Indian Competition Law

individuals causes any AAEC in India topic to conditions under subdivision 3 ( 3 ) ( a ) to ( vitamin D ) , if it does so so merely it will be covered under this subdivision.

5.4Enterprises: –

The significance of endeavors for the intent of this Act has been defined under Section 2 ( H ) of the Act as under: –

  • =Enterprise‘ means a individual or a section of the Government, who or which is, or has been, engaged in any activity, associating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the proviso of services, of any sort, or in investing, or in the concern of geting, keeping, subventioning or covering with portions, unsecured bonds or other securities of any other organic structure corporate, either straight or through one or more of its units or divisions or subordinates, whether such unit or division or subordinate is located at the same topographic point where the endeavor is located or at a different topographic point or at different topographic points, but does non include any activity of the Government relatable to the autonomous maps of the Government including all activities carried on by the sections of the Cardinal Government covering with atomic energy, currency, defense mechanism, and infinite.

Explanation.-For the intents of this clause, –

( a ) aˆ•activityaˆ- includes profession or business ;

( B ) aˆ•articleaˆ- includes a new article and aˆ•serviceaˆ- includes a new service ; ( c ) aˆ•unitaˆ- or aˆ•divisionaˆ- , in relation to an endeavor, includes–

( I ) a works or mill established for the production, storage, supply, distribution, acquisition or control of any article or goods ;

( two ) any subdivision or office established for the proviso of any service ; aˆ-65 The substance of the definition of endeavor is that it can either be a individual ( subdivision 2 ( cubic decimeter ) ) or a section of authorities topic to the conditions specified in the definition transporting on an economic activity in the supply of goods or services. The definition makes it clear that all person66 or section of the authorities, any other entity can non for the intent of the Act, be treated as an endeavor unless it is engaged in commercial activities.


Section 2 ( H )


Section 2 ( cubic decimeter )

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5.5Trade Associations: –

Trade associations have non been specifically dealt under the Act but they come under the

horizon of subdivision 3 for they are simply association of endeavors engaged in similar sort of trade.

Trade association can be defined as an association of concern organisations holding similar concerns and engaged in similar Fieldss, formed for common protection, the interchange of thoughts and statistics, and the constitution and care of industry standards.67

Trade associations in India, as a socially responsible organic structure and in enlightened ego involvement, can proactively advance conformity on the portion of endeavors every bit good as themselves. They make a positive part to the economic system, peculiarly to the specific industry they represent. They can lawfully buttonhole the governments to decide jobs confronting the industry, or make consciousness about new Torahs or revenue enhancements or environmental issues, or ready the industry to run into new challenges. But the really fact that an association brings together rivals presents the hazard that they will come in into an understanding that might go against the competition jurisprudence. Any such understanding held under the protections or screen of a trade association, can spell problem for non merely the conspiring houses but besides for the association and its office carriers.

5.6Person: –

The term “person” has been defined really widely under subdivision 2 ( cubic decimeter ) 68 it would cover every imaginable entity. It would include an single, a Hindu undivided household, a company, a house, an association of individuals, whether incorporated or non, in India or outside India, a registered co- operative society, a local authorization and every unreal juridical individual, non falling under any above said class.


Black’s Law Dictionary, 8th edition p. 133


Section 2 (cubic decimeter ) “person” includes–

( I ) an person ;

( two ) a Hindu undivided household ;

( three ) a company ;

( four ) a house ;

( V ) an association of individuals or a organic structure of persons, whether incorporated or non, in India or outside India ; ( six ) any corporation established by or under any Central, State or Provincial Act or a Government company every bit defined in subdivision 617 of the Companies Act, 1956 ( 1 of 1956 ) ;

( seven ) any organic structure corporate incorporated by or under the Torahs of a state outside India ; ( eight ) a co-operative society registered under any jurisprudence relating to concerted societies ;

( nine ) a local authorization ;

( ten ) every unreal juridical individual, non falling within any of the predating sub-clauses ;

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However it is to be noted that individuals and entities defined supra will fall under the scope of subdivision 3 merely if their activities consequences in any of the consequence mentioned under subdivision 3 ( 3 ) and 3 ( 4 ) .

