prices as well. 

For example- The manufacturer tells the distributor to sell a product at a stipulated price only, and if the seller does not comply with the stipulations, then the manufacturer may cut down on all business with the seller. This is also known as vertical price fixing.

Re Prime Mag. Subscription Services Pvt. Ltd

In this case, the CCI observed that even though the publisher in the instant case imposed the maximum discount rate on the distributor, it does not imply that it was an abuse of the dominant position because the impact of this resale price maintenance is very negligible in the market.

Horizontal agreements vs. vertical agreements 

The Competition Act treats horizontal agreements differently from vertical agreements. The difference between horizontal and vertical agreements in the market can be tabulated as follows:

Horizontal Agreements	Vertical Agreements
Horizontal Agreements are entered into between those enterprises that are involved in the trade of similar or identical goods and services.	Vertical Agreements are entered into between enterprises which are at different levels of the supply chain, such as production, distribution, storage, etc.
Here, the enterprises are competitors in the market and operate at the same level of supply chain, such as two producers of cement.	2. Here, the enterprises are at different levels of the supply chain, such as one producer and the other- a retailer.
Kinds of Horizontal Agreements include-Price Fixing,Limiting the supply,Sharing the markets among the competitors,Rigging the bid.	3. Kinds of Vertical Agreements include-Tie-in arrangement,Exclusive Supply agreement,Exclusive distribution agreement,Refusal to deal,Resale price maintenance.
The rule of presumption is applied in cases of horizontal agreements, such as cartels. This is a rebuttable presumption.	4. The rule of reason is applied in cases of vertical agreements in the market.
Example- Two sellers of cement enter into an agreement and decide to increase the price in the market together.	5. Example- The producer of sofas makes an agreement with the distributor to only distribute his products in the market.

Exceptions to anti-competitive agreements

While it is the aim of the Competition Act to restrict all agreements that are anti-competitive in nature, the Act also states a few exceptions where restrictions may be imposed by the players in the market. These exceptions are contained in Section 3(5) of the Act. 

IPR and competition law interface

The Act provides exceptions to anti-competitive agreements in the case of intellectual properties. The Competition Act states that any restraint or reasonable conditions that are imposed to protect intellectual property rights are exempted from the purview of this Act. 

Intellectual property is the creation or a product of the mind of an individual. It is intangible and quite different from other properties; hence, it needs a different level of protection than other kinds of goods and services, so that intellectual inventions are not copied without consent and to promote invention and research among individuals. 

The Act has exempted the following kinds of intellectual property:

• Copyright– Copyright is the exclusive right of an author or composer to exclusively publish and sell his/her original work in a tangible form. This protection is provided to the authors as a fair reward for their creative efforts. This exclusive right limits others from duplicating the works of others, reproducing the same and reaping the benefits of others’ labours.
• Patents- A patent is exclusively provided by the government to individuals to make, sell, and use the inventions for a limited period of time. This is done to ensure that the inventor can use his or her invention to reap profits and that others cannot misuse the inventor’s work.
• Trade and Merchandise Marks- A trademark is a symbol that is used to distinguish goods and services in the market. Trademarks act as indicators for customers about the goods and the brand. The Act does not take into account any restriction that takes place pursuant to the trademarks of any goods or services because trademarks help brands retain their individuality and prevent imitators from copying other brands. 
• Geographical indications of goods- Geographical indications of goods are done to separately identify the goods and services that originate from a specific part of India and gain their reputation from there. 

Such as Darjeeling tea and Matti banana. These indications help customers identify specific goods and also stop others from misusing the name of the product and reaping profits. Exclusive rights are given to use these indications.  

• Designs- The Designs Act, 2000, is aimed at mandatory registration of designs to protect against any kind of infringement. Designs include any specific shape of a product or its pattern or colours. The registration of this design gives the proprietor the right to use the design in any way needed and restricts others from using the same for a limited period of time. 

The Competition Act does not interfere with any agreement pursuant to the Designs Act since it is aimed at protecting the proprietor from infringing on its registered designs. 

• Layout designs of integrated circuits– An integrated circuit is a product which is in its final or intermediate form, where at least one of the elements is active and all interconnections are formed integrally to perform some electronic function or for manufacturingpurposes., 

These layout designs are the original works of those who create them and are not commonly available or thought of by others. Thus, these creators are given the right to produce, reproduce, and sell these layout designs for their own profit and commercial purposes.

Export cartels

Section 3(5) of the Act also exempts the right of a person to export goods from India if such an agreement, although hampering competition, is with regards to the production, supply, distribution, and control of goods and services only for the purpose of export. 

An export cartel can take the form of an agreement between firms to charge a specific price for export or to efficiently divide the export market among themselves. The effect of this cartel is only felt in the country to which the goods and services are being exported, not in the country that is exporting. These export cartels are allowed to successfully enter foreign markets and bring income from the foreign countries to India for its own economic growth. 

Unfair Trade Practices

“Unfair Trade Practices” can be understood as practices that are deceptive and adopted to deceive for the purpose of sale and supply of goods and services. Before the introduction of the Competition Act, 2002, its predecessor was the Monopolistic or Restrictive Trade Practices Act (MRTP), 1969, which was specifically empowered to deal with unfair trade practices used by producers and sellers in the market. While the Competition Act, 2002, does not specifically deal with unfair trade practices, it can efficiently look into unfair trade practices in the market under Section 19 of the Act, if the parties involved have entered into an anti-competitive agreement or are abusing their dominant position in the market. Let us take a look at the types of unfair trade practices in the market that can hamper competition:

False and misleading representations

Many times, sellers in the market make various oral and written representations regarding their goods and services, which are not necessarily true. The sellers may falsely suggest that:

• The goods sold are of a particular quality or grade. 
• The services are of a specific standard and grade.
• A second hand or old product is sold as a new model to deceive customers.
• The goods have special approval or characteristics, which, in fact, they do not.
• The goods are used for a specific purpose, which is not true.
• Giving a guarantee or warranty which is not true and not based on proper testing, etc. 

Bargain price advertising

The producers and sellers in the market may put up an advertisement in the market where they claim to offer the goods and services at a bargain price but have no intention of selling them at that price.

It is unfair if the sellers suggest that the bargain price is lower than the ordinary price of the product, which is not true, or that such an advertisement would lead the customers to believe that the bargain price is better and more attractive than the ordinary price, which is not true. 

Bait selling, gifts, prizes and contests

Under this category of unfair trade practices, the seller or producer in the market does the following acts to deceive the customers:

• The seller offers any product or service as a gift or a prize when, in fact, the intention is not to give the same.
• Creating a false sense of impression that the gift is being offered for free when in reality the price of the same is being covered by the seller by overpricing the main goods or services sold or provided. 
• The seller gives prizes to the buyers of a good by conducting various contests and lotteries, when in fact the intention is to simply promote sales and business of the seller.

