The Competition Act, 2002 (as amended) follows the philosophy of modern competition laws and aims at fostering competition and at protecting Indian markets against anti-competitive practices by enterprises. The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises, and regulates combinations (mergers, amalgamations and acquisitions) with a view to ensure that there is no adverse effect on competition in India. The Act prohibits any agreement which causes, or is likely to cause, appreciable adverse effect on competition in markets in India. Any such agreement is void. An agreement may be horizontal i.e. between enterprises, persons, associations, etc. engaged in identical or similar trade of goods or provision of services, or it may be vertical i.e. amongst enterprises or persons at different stages or levels of the production chain in different markets. Cartelisation is one of the horizontal agreements that shall be presumed to have appreciable adverse effect on competition under Section 3 of the Act.
An agreement includes any arrangement, understanding or concerted action entered into between parties. It may or may not be in writing. Anti-competitive agreements under competition law are broadly classified into two categories, the Anti-competitive Horizontal Agreement and Anti-competitive Vertical/Agreement.
Horizontal Agreements are those agreements where enterprises engaged in identical or similar trade of goods or services. When enterprises collude amongst each other to distort competition in the markets, such agreement is presumed to have an appreciable adverse effect on competition and thus, shall be void. The following four categories of such agreements amongst competitors are presumed to have AAEC-
• agreement to fix price;
• agreement to limit production and/or supply;
• agreement to allocate markets;
• bid rigging or collusive bidding.
However, such presumption is rebuttable.
Vertical Agreements are those agreements which are entered into by enterprises at different stages or levels of production, distribution, supply, storage etc. Such vertical restrains include:
• tie-in arrangement;
• exclusive supply/distribution arrangement;
• refusal to deal; and
• resale price maintenance.
Imposition of reasonable conditions as may be necessary for protection of intellectual Property Right (IPR) which are listed under Section 3(5), is generally not to be treated as violative of the Act.
They are however, subject to scrutiny by the Commission to decide whether such conditions are reasonable and necessary to protect IPR.
Dominance refers to a position of strength which enables an enterprise to operate independently of competitive force in the market or to affect its competitors or consumers in its favour. Dominant position of an enterprise itself is not prohibited; however, if the enterprise by virtue of having dominant position in the relevant market abuses its dominance then the same stands prohibited. Abuse of dominant position impedes fair competition between firms exploits consumers and makes it difficult for the other players in the market to compete with the dominant undertaking. Abuse of dominant position covers:
• imposing unfair condition or price, including predatory pricing;
• limiting production/market or technical or scientific development
• denying market access, and
• making conclusion of contracts subject to conditions, having no nexus with such contracts; and
• using dominant position in one relevant market to gain advantages in another relevant market.