5.7Practice: –

The term pattern have been defined undersubdivision 2 ( m )of the Act aspatternincludes

any pattern relating to the transporting on of any trade69 by a individual or an endeavor. It is an inclusive definition.

There have been practical troubles to set up the being of an anti-competitive understanding between the houses. The fact is that houses prosecuting anti-competitive behaviors have developed sophisticated mechanics of concealing their behaviors so that they escape the liability under the competition Torahs. Hence the competition Torahs of most of the states have introduced a safety cyberspace in the signifier of prohibition on conjunct patterns However, in the Act peculiarly the word

conjunct patternshad non been used it says“practice carried on”, or determination taken by, any

association of endeavors or association of personsaˆ- which indicates meeting of heads of endeavors

ensuing into pattern carried in by associations of endeavors.

Harmonizing to Lord Denning aˆ•people who combine together to maintain up monetary values do non shout it from the housetops. They keep it rather. They make their ain agreements in the basement where no 1 can see. They will non set anything in authorship or even into word. A nod or will make. Parliament as good is cognizant of this. So it included non merely an agreement‘ decently so called, but any arrangement‘ , nevertheless informal.aˆ- 70

A prima instance discoursing conjunct patterns in EU isImperial Chemical industries V.

Commission71,in which the ECJ defined concertation under Article 81 ( 1 ) ( now Article 101 ) as

aˆ•A signifier of coordination between set abouting which, without holding reached the phase where an understanding decently so called has been concluded, wittingly substitutes practical cooperation between them for the hazard of competition.aˆ-

69 ( ten ) “trade’ means any trade, concern, industry, profession or business relating to the production, supply,

distribution, storage or control of goods and includes the proviso of any services


RRTA V W.H. Smith n Sons Ltd. ( 1969 ) 3 All ER 1065


1972 E.C.R. 619at page 64, 65.

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The ECJ further added that by its really nature a conjunct pattern have all the elements of contract but may bury alia originate out of coordination which becomes apparent from the behavior of

the participants.72

Conceptually concerted patterns are non easy to specify with preciseness and its application depends on facts and fortunes of a given instance. A conjunct pattern is a signifier of coordination between the parties where they have non reached the phase of existent understanding. But wittingly organize their actions and cooperate with one another alternatively of viing with each other. Standards of cooperation and coordination in no manner requires the working of an existent program and it must be understood in the visible radiation of construct inherent in EC pact associating to competition that each economic operator must find independently the policy which he intends to follow on common market including the pick of individual and project to which he makes offers or sells.

The trial for conjunct pattern is that the parties have substituted for the hazard of competition practical co-operation between the parties between the parties, which culminated in a state of affairs, which does non match with the normal conditions of the market.

In order to represent a conjunct pattern, a action by a group of rivals need non make

the degree of understanding, but must bewittinglycoordinated with the farther cognition that the

consequence of coordination will be to replace efficaciously concerted for competitory conditions. In add-on to represent misdemeanor of Section 3 coordinated behavior must hold an AAEC as per the conditions laid down in Section 3 ( 3 ) ( a ) to ( vitamin D )

For the intent of present surveySection 3can loosely be divided into four parts viz. :

  1. General prohibition [ subdivision 3 ( 1 ) and subdivision 3 ( 2 ) ]
  2. Horizontal understandings [ subdivision 3 ( 3 ) ]
  3. Vertical understandings [ subdivision 3 ( 4 ) ]
  4. Exceptions [ subdivision 3 ( 5 ) and ( 3 ) ]
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  1. General Prohibition: –

Section 3 ( 1 ) is a general prohibition of an understanding associating to the production, supply, distribution, storage, acquisition or control of goods or proviso of services by endeavors, which causes or is likely to do an AAEC within India. Section 3 ( 1 ) is that such understanding must do an AAEC within India. So the cardinal elements for application of subdivision 3 ( 1 ) are understanding between endeavors and its AAEC within India. It is to be noticed that subdivision 3 ( 1 ) prohibits understandings which causes appreciable inauspicious consequence in India merely.