Product safety standards

When a seller sells goods or provides services to the consumers in the market with full knowledge that the goods or services so provided are not in full compliance with the safety standards and are very likely to cause harm to the consumer, and yet he or she sells or provides such goods and services, he/she is said to indulge in unfair trade practices for his/her own profit without any consideration for the consumer in the market and the consumers are unaware of the same.

Hoarding and destruction of goods

One of the most common means of unfair trade practices, especially by dominant firms in the market, is the practice of hoarding goods. The firms hoard the goods or willfully destroy the goods that are in demand in the market in order to create further shortages. As a result of such an artificially created shortage, the prices naturally rise in the market and later, the firms sell the hoarded goods at exorbitantly high prices in the market for profits. 

Powers for inquiry into Unfair Trade Practices

After the MRTP Act was repealed by the Government, all provisions relating to unfair trade practices were included as a separate chapter under the Consumer Protection Act, 1986, now the Consumer Protection Act, 2019. The reason why the same was not included in the Competition Act, 2002 was that the legislature did not want the Competition law to be overburdened. Thus, the same was merged under the Consumer Protection Act, which already dealt with unfair trade practices. These unfair trade practices will fall under the purview of the Competition Act only when they are committed as an abuse of a dominant position by a firm in the market. 

Procedure for inquiry into Unfair Trade Practices

The Competition Act gives the Commission the power to inquire into unfair trade practices when they are in contravention of Sections 3 and 4 of the Act. It is the Consumer Law that provides effective and direct remedies to consumers through its forums. However, an inquiry can still be made under the Competition Act if it is hampering competition in the market. 

Restrictive Trade Practices

Restrictive trade practices have the ability to disturb the competition in the market; hence, it is important to monitor and efficiently control them. The Monopolies and Restrictive Trade Practices Act (MRTP), 1969, was aimed at curbing and controlling these restrictive trade practices in the market. However, with the replacement of the MRTP Act with the Competition Act, 2002, the Competition Commission now monitors the market and the competition within it. Some of the restrictive trade practices entered into by enterprises have been discussed here.

Types of Restrictive Trade Practices

These are some of the restrictive trade practices which can be harmful to the public interest-

Refusal to deal

Any agreement that restricts the other party from dealing in goods with another enterprise in the market is considered a restrictive trade practice. Due to this refusal to deal, many enterprises cannot compete in the market. 

Tying arrangements and Full-line forcing

It is the tying of one good with the other as a condition and it is compulsory. Thus, in order to buy one good, one must also buy the other good. It acts as a barrier for other producers to sell their products on the market.

Exclusive dealings

Under this practice, exclusive arrangements are entered where the sellers in the market can only deal with one particular manufacturer, and it also acts as a bar from dealing in any other specific territory as well. 

Price fixing agreements

Any agreement between enterprises that leads to the fixing of prices is not dictated by the normal market forces of demand or supply. This acts as a hindrance for other sellers in the market to perform.

Discriminatory discounts and rebates

This is the practice under which one seller provides the same goods and services at different prices and discounts to different customers or in different territories. It affects the other sellers and consumers in the market.

Allocation of territories and withholding of output or supply

Through this practice, the manufacturers or producers allocate the market to each other on the basis of geography and only deal in one area. This acts as a restriction for one producer to use the market allocated to the other; it also takes away the choices of consumers in different markets.

Group boycott

Under this practice, one or more producers may decide to boycott doing business with any one player in the market unless they agree to stop doing business with any other competition in the market.

Predatory pricing

The fixing of very low prices by a powerful enterprise with deep pockets in order to attract all the consumers in the market and drive other competitors out of the market is known as the practice of fixing predatory pricing.

Resale price maintenance

Through this practice, the manufacturer of a product determines the resale price of the product being sold in the market. This prevents the resellers from competing in the market and acts as a restriction.

Control of restrictive trade practices

Earlier, the control and regulation of restrictive trade practices was monitored  by the MRTP Act; however, now that the Competition Act, 2002, has passed, it monitors such restrictive trade practices by the players in the market. All complaints regarding such restrictive trade practices that hamper competition are to be made before the Competition Commission of India.

Investigations and punishments for anti-competitive agreements

The Competition Commission of India, in pursuance of the objectives of the Competition Act, 2002, monitors the players in the market to ensure there is competition for the welfare of consumers in a free market. The CCI has been given powers by the Act to investigate anti-competitive agreements in the market and to punish the offenders.

Section 19 of the Act deals with the power of the Competition Commission of India to investigate into anti-competitive agreements and the abuse of dominant positions by enterprises in the market.

Procedure for investigation into anti-competitive agreements

The procedure for investigation into the anti-competitive agreements in the market has been laid out by the Act under Sections 19, 26, and 27. 

Information for initiating investigation

The Commission has been given the power to inquire into any horizontal or vertical agreement in the market or the abuse of a dominant position. Such an inquiry can be initiated in any of the following manners, as mentioned under Section 19(1) of the Act:

• Commission’s own motion-The Commission can initiate an inquiry into any cartel or anti-competitive agreement on the basis of any information or knowledge that is already in its possession. Such an investigation is initiated by the CCI on its own by looking into the market. 
• On receipt of information-The Commission can also start an inquiry into anti competitive agreements if they receive any information or tips regarding such agreements. Any person, consumer, or association can provide such information to the Commission under the Competition Commission of India (General) Regulations, and such persons providing information for initiation of inquiry must also pay the required fees for the inquiry. 
• On reference by the Government-The Commission may also start an investigation into anti-competitive agreements on reference made by the Central or state government, or any statutory authority as well. 

After the Commission receives any such information from any person regarding anti-competitive agreements or abuse of dominant position in the market, or by way of reference by the Government or on its own motion, and the Commission is of the opinion that there is a prima facie case of such an agreement or abuse, then it has the power to start the investigation, and it shall direct the Director General of the Commission to begin the investigation under Section 26 of the Act.

If the Commission is of the opinion that the information provided is already known to the Commission, then it can be clubbed with other information about the same subject. Whereas, if the Commission is of the opinion that no prima facie case is being established with the given information, then it can close the matter. The commission has to pass an order stating reasons for not starting the investigation and send a copy of such an order to the persons who provided the information or the Government, as the case may be. 

Investigation and submission of report

The Director General of the Commission is entrusted with the act of investigating anti-competitive agreements in the market under Section 26(1) of the Act. After the investigation, the Director General has to submit a report on his findings about the matter. This report is forwarded to the respective parties concerned in the matter.

If in the Director General’s report it is stated that no anti-competitive agreements or abuse of dominant position have been detected, then the Commission will invite objections from the parties to the report. The parties can state their objections. The Commission will carefully take the objections into consideration and if it agrees with the report of the Director General, then the matter will be closed. However, if the Commission is of the opinion that the objections of the parties have substance in them, it may redirect further investigation into the matter by the Director General.

Passing of order

If, after the inquiry conducted by the Director General, it is found that there has been a contravention of Section 3 (Anti-Competitive Agreement) or Section 4 (Abuse of dominant position)  of the Competition Act, then the Commission has the power to pass the following orders under Section 27 of the Act:

• The power to direct the enterprise engaged in such anti-competitive agreement or abusing its dominant position to discontinue the agreement and not to re-enter into any such agreement or not to abuse its dominant position, as the case may be. 
• The power to impose penalties on the enterprises engaged in such contravention. The penalty for such contravention will be up to ten percent of the average turnover of the enterprise for the last three financial years. 
• The power to direct the enterprises that are a part of the agreement to modify the agreements in the manner specified by the Commission.
• The power to pass any other orders or directions as it deems fit.  

What are combinations

The Competition Act, 2002, also regulates the combinations of enterprises in India. A combination is defined as the acquisition of one or more companies or enterprises by one or more persons, or the merger or amalgamation of enterprises under Section 5 of the Act. So a combination can be understood as the amalgamation or coming together of two or more enterprises or their merger or acquisition. Such combinations need to be controlled and monitored to prevent the big MNCs from taking over the business in India and throwing the small Indian businessmen to the curb, and to protect the customers in the market. While combinations such as mergers and acquisitions are quite normal in the business world, it becomes a matter of concern when they cross a certain financial threshold because they will have a considerable effect on the market and consumers. Thus, it becomes necessary to report such combinations to the CCI.

Filing notice of combinations

Regulation 9 of the Combination Regulations, 2016, requires an acquirer to notify the CCI regarding any acquisition or hostile takeover in the market. Similarly, enterprises must also file a joint notice in case of a merger or an amalgamation of enterprises.

The Act mandates certain combinations to be filed before the Competition Commission to ensure that such combinations do not cause an appreciable adverse effect on the competition, and CCI has the right to propose modifications to the combinations. The financial threshold for filing a notice regarding any merger, acquisition, or amalgamation of enterprises before the Competition Commission of India as per Section 5 of the Act is: 

1. In case of Indian Enterprises-

• If the asset of the enterprise is more than Rs. 2,000 crore; or
•  If the turnover of the enterprises is more than Rs. 6,000 crore. 

2. In case of Worldwide Enterprises with Indian Enterprise-

• If the asset of the Foreign enterprise is more than US $1 billion with at least more than Rs. 1000 crore in India, or
• If the turnover is more than US $3 billion with at least more than Rs. 3000 crore in India. 

3. In case of Indian Groups-

• If the asset of the companies are more than Rs. 8,000 crore; or
• If the turnover of the companies is more than Rs. 24,000 crore.

4. In case of Groups of Worldwide enterprises with India-

• If the assets of the companies are more than US $4 billion with at least more than Rs 1000 crore in India; or
• If the turnover of the group is more than US $12 billion with at least more than Rs. 3000 crore in India. 

Regulation of combinations: ex ante

The Competition authorities around the world adopt various ways of regulating the combinations in the market. These regulations are primarily of two kinds, namely ex ante and post facto. 

Ex ante regulation of combination implies certain standard practices and policies that are set in place to effectively monitor and solve specific situations in their apprehension. These are interventions that are present beforehand and they mandate that the players have to behave and act in a certain way. This regulates the combinations before any contravention has actually arisen.

Regulation of combinations : post facto

Ex post facto regulation of combinations implies the regulation of combinations after they have already been formed and have impacted the competition in the market. These are in contrast to the ex ante regulations; these regulations take action once the distortion has already occurred.

India’s Competition Law Framework follows the post facto regulatory approach in dealing with the appreciable adverse effect on competition.

With the increasing pace of digital business and the digital market in India, a need has been felt by many experts in Competition Law for an ex ante regulation of the digital market. This change of wind towards the need for ex ante regulation is the result of the possible threat of deep discounting and potential big mergers and acquisitions in the digital market, which could have critical effects on the Competition in the digital market if not properly monitored beforehand. Now it is a matter of great apprehension whether such an ex ante regulation for the digital market will be adopted or not in the coming years. 

Market power under Competition Act

The concept of market power is very important in order to effectively analyse the mergers, acquisitions, combinations, and anti-competitive practices in the market. The market power of a firm is analysed on the basis of its ability to raise prices above the competitive level in the market and sustain the same price. Market power is mostly used in cases of mergers, acquisitions, and various anti-competitive agreements where one firm with high market power is able to dominate the market effectively and drive other competitors out of the market. Hence, we can understand market power as follows:

• The ability of a firm to set prices above the marginal cost and also act independently of its fellow competitors is its market power, and
• The market share of the firm. 

The Competition Commission gives due weightage to the market power of a firm while investigating the contravention of anti-competitive agreements, the abuse of dominant positions, and various combinations.

Inquiry into appreciable adverse effect on competition

The Competition Commission of India has the power to inquire into agreements that have an adverse effect on competition or are likely to have an appreciable adverse effect on competition under Section 19(3) of the Act. The Commission will look into all or any of the following factors:

• The creation of barriers, if any, to the new entry in the market;
• The act of driving competitors out of the market;
• The foreclosure of competition in the market by hindering entry;
• The accrual of benefits by the consumers in the market;
• The improvement in production or distribution of goods and services;
• The promotion of technical, scientific, or economic development through the production or distribution of goods and services. 

Legality principles : presumption, rule of reason and per se rule 

The Competition Law around the World refers to different kinds of rules for determining and punishing anti-competitive practices by enterprises. The major approaches taken by Competition Laws around the world are Rule of Reason and Per se Rule. 

The Per se Rule under the Competition Law implies that certain kinds of agreements are presumed to be violative of the antitrust laws as soon as they are formed, without any regard to other factors in the market. The parties to the agreement are deemed to be in contravention and the onus to prove that the agreement is not anti-competitive is on the members of the agreement. 

The Rule of Reason under the Competition Law implies that an agreement is not violative of competition or antitrust laws per se, the courts look into various factors in the market before determining the violation. The onus to prove the violation of the law is on the informant or the plaintiff. 

Various competition and antitrust systems around the world have their own preferences between these two approaches. Let us take a look at the position in different countries.

Position in the US

Around 1800, in the USA, with the increase in mass production and fast developing economy, various trusts had been established in the country. As a result, the US antitrust law known as the Sherman Act (1890) was enacted to curtail and de-structure the trusts established by President Roosevelt. The Sherman Act restrained all kinds of contracts in restraint of trade as void without any exception. All combinations among competitors came under the restraint of trade.

United States v. Trans Missouri Freight Association (1897)

In this case, the freight association was accused of fixing prices, which was covered by Section 1 of the Sherman Act. The association agreed to fix the prices to regulate competition and not suppress it. Also, the prices that were fixed were reasonable to save themselves from personal ruin. While the appellate court held that there was no violation of the Sherman Act.

The US Supreme Court stated that all price fixes are violative, irrespective of their reasonableness. It adopted the Per Se Rule. However, there was strong dissent against such unreasonable restraints. 

Standard Oil Company v. USA (1911)

This case brought a turning point in the principle of legality in the US. Here, the Rockafeller brothers had formed the Standard Oil Company and gradually gained control of almost all other refineries and oil industries. Later, the Standard Oil Company was prosecuted under Sections 1 and 2 of the Sherman Act. 