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On reading the section3 ( 1 ) it becomes clear that Act does non supply that understandings between endeavors and individuals are prohibited it clearly states that No endeavor or association of

endeavors or individual or association of individuals shall come in into any understanding whichcauses or is

probably to doan AAEC within India. It is besides clear from the proviso if an understanding does non

hold any inauspicious consequence on competition within India so it will stay out of the prevue of this proviso, but if person alleges that understanding is likely to do an appreciable inauspicious consequence, so there will originate an action under this Section. The proviso of subdivision 3 ( 1 ) cast a responsibility upon endeavors to analyze the proposals for understanding from its long term consequence on competition in the market.

Section 3 ( 2 ) declares all the understandings void entered into dispute of the commissariats contained in subdivision ( 1 ) .

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  1. Horizontal Agreements

Agreements prohibited under subdivision 3 ( 3 ) are described as horizontal understandings for they apply to similar or indistinguishable trade of goods or proviso of services. A careful reading of subdivision 3 ( 3 )

prompts that it restricts three things viz.understanding,patternanddeterminationincludingtrusts

who are indistinguishable or similar trade of goods or proviso of services. The Act under this sub-section presumes following activities as to hold appreciable inauspicious consequence on competition.

  1. Agreementbetween: –
  • Enterprises
  • Associations of endeavors
  • Persons
  • Associations of individuals
  • Person and endeavor
  1. Practice carriedby: –
  • Association of endeavors
  • Association of individuals
  1. Decisiontakenby: –
  • Association of endeavors
  • Association of individuals
  1. Trusts

Who are engaged in indistinguishable or similar trade of goods or proviso of services including trusts merely if any of their activity: –

  • Determines either straight or indirectly purchase or sale monetary values.
  • Limits or controls production, supply, markets, proficient development, investing or

proviso of services.

  • Shares the market or beginning of production or proviso of services by manner of

allotment of geographical country of market, or type of goods or services, or figure of clients in the market or any other similar manner ;

  • Directly or indirectly consequences incommand set upingorconniving bidding73


Section 3 ( 3 ) ( a ) to ( vitamin D )

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It is to be noted that under subdivision 3 ( 3 ) understandings, determinations and patterns between similar trade of goods or proviso of services is a status case in point for prohibition. For the misdemeanor of Section 3 ( 3 ) ( B ) , it must be established that there exists an understanding, pattern carried on or, determination taken by entities mentioned in this, including trusts, engaged in indistinguishable or similar trade of goods or commissariats of services, which result in effects mentioned in clauses ( a ) to ( vitamin D ) of sub- subdivision ( 3 ) of Section 3 of the Act. These include Acts of the Apostless that limit or command production, supply,

markets, proficient development, investing or proviso of services.74

7.1. Types of horizontal understanding prohibited under Section 3 ( 3 ) : –

Section 3 ( 3 ) of the Act expressly mentions four types of horizontal understandings that are presumed to hold an AAEC as mentioned above. Now we will discourse those understandings in item.

7.1.1 Agreements that straight or indirectly determine purchase or sale monetary values: –

Monetary value repairing understandings, as the name suggests are understandings to repair, straight or indirectly purchase or sale monetary values. The term monetary value repair is applied to a broad scope of actions taken by rivals holding a direct consequence on monetary value and includes a figure of understandings such as understandings on monetary value, understandings on recognition footings, understandings to adhere to print monetary values etc75.

InSouthern Motors Rate Carriers Conference Inc. et. Al. V. United States76, it was observed

that the term monetary value repairing by and large refers to a procedure by which rivals agree upon monetary values that will predominate in the market for the goods or services they offer. The Competition Act, nevertheless refers to understandings to find both purchase and sale monetary values. For case, if a group of makers of merchandise aˆ-A‘ enter into an understanding non to sell merchandise aˆ-A‘ below a fixed monetary value.