Justice White, in his judgement, said that common law allows reasonable restraint and the Sherman Act has to institutionalise Common Law. While Section 2 of the Act says that monopolisation or the attempt at monopolisation is illegal, nowhere in common law has there been any prohibition on monopolies created by efficiency. So, it has to be looked at through efficiency and reasonableness. Standard Oil was found guilty of malpractice and was dissolved, and the Rule of Reason was established in the USA. 

But the critics of the rule of reason stated that it would open Pandora’s Box since reasonableness in itself is subjective. Hence, the USA adopted the Per Se Rule so that the judiciary is not overburdened.

Position in the EU

Antitrust laws in the European Union started developing after 1950. The Competition Law of the EU is contained in the Treaty on the Functioning of the European Union (TFEU), to make sure that competition is not distorted in the markets. The EU followed the order of liberalism along with regulations, unlike the Magna-Carta capitalised economy of the USA. The EU economy wanted to be midway between capitalism and communism.

Articles 101 and 102 of the TFEU are the laws aimed at competition and antitrust activities. Article 101 of the TFEU states that all agreements which are aimed at preventing or distorting competition are prohibited, such as fixing of prices, controlling output and supply, etc. While this may seem like a per se rule like the USA, Article 101(3) of the Treaty also states a few exceptions to this prohibition. The exceptions state that even those agreements that distort competition but are entered for the purpose of technological or economic progress and benefit customers are not forbidden.

So, the EU follows the rule of reason and not the per se rule. Due importance is given to the exceptions under the Treaty.

Position in India

The Competition Law of India has followed the rule of reason in determining the anti-competitive agreements in the market. Section 3 of the Competition Act deals with both horizontal and vertical agreements, as discussed earlier in this blog. 

In Section 3(3)(d) of the Act, the phrase “shall be presumed” has been used, which states that all the anti-competitive horizontal agreements shall be presumed to have an appreciable adverse effect on competition. This presumption rule can be said to be similar to the per se rule in the USA because it is believed that horizontal agreements are presumed to have such an adverse effect on competition. However, it has been held that even though the per se rule can be read through Section 3(3) of the Act, it has been diluted through Section 19(3), which provides for exceptions to this rule.

Sodhi Transport v. State of U.P (1986)

In this case, it was held that the presumption under Section 3(3) of the Act is a rebuttable presumption and that it is not conclusive proof. So, any horizontal agreement or cartel will be presumed to have an adverse effect on the competition; however, the burden of proof will shift to the defendant and the defendant can make its representation. 

In the case of vertical agreements under Section 3(4) of the Act, the Commission follows the rule of reason itself. The pro-competitive effects and anti-competitive effects are evaluated against each other to find out if there has been a contravention of the law or not. The Commission evaluates if these agreements are “likely to cause” appreciable adverse effects. 

Neeraj Malhotra v. Deutsche Post Bank (2011)

The CCI held that even though the wording of Section 3(3) reflects the per se rule in India, it is simply a presumption that shifts the burden of proof. The defendant is free to take the shelter of Section 19(3) to disprove the presumption. Indian law has been more inclined towards the use of Rule of Reason  and not the Per se Rule. 

Abuse of dominant position

The Competition Act, along with prohibiting various anti-competitive agreements, also prohibits the abuse of a firm’s dominant position in the market. Dominance in the market in itself is not wrong; however, no enterprise should abuse its dominant position in the market, says Section 4(1) of the Act. When one dominant firm abuses its position, it makes it difficult for other competitors to perform in the market and ultimately becomes a disadvantage for consumers.

Meaning of dominant position

The term “Dominant Position” has been defined under Section 4 of the Act. A firm or an enterprise is said to enjoy a dominant position in the market if it has a position of strength in the relevant market, which means it can do the following:

• It can operate in the market independently without being affected by the competitive forces in the relevant market.
• It can substantially affect other competitors, consumers, and the relevant market in its favour. 

Factors to determine dominant position

In order to prohibit the abuse of dominant position, the Competition Commission of India must determine if the firm actually enjoys a dominant position in the market. The CCI takes into consideration the following factors under Section 19(4) of the Act while determining the dominant position of a firm in the relevant market:

• The market share of the enterprise in the relevant market.
• The size of the enterprise and its available resources.
• The size of its competitors in the market and their importance.
• The economic power of the firm in the market will also include the commercial advantages enjoyed by the firm over its competitors.
• The service network of the enterprise in the market.
• The level of dependency of the consumers in the market on the enterprise.
• Whether the dominant position has been acquired as a result of a statute or as a result of being a government company or a public sector undertaking.
• The prevailing entry barriers in the market such as regulatory barriers, high financial risk, high capital costs for entry into the market, technical barriers, economies of scale, and the high cost of substitute goods and services in the market. 
• The countervailing buying power of the consumers on the market.
• The structure of the market and its size.
• Any social obligations or social costs prevailing in the market.
• Any relative advantage given to the enterprise as a result of its contribution to economic development that is causing or is likely to cause an appreciable adverse effect on competition in the market. 
• The commission may also look into any other relevant factor for inquiring into the dominant position of a firm, as it deems fit. 

Determination of abuse of dominant position

A firm that, according to the Competition Commission of India, enjoys a dominant position is said to abuse the same in the following circumstances:

• Unfair conditions– When the enterprise imposes unfair or discriminatory conditions during the purchase or sale of goods and services in the market, it is said to abuse its dominant position.
• Predatory pricing– When a powerful firm with large resources prices their goods and services at such low rock-bottom levels that other competitors cannot compete, such a practice is known as predatory pricing. Such pricing is aggressive and harmful to competition.
• Limiting production and development- If the dominant firm in the market limits or restricts the production of goods and services in the market to benefit itself and creates shortages or restricts any technical or scientific development in goods and services that causes prejudice to the consumers, it is said to abuse its dominant position in the market.
• Denial of market access- If a dominant firm in the market does not allow other competitors to enter the market and denies them access, it is abusing its dominant position.
• Imposition of contract- When the dominant firm makes contracts with other parties and such contracts consist of supplementary obligations, these supplementary obligations have no relation to the main contract but are simply advantageous for the dominant firm. 
• Protection of relevant market– When a dominant firm in a market uses its position in one market to enter another market and, in the meantime, prevents other players from entering the same market, it is said to abuse its dominant position. 

Relevant market

Each enterprise will be assessed by the Commission for abuse of its power only within the relevant market. The definition of relevant markets has been discussed in the above passages. The Commission, while investigating the abuse of dominant position, will first analyse and demarcate the relevant market. The relevant market is with reference to-

1. Relevant Product Market, and
2. Relevant Geographic Market. 

Relevant geographic market [S.19 (6)]

The relevant geographic market for the purpose of determining the abuse of dominant position by a firm will comprise the area in which the conditions of competition for the supply and demands of the goods and services are distinctly homogeneous and they can be distinguished from the neighbouring market. The Competition Commission of India, in order to determine the relevant geographic market, looks into the following factors, amongst others:

• The present regulatory trade barriers; 
• Any local specification requirements of the market;
• The national procurement policies present;
• All the distribution facilities present in the market;
• The cost of transportation;
• The language;
• The preferences of the consumers in the market;
• The need for regular supply in the market and the after-sales services. 

Please note : This is a non-exhaustive list of factors. 

Relevant product market [Section 19 (7)]

The relevant product market for the purpose of determining the abuse of dominant position by a firm will comprise all those products and services that are regarded as interchangeable and substitutable by the consumers in the market. The products are substitutes for each other due to their characteristics, price, or uses. 

For example- In order to determine if an umbrella producer is abusing its dominant position or not, the Commission will look into the umbrella product market only and not the chocolate product market.

The Commission looks into the following factors to determine the relevant product market to establish the abuse of dominant position by a firm, they are:

• The physical characteristics of the goods and their ultimate end use;
• The price of the goods and services;
• The preferences of the consumers in the market;
• The exclusion of in-house production;
• The presence of any specialised producers of the product in the market;
• The classification of industrial products. 

Please note : This is a non-exhaustive list of factors.

Tools to determine relevant market

The Competition Commissions around the world, in order to determine the relevant market, also use various economic tools. We shall discuss the few important and noteworthy tools used: 

SSNIP Test

One of the most effective tools used by the Competition Commission is the SSNIP test. SSNIP stands for Small but Significant Non-Transitory Increase in Price. In this test, the invigilator monitors the market to see if the monopolist or dominant player increases the price of the product by a small and significant amount over a non-transitory continuous period of time. The invigilator then monitors the number of buyers who will switch to other products and at some point, the increase in price will be unprofitable for the dominant player. All the substitutes for the product are included in the new product market and this same process is repeated until there are no close substitutes. This is how the relevant market can be determined. This substitutability has to be looked into from both the demand and supply sideof the market.

SSNDQ Test

Another tool for determining the relevant market in Competition Law is the use of the SSNDQ test. SSNDQ stands for Small but Significant Non-Transotory Decrease in Quality. In this test, the invigilator monitors the market when the dominant player slowly decreases the quality of the product over a small and significant non-transitory continuous period of time. The invigilator then monitors how the buyers switch to other products as the quality slowly decreases. The products that the buyers see as substitutes are included in the new relevant market. This test can be continued until there are no more substitutes. 

Belaire Owners Association v. DLF Ltd. (2010)

The DLF builders had launched a new housing complex called the Belaire, which was set to be completed within 36 months. However, the initial sanctioned plan was changed and the number of flats increased significantly. As a result, there was less space, the additional facilities were removed and the completion time was increased by 2 years, although the payments were made on time.

The Belaire Owners Association filed a complaint before the CCI for abuse of dominant position through the imposition of a contract on the owners. The Apartment Buyer’s Agreement was unfair, unreasonable, and arbitrary. The CCI established a prima facie case against DLF for abuse of dominant position. The relevant product market was high end residential buildings and the relevant geographical market was Gurgaon. 

The CCI held that DLF had almost a 45% share of the real estate market and there was minimal competition due to the very low entry of new players; thus, it was in a dominant position. DLF abused its dominant position by unilaterally altering the provisions of the Apartment Buyer’s Agreement. DLF had the power to change its geographical market from residential buildings to commercial; hence, it was established that it had made unfair and discriminatory conditions in the sale of services. A penalty was imposed by the CCI against DLF.

Anuj Kumar Bhati v. Sony Entertainment Television (SET) (2012)

In this case, a complaint was filed against Sony Entertainment Television, alleging that it was engaging in abuse of its dominant position in the market. It was alleged that SET was duping the participants of Kaun Banega Crorepati 4 (KBC-4) by indulging in foul play for selecting candidates and the choice of questions for the show. The Competition Commission of India looked into the viewership of the show Kaun Banega Crorepati and discovered that the viewership was not much. SET was not in a dominant position and people have the option to watch other shows if they do not like KBC. It was ordered that SET was not in a dominant position and was not abusing the same. 

Ramakant Kini v. Dr. L.H Hiranandani Hospital (2012)

In this case, Mrs. Jain had an agreement with M/S Life Cell Pvt. Ltd. to avail of their stem cell services, in which the umbilical cord is collected at the time of birth and preserved. She was also registered with L.H. Hiranandani Superspecialty Hospital for maternity services and the delivery of children. So Mrs. Jain requested that the hospital allow Life Cell to collect stem cells after delivery. The Hiranandani Hospital refused to allow the stem cell service to enter the hospital and collect the stem cells. The Hospital stated that if the informant wanted to use the stem cell services, she could avail herself of Cryobanks International India and the Hospital had an exclusive agreement with Cryobanks to collect stem cells after delivery in the hospital. 

The informant approached the CCI alleging violation of Sections 3(4), 4(2)(a)(i) and 4(2)(c) of the Act, which is indulging in vertical agreements and abusing the dominant position in the market by imposing unfair conditions and denying market access. The CCI looked into the agreement and held that it was a tie-in arrangement and in violation of Section 3(4). However, abuse of the dominant position was not established. 

Subsequently, the COMPAT again inquired if there was a tie between the hospital and the stem service. The Tribunal held that there was no tie-in arrangement because more than 93% of the mothers had the choice to take only maternity services from the hospital; it is not mandatory to take the stem cell services as well. Further Cryobanks has arrangements with other hospitals as well.

On the question of the abuse of the dominant question, it was held that the relevant market in question was the market for maternity services and not the market for superspeciality hospitals and Hiranandani Hospital does not enjoy a dominant position in the maternity market because the patients have the option to choose other hospitals as well.     

M/S Kansan News Pvt. Ltd. v. Fastway Transmission (2015)

In this case, the CCI inquired into the abuse of dominance by enterprises engaged in the cable TV service in Punjab and Chandigarh. It was alleged by the complainants that the cable service was causing disruptions in the broadcast of the informant’s news channel and denying it market access. The CCI looked into the market shares of the enterprises, their resources, the market structures and the ability of the enterprises to operate independently of the competitive forces in the market. 

Finally, the CCI held that the cable service enjoyed dominance in the market and was abusing the same. This decision of the CCI was upheld by the Supreme Court of India in its order in 2018. 

Fast Track Call Cab Pvt. v. Ani Technologies (2017)

In this case, it was alleged that Ola engaged in anti-competitive practices by providing refunds, rewards and various kinds of discounts. The CCI observed prima facie that this act of giving huge discounts by Ola to its customers is a strategy of predatory pricing to restrict other players from competing in the market and Ola enjoyed a dominant position.

However, the NCLAT, in its judgement, stated that Ola faced competition in the market from other companies such as Uber, Meru and Fast Track. It cannot be said that Ola enjoys a dominant position in the market. It is not capable of operating independently of competitive forces in the market. Ola also contended that the low prices offered by it are a part of its variable cost to build its brand and hence it is not predatory. Thus, the NCLAT held that Ola is not engaged in anti-competitive activities in the market.