Monetary value repairing understandings between rivals negatively impact competition as they prevent monetary values from being fixed by the competitory forces in the market. Consumers may therefore, be forced to pay higher monetary values for good than they would pay in competitory market. The purpose and consequence of every monetary value repairing understandings, if effectual, is the riddance of one signifier of competition. The power to repair monetary values, whether moderately exercised or non, involves the power to command the market and to repair

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74Shri Govind Agarwal Vs. ICICI Bank Ltd. , Shri Norbert Lobo Vs. Citibank, Shri Gulshan Kumar Gupta Vs. BHW Home

Finance Ltd. ( para 61 ) Decided On: 07.06.2011 by CCI. ( MRTP Cases )

75World Bank/OECD ( 1998 ) : A model for the design and execution of Competition Law and Policy, World,

OECD, 1998


471 US 48 ( 1985 )

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arbitrary and unreasonable prices.77 The sensible monetary value fixed today, may through economic and concern alterations become the unreasonable monetary value of tomorrow. Once established, it may be maintained unchanged because of the absence of competition secured by understanding for a monetary value sensible when fixed. Agreements which create such possible power may good be held to be in themselves unreasonable or improper restraints, without the necessity of minute enquiry whether a peculiar monetary value is sensible or unreasonable as fixed without puting on the authorities, in implementing the jurisprudence, the load of determining from twenty-four hours to twenty-four hours whether it has become unreasonable through the mere misdemeanor of economic conditions.aˆ-

7.1.2 Limits or controls production, supply, markets, proficient development, investing or proviso of services: –

Agreements that limit or command production, supply, markets, proficient development investing or proviso of services are besides considered to be anticompetitive. An illustration of such an understanding is one where there is a clause that the distributer must guarantee the merchandising of 100 cylinders a month78.

An understanding restricting production may take to a rise in monetary values of the concerned merchandise. Similarly, restricting proficient development that may assist in take downing the costs of a merchandise, ay affect the involvements of consumers. Livingstone notes that restricting production maintains high monetary values by guaranting that there is no excess and hence, demand remains steady ; restriction of gross revenues has a similar consequence every bit good as detering competition for new entrants79.

Agreement for restricting or commanding production are anticompetitive for two grounds ; one that by commanding production. The supply is kept low as compared to the demand making unreal scarceness ; second the understanding, in consequence restricts competition between the parties themselves so that the efficient 1s among them besides can non travel in front with farther production and free the less efficient from the market.


See Arizona v. Maricopa County Medical Society 457 US 332 ( 1982 ) ; Unites States v. Trenton Potteries 273 United states

392 ( 1926 )


Livingstone, Dorothy ( 2001 ) : “Competition Act, 1998: A practical Guide” , Sweet and Maxwell, London


Livingstone, Dorothy ( 2001 ) : “Competition Nutmeg State, 1998” : A Practical Guide” , Sweet and Maxwell, London

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7.1.3Shares the market or beginning of production or proviso of services by manner of

allotment of geographical country of market, or type of goods or services, or the figure of clients in the market or any other similar manner

This class covers the understandings referred to as market sharing understandings. Market sharing or market division understandings may be either to portion markets geographically or in regard of consumers or peculiar classs of consumers or types of goods or services in any other manner. An illustration of geographical market sharing would be an understanding between maker aˆ-A‘ and a maker aˆ-B‘ ( both makers of

merchandise aˆ-P‘ ) that aˆ-A‘ will sell merchandise aˆ-P‘ in a certain geographic country, while aˆ-B‘ will sell

merchandise aˆ-P‘ in another country and A will non sell P in the country allotted to aˆ-B‘ and frailty versa.

Market sharing understandings are considered to be anti-competitive80 as they cut down the pick available to clients in a competitory market. Such understandings besides cut down competition between the parties to understanding. Prof. Whish81 observes that geographic market sharing is peculiarly restrictive from the customers‘ point of position since it diminishes pick ; at least where the parties hole monetary values, a pick of merchandise remains and it is possible that limitation of monetary value competition will coerce parties to vie in other ways. Market allotment understandings eliminate the demand to patrol the pricing patterns of the companies party to the understanding and the demand for manufacturers with different costs to hold on appropriate prices82.