Exclusionary abuses

Exclusionary abuse of dominant position in the market includes the practice of entering into such agreements and contracts that act as barriers for new entrants in the market. The enterprise will enter into such practices, which will make it difficult for small enterprises to compete and restrict them from conducting their business or expanding in the market. This will exclude the other enterprises from the market. 

For example- the concept of predatory pricing is an exclusionary abuse of the dominant position of a firm in the market. 

Exploitative abuse

Exploitative abuse of the dominant position is the method of using the dominant position to take unfair advantage of a person or a group in order to earn more profits and advancement in the market. The main goal of such abuse is to exploit the consumers in the market. One of the main examples of this exploitative abuse is the practice of discriminatory pricing. 

For example- Charging excessive or discriminatory pricing from some consumers in the market. 

Competition Advocacy

Section 49 of the Competition Act talks about Competition Advocacy. The major role of competition advocacy is to spread and reach out to all the stakeholders of the competition law in the market. This competition advocacy allows for the introduction and knowledge of the role and functions of the Competition Commission of India. 

Competition Advocacy is a necessary aspect because competition law is a relatively new law in India. It is important to make consumers and practitioners of law aware of it and its uses. It is also important to make the players in the market aware of this law so that they do not commit a contravention of the law due to ignorance of the law.

Through this competition advocacy, the Central Government, while formulating any policy for competition in India, will refer to the Commission for its views and opinions on the matter. Although the opinions of the Commission are not binding on the Government, this acts as a method of dialogue between the Commission and the Parliament. This Advocacy will also help in spreading awareness and training the general public about the issues in the Competition law and the market. 

Competition in the digital market

The advent of technology has brought with it the existence of a market that does not depend on the physical contact between the buyers and the sellers. The interaction between goods and services, people, and businesses takes place over the internet. These markets in the digital economy are known as digital markets.

While regulating competition in the physical market is already a humongous task, regulating the digital market is tougher. The digital markets are different from the traditional markets; they are highly dynamic and the notions of the traditional market cannot be used to effectively deal with the digital market. The laws and regulations for the market have been developed keeping in mind the physical market, which cannot be adequately applied to digital markets. So, digital markets have become a place for unchecked dominance. 

How to establish dominance in the Digital Market

The process of establishing dominance in the digital market is very problematic because of the following reasons:

1. The non-price dimension of competition– The digital market consists of the non-price dimension of competition, where prices of goods are not the only factor. Many things on the internet are provided free of charge. Along with the price, due importance is to be given to other factors such as innovation and quality of goods and services provided. 
2. Non-applicability of the SSNIP Test-It is not possible to use the SSNIP test for digital markets where the prices are zero because a slow and substantial increase of 10% in the price of zero is still zero. Hence, it becomes difficult to use some of the economic tools for the determination of relevant markets on the digital platform. 
3. Difficult to determine market– In the digital market, a single enterprise can act as both the intermediary and the competition in the market. A single firm has both- online and offline presence; it is a multi-sided market; hence, it becomes difficult to distinguish the digital market from the physical market at times. 

The aforementioned problems in the digital market highlight the need for efficient laws and measures to check the competition in the digital market and to have certainty in laws. 

What is the relevant market in the digital market

The CCI had a lot of confusion in the early years of the advent of the digital market about how to correctly demarcate the relevant market. 

Ashish Ahuja v. Snapdeal (2014) 

In this case, the CCI held that although the online and offline markets differ in terms of discount and shopping experience, they are different channels of distribution of the same product and hence are not two different relevant markets. However, this view of the CCI gradually changed and developed in later cases.

Matrimony.com Limited & CUTS v. Google LLC (2018)

The CCI examined the relevant market in the digital economy very closely. Information was filed against Google with the CCI alleging that Google was running its search business in a discriminatory manner and that it was harmful to advertisers and consumers. It was alleged that Google was mixing its vertical results with the main search results. More prominence was given to those sites that belonged to Google and other websites and ads were not given a fair chance. 

Thus, Google was abusing its dominant position. An inquiry began and the Director General first demarcated the relevant market for the case. It was submitted that the market for general online web searches and the market for online advertising searches are different. Also, Google is marked as the default in many web browser searches, which is harming the competition in the market for other players. In the intermediation agreements as well, Google has imposed unfair conditions stating that the publishers cannot show ads that are similar to Google’s ads. 

The CCI, in its final order, held that Google was in fact guilty of the contravention of Section 4 of the Competition Act. It had abused its dominant position in the market for both general web searches as well as advertising search services. It was asked to stop and cease these abusive activities. 

Penalty under the Competition Act, 2002

Any contravention of the provisions of the Competition Act, 2002, by any person or enterprise would invite hefty penalties from the Competition Commission of India. Section 27(b) of the Act states that if the Commission, in its inquiry, discovers anti-competitive agreements or abuse of a dominant position in the market, it can impose a penalty. 

Unlike other penal provisions, where the amount of penalty is fixed, the Competition Act does not have a fixed amount stated as a penalty for contravention of the Act. The penalty is imposed depending on the turnover of the enterprises engaged in such anti-competitive practices. 

Section 27(b) states the following:

• In cases of anti-competitive agreements and abuse of dominant position by a firm, a penalty of not more than 10% of the average turnover of the last three financial years will be the penalty.
• In case of cartels, a penalty up to three times the profit of every year of engagement in the cartel is imposed as penalty, or 10% of the turnover of each year of engagement in the cartel is imposed as a penalty. 

The penalty for cartels is heftier than for other kinds of agreements and abuse because it is believed that cartels have no redeeming effect at all. 

What is leniency (Section 46) 

The Competition Commission of India uses both reactive and proactive methods to detect cartels. One of the methods of reactive detection is the use of leniency. Section 46 of the Act, along with the Lesser Penalty Regulations, 2009, as amended in 2017, provide for leniency in Competition Law in India. 

When a member of the cartel brings vital information regarding the cartel to the Commission and helps the Commission overthrow the cartel, the informant is provided a lesser penalty than the other cartel members; this is known as leniency in cartels.

Please note : Leniency is available only with respect to Cartels. 

Who can apply for leniency

Leniency can be applied by any enterprise or individual who has been a member of the cartel itself. It is very difficult to get information about a cartel except from within the cartel itself.

When can an applicant apply for leniency

An applicant can apply for leniency from the cartel penalty under two circumstances-

• Before the prima-facie opinion is formed by the Commission regarding a cartel.
• After the prima-facie opinion is formed, but before the Director General submits its report.

What are the conditions for the grant of leniency

There are certain conditions prior to the grant of leniency to any enterprise or individual under the Competition Act. They are-

• A full, true and vital disclosure of the contravention of Section 3 of the Act must be revealed.
• The applicant must no longer be a part of the cartel.
• The applicant has not concealed or manipulated the information.
• The applicant continues to cooperate through the whole process.
• The applicant complies with all the conditions set out by the Commission. 

Markers of leniency

The Competition Act under the Lesser Penalty Regulations (LPRs) provides for marker status to various leniency applicants.

First Marker – Regulation 4(a) of the LPRs provides a reduction in penalty up to or equal to 100% to those enterprises and individuals who provide vital and unknown information about the existence or establishment of a cartel in the market. The information has to be completely unknown and must help CCI establish a prima facie case.

Regulation 4(b) provides for a reduction in penalty for those applicants after the first marker who submit evidence and provide disclosures that add significant value to the already existing evidence with the Commission. 

Second Marker – Regulation 4(c)(i) of the LPRs provides for a reduction in penalty for those applicants who provide information that is second in priority. They are provided with leniency up to or equal to 50% of the full penalty.

Third and Subsequent Markers – Regulation 4(c)(ii) of the LPRs provides for those applicants who provide further information regarding the cartel, which helps the CCI overthrow the cartel, the third marker status. A reduction in the full penalty of up to 30% is provided to them.

Leniency plus

When an informant for one cartel investigation provides information that helps in disclosing another cartel, such an informant is provided with leniency plus. It is an additional reward.

For example- If A is being investigated for a cartel in X, and A discloses a cartel in Y. Here, A will get the marker status with respect to Y and also get an additional reduction of penalty with respect to X. 

Brushless D.C Fans (2014) Suomoto

This was the first leniency decision of the Competition Commission of India. The CCI, on receiving information from the CBI about an alleged cartelization between manufacturers and suppliers of Brushless Fans in relation to tenders by Indian Railways, started a suo moto investigation.

One of the parties to the cartel applied for leniency and it added significant value in determining the existence of the cartel. The CCI provided a penalty reduction of 75% for the information. Full leniency was not given because the CCI already had the prima facie established against the cartel members.

Zinc Carbon Dry-Cell Batteries Case (2016)

In 2016, a leniency application was filed by Panasonic, which triggered an investigation by the CCI into the cartelization of dry-cell batteries between Panasonic, Everready, and Nippo. Based on the information, the Director General conducted a search and seizure and examined all faxes, emails, and documents of Panasonic, Everready, and Nippo. 

Since Panasonic itself had provided the full information, 100% leniency was provided to Panasonic, and later, Everready and Nippo also applied for leniency; they were provided leniency of up to 30% and 20%, respectively. 

This reveals that leniency is also an effective way of gaining information about the existing cartels in India.

Re:alleged anti-competitive conduct in Paper Manufacturing Industry (2021)

The CCI suo moto looked into 20 paper manufacturing units for alleged cartelization. It was observed that the units were fixing prices for non-wood based paper. They had a common association where they discussed the prices and one of the parties approached the CCI with information about the cartel. The Director General, in his investigation, found the evidence of emails discussing prices and various other documents. A penalty was imposed on almost 10 opposite parties and the informant received 100% leniency.

What is “Turnover” for the purpose of penalty under Competition Act, 2002

As discussed earlier, for the purpose of imposing penalties, it is very important for the Competition Commission to determine the turnover of the enterprises engaged in anti-competitive practices in the market. Turnover is defined as the value of the goods and services of the enterprise. However, there has been a great deal of confusion regarding the proper understanding of the term, whether turnover here means the total turnover of the company or only the relevant turnover.

The total turnover of a company means the turnover of the company with respect to all its business operations. It would imply a huge penalty, especially in the case of companies that are engaged in a number of different trades and are multi-product. 

For example- If a company is engaged in the trade of bananas, umbrellas, and coffee and forms an anti-competitive agreement with respect to umbrellas in the market, the concept of total turnover would lead to a penalty in the case of all the businesses of the company, including bananas and coffee, and not simply umbrellas.

On the other hand, the concept of relevant turnover means that the turnover only for the concerned product and geography will be taken into consideration. So, in this case, only the turnover from the umbrella business will be taken into consideration to impose a penalty.

In its early years, the CCI was very harsh in its imposition of penalties and imposed the penalty on the total turnover of an enterprise. The amounts were disproportionate for members of the same agreement, and the number of appeals eventually increased before the COMPAT and the Supreme Court of India. Finally, the question of turnover was settled by the Supreme Court of India in the Excel Corp case, which is discussed in detail below.

Excel Corp Care Ltd. Competition Commission of India (2017)

The Excel Corp Case was regarding bid rigging in the Aluminium Phosphide tablets which are a type of insecticide. The Food Corporation of India filed a complaint before the Commission and the Director General started an investigation into bid rigging or collusive bidding by four major companies in relation to the tenders.

In its Report, the Director General found a violation of Section 3 of the Act and it imposed a penalty of 9% of the average of the total turnover of the last three years of the companies. The companies were aggrieved by this order of the Commission and filed separate appeals before the then COMPAT, and COMPAT ordered that in the case of companies that are multi-product, only the relevant turnover is to be taken into consideration and not the total turnover. This further elevated the confusion regarding which turnover to choose. It was argued by the CCI that heavy penalties must be imposed and that the COMPAT cannot add the word relevant when such a word is not there in the provision. 

Finally, the case was heard by the Supreme Court of India and the following analysis was made by the Apex Court:

• The concept of total turnover may bring inequitable results, especially in the case of multi-product companies. 
• If two interpretations of the same provision are possible, then the one that leans in favour of the infringer has to be adopted.
• The turnover must be in respect of only the infringing product.
• The doctrine of proportionality must be adopted by the Commission, and due regard must be given to the relationship between the offence and the benefit gained while imposing the penalty. 
• Thus, relevant turnover is the yardstick for imposing penalties under the Competition Act, 2002. 

Justice Ramana, in his concurring opinion, also suggested a two-step process to determine the penalty for cartels:

1. The determination of the relevant turnover, and
2. The determination of the percentage of the appropriate penalty based on certain aggravating and mitigating circumstances such as the nature, gravity and extent of the contravention; the role played by the infringer; the duration of the engagement with the cartel; the loss suffered by others in the market; the nature of the product and the existing barriers in the market, etc. 

Global turnover

The recent Competition Amendment Act, 2023, has further brought a change to the calculation of turnover for the purpose of imposing a penalty. The Competition Commission of India will now impose a penalty on the Global turnover of enterprises caught in contravention of the Competition Law. While earlier the penalty was imposed on the relevant turnover only, the introduction of global turnover will significantly increase the amount of penalty for enterprises, especially multi-product global industries.

The potential problems that may be brought about by this concept of global turnover are:

• The concept of global turnover might act as a potential barrier to global players from entering the Indian market. As a developing economy, the step might act as a deterrent; although this is helpful in bringing down the cases of Anti competitive agreements, it might hamper competition itself. 
• The concept of global turnover will lead to excessive fines, and while penalties are important, it is also important to have proportionality between the cause and the effect. Global turnover will lead to high fines and may act as an over deterrent. 

Power to exempt under Competition Act, 2002 

According to Section 54 of the Act, the Central Government has the power to exempt any person or enterprise engaging in any of the anti-competitive practices stated in the Competition Act when such contravention is done due to the following reasons:

• If such an anti-competitive practice is necessary for the interest of security of the state or for public interest;
• If such an anti-competitive practice has arisen out of any obligation of a treaty, agreement or convention entered into between India and other countries;
• If such an act or contravention is done in the course of performing a sovereign function on behalf of the Government of India or the state government. 

Crisis cartels

One of the examples of exemptions under Section 54 of the Act is the crisis cartel. Crisis cartels are formed during severe economic downturns in the economy and the competition law allows and encourages such cartels during economic crises. 

The reason behind encouraging these crisis cartels is to reduce unemployment, excess capacity, promote innovation, and eliminate unnecessary competition. During a crisis, the demand for goods and services declines, leading to overcapacity, due to which too much product is accumulated and small firms may not be able to survive in the market and will ultimately have to exit the market. In such a scenario, cartels might be needed. 

One of the major examples of crisis cartels could be seen during the COVID-19 Pandemic.  

International Steel Cartel (ISC) 1926-1933

Due to the effects of the First World War, the International Steel Cartel was formed, which comprised countries such as Belgium, France, Germany, and Luxembourg. The objective of such a cartel was to stop imports, share the market among themselves and decide product quotas due to the severe effects of the World War.

Appalachian Coal v. USA (1933)

The coal industry was facing overcapacity, and the prices were too low due to the huge competition. As a result, the coal producers were given permission to sell their products through a common selling agent. It was held that such an arrangement was not a violation of the Sherman Act because it was necessary to defend the market.

Eastern Railway Kolkata v. M/S Chandra Brothers (2021)

In this case, almost 8 companies were engaged in bid rigging for the supply of axles to Eastern Railway, Kolkata. In the investigation, the calls, emails, and other communications between the companies were examined, and they were found guilty of violating Section 3 of the Act. However, the CCI did not impose any penalties on these companies because the MSME sector was facing financial difficulties during the COVID-19 Pandemic. 

Competition Authorities in India

The Competition Act, 2002, has established authorities for the purpose of monitoring competition in India and investigating anti-competitive agreements and violations of the laws. 

Competition Commission of India

Section 7 of the Act states the establishment of the Competition Commission of India or CCI. It has the following characteristics:

• It is body corporate.
• The commission has perpetual succession.
• It has a common seal of power.
• It has the power to hold and dispose both moveable and immovable properties.
• It has the power to enter into contracts and to sue or be sued. 

The head office of the Competition Commission of India is situated in New Delhi. The Commission also has the power to establish offices in other places within India. 

Composition and Appointment of Competition Commission of India

Section 8 of the Act states the composition of the Competition Commission of India. The Commission is headed by a Chairperson, and the number of members in the Commission shall not be less than two and it shall not be more than six members. These members are appointed by the Central Government. 

The Chairperson and members of the Commission are appointed by a selection committee. This selection committee elects the following designations-

Selection Committee Member	Designation	Term of Office
Chief Justice of India	The Chairperson of the Commission	Five years
Secretary in the Ministry of Corporate Affairs	A member of the Commission	Five years
Secretary in the Ministry of Law and Justice	A member of the Commission	Five years
Other two experts having special knowledge and experience in the field of International Trade, economics, commerce, business, law, finance, management, accountancy, public affairs, industry or matters related to competition law and its policies	A member of the Commission	Five years

The Chairperson and the members of the Commission are eligible to be re-elected. However, no one can be a member of the Competition Commission of India after the age of sixty five years. The Chairperson and the members can resign from their office by serving a notice of resignation in writing to the Central Government. 

Duties of the Competition Commission of India

The Competition Commission of India is endowed with the following duties:

• To eliminate those practices from the market which have an adverse effect on competition by enquiring into various agreements;
• To investigate the agreements and acts which are harmful to competition;
• To issue such interim and other orders required to regulate competition in the market;
• To impose penalty on enterprises and individuals acting in contravention of the Competition Act, 2002;
• To promote competition in the market and work towards sustaining it;
• To protect the interests of consumers in the market;
• To ensure that the market is characterised by freedom of trade for all participants in India. 

Competition Appellate Tribunal

Earlier, all appeals from the orders of the Competition Commission of India would lie with the Competition Appellate Tribunal or COMPAT. However, an amendment was brought into effect from 2017, as a result of which all the functions of the Competition Appellate Tribunal are now conferred on the National Company Appellate Tribunal (NCLAT).

Any person, enterprise, or government aggrieved by the orders of the Competition Commission of India can prefer an appeal before the NCLAT as per Section 53A of the Act. The time limit for filing an appeal is sixty days from the date on which a copy of the order or direction of the CCI is received by such aggrieved person, enterprise, or government. However, the NCLAT has the discretionary power to entertain appeals even after the expiration of the time limit if there is sufficient cause for the delay. The NCLAT will then provide each of the parties with the opportunity to be heard and pass such orders or directions as may be necessary. 

The NCLAT has been given the responsibility to deal with appeals under the Competition Act as expeditiously as possible. Section 53B(5) states that the NCLAT will try to dispose of the matter within six months of the filing of the appeal. 

Every proceeding before the NCLAT is deemed to be a judicial proceeding, and the Tribunal is considered to be a civil court.

Supreme Court of India

The highest authority of appeal under the Competition Act is the Supreme Court of India. Persons, enterprises or the government aggrieved by the orders of the NCLAT may prefer an appeal before the highest court of India, which is the Supreme Court. 

The appeal must be filed within sixty days from the serving of the order by the NCLAT on the matter. This limitation of sixty days can be waived by the Supreme Court if it can be established that the delay was due to some sufficient cause. The decision of the Supreme Court shall be final. 

Competition Amendment Act, 2023

The Competition Amendment Act, 2023, has brought some significant changes to the Competition Law in India. Some noteworthy changes are:

• The introduction of new financial thresholds for mergers and acquisitions under the Competition Law by amending Sections 5 and 6 of the Act. The threshold for reporting combinations to the Commission has now been increased to Rs 2000 crore, after which any such combinations have to be reported to the Competition Commission of India.
• The introduction of the concept of global turnover for the purpose of imposing penalties under the Act. This will lead to an increase in the amount of fines and will affect global companies dealing in multiple products. 
• The deposit for filing an appeal before the National Company Law Appellate Tribunal has been amended. It states that an appeal can be preferred within 60 days of the receipt of the order from the CCI by paying a deposit of 25% of the amount that has been imposed as a penalty by the Commission. 
• The introduction of hubs and spoke cartels. The definition of cartels has been amended to include a new concept of hub and spoke, which has been discussed in great detail in the above passages.

These are some of the significant changes brought about by the Competition Amendment Act, 2023. Competition Law is an up-and-coming area of law that is very important to monitor and maintain a free and fair market. It is important to understand the intricacies of competition law to ensure that the economy of India continues to thrive and businesses keep booming. 

References

• https://www.cci.gov.in/legal-framwork/act
• https://www.oecd.org/daf/competition/prosecutionandlawenforcement/32033710.pdf 
• https://www.jstor.org/stable/3113401 
• Richard Whish & David Bailey Competition Law, Seventh Edition, Oxford University Press

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