Understanding Of Anti-Competitive Agreements In India

Author: LawSphereX

Category: General Law

Published: 2026-08-23T21:38:31.219056+00:00

Updated: 2026-08-30T07:12:41.421Z

UNDERSTANDING OF ANTI-COMPETITIVE AGREEMENTS

IN INDIA

Jinsee Desai, Unitedworld School of Law, Karnavati University

ABSTRACT

Competition plays a vital role in enhancing a nation's economic strength on the global stage and in fostering a consumer-centric environment within domestic markets. While liberalization is an important step, it is not sufficient on its own—there must also be a comprehensive competition policy to ensure sustained market efficiency and fairness. Such a policy is particularly crucial for developing and transitioning economies, where structural reforms require a balanced regulatory framework. A sound competition policy serves to regulate market dynamics by curbing monopolistic tendencies and promoting fair conduct among enterprises. Its objective is to ensure market efficiency by discouraging unfair trade practices and fostering a level playing field. Essentially, competition policy consists of legal frameworks and regulatory measures that influence both firm behavior and market structure.

It targets the elimination or reduction of restrictive business practices, which can obstruct fair competition. These practices are often motivated by the desire to raise prices and maximize revenues at the expense of consumer welfare and market health. By implementing such policies, governments can prevent the harmful effects of cartels, and avert the risk of replacing public monopolies with unregulated private monopolies. Firms often engage in a range of anti-competitive conduct to suppress competition, including market division, price collusion, bid rigging, dumping, and predatory pricing. Keywords: Anti-competitive agreements, bid rigging, cartels, per se rule, resale price maintenance, rule of reason.

INTRODUCTION

The Competition Act, 2002, was enacted by the Parliament of India to establish the Competition Commission of India (CCI) with the objective of protecting consumer interests and ensuring the freedom of trade in Indian markets through the promotion of fair competition. Its key objectives include: • Prohibiting agreements or practices that restrict free trade and hinder competition between business entities, • Preventing the abuse of dominant market positions or monopolies, • Encouraging healthy competition among entrepreneurs, • Establishing international cooperation and enforcement networks, and • Curbing anti-competitive practices to ensure a fair and competitive marketplace. Before the enactment of the Competition Act, the regulatory framework was governed by the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act).

This legislation aimed to prevent the concentration of economic power in the hands of a few and was applicable throughout India, except the former state of Jammu & Kashmir. The objectives of the MRTP Act were: • To prevent the concentration of economic power in a few hands that could be detrimental to public interest, • To regulate and control monopolistic practices, and • To prohibit monopolistic and restrictive trade practices in the Indian market1. KEY DIFFERENCES BETWEEN THE MRTP ACT AND THE COMPETITION ACT The MRTP Act was India’s first legislation addressing competition, focusing primarily on 1 (Lexindis) accessed 15 April regulating monopolies and preventing unfair trade practices. In contrast, the Competition Act was introduced to actively promote and sustain healthy competition in the market while ensuring freedom of trade.

The MRTP Act is reformatory in nature, aiming to reform business practices without imposing strict penalties. The Competition Act, however, is punitive, with provisions to penalize entities involved in anti-competitive activities2. Under the MRTP Act, there were no specific penalties for violations. On the other hand, the Competition Act includes clear penalty provisions to deter anti-competitive conduct and ensure compliance. The primary goal of the MRTP Act was to control the concentration of economic power and monopolistic practices. The Competition Act, however, aims to encourage competition, promote consumer welfare, and support economic efficiency3. AGREEMENTS UNDER THE COMPETITION ACT Section 3(1) of the Competition Act, 2002 deals with anti-competitive agreements.

These agreements are broadly categorized into two types: • Horizontal Agreements • Vertical Agreements As per Section 2(b) of the Act, an agreement includes any arrangement or understanding between parties, whether formal or informal, written or oral, that pertains to the production, supply, distribution, storage, acquisition, or control of goods or services. If such an agreement causes or is likely to cause an appreciable adverse effect on competition (AAEC) in India, it shall be considered void4.

2 ‘FROM MRTP TO COMPETITION ACT: AN EVOLUTION OF COMPETITION LAWS IN INDIA’ (JLRJS)

accessed 15 April 2025 (Anti-competitive agreements under the Competition Act, 2002) accessed 15 April 2025 4 (Competitive agreements by either per se rule or ... ) accessed 15 April 2025 The definition of "agreement" under the Act is intentionally broad. It does not require direct or written proof—a mere nod, wink, or oral understanding can suffice. Even circumstantial evidence can be used to establish the existence of an agreement. A significant subset of anti-competitive agreements is cartels. A cartel is formed when producers, sellers, distributors, traders, or service providers come together—often secretly— to control or limit the production, distribution, sale, or pricing of goods or services. These agreements are typically covert, operating away from public scrutiny. In the case of Indian Foundation of Transport Research and Training v.

Shri Bal Malkait Singh & Others5, the All India Motor Transport Congress (AIMTC) directed its members to uniformly increase truck freight rates by 15% due to a hike in diesel prices. This action adversely impacted consumers by artificially inflating freight charges. The Competition Commission of India (CCI) observed that similar press statements made by AIMTC’s President and its spokesperson indicated a meeting of minds, amounting to a coordinated effort among members to fix freight rates. The CCI concluded that such conduct resulted in an appreciable adverse effect on competition, thereby violating Section 3 of the Competition Act6. i. Horizontal Agreements – Section 3(3) of the Competition Act, 2002 Section 3(3) of the Competition Act specifically deals with horizontal agreements, i. e.

, agreements between enterprises or associations of enterprises (or persons) engaged in identical or similar trade of goods or provision of services. These include cartels and any practice or decision taken collectively. The Act presumes such agreements to have an appreciable adverse effect on competition (AAEC) if they involve any of the following: (a) Directly or indirectly determining purchase or sale prices; (b) Limiting or controlling production, supply, markets, technical development, investment, or

5 Case No 61 of 2012

6 ibid

the provision of services;7 (c) Sharing the market or sources of production or services through the allocation of geographical areas, types of goods/services, customer segments, or any similar method; (d) Engaging in bid rigging or collusive bidding. These agreements, being between competitors, are inherently considered anti-competitive and do not require proof of adverse effect — the presumption under the law stands unless rebutted8. Indicators of Anti-Competitive Conduct, Horizontal agreements may involve the exchange or alignment of: • Prices, • Input costs, • Price or cost components, • Profit margins, • Cost structures and pricing calculations. Such coordination restricts competitive behavior and disrupts market fairness. Atypical Cartels – The Hub-and-Spoke Model, An atypical cartel, also known as the hub-andspoke cartel, is a form of indirect coordination.

In this model, Competitors do not communicate directly with each other. A third party (the hub), such as a distributor, online platform, or trade association, facilitates the exchange of sensitive commercial information between competing enterprises (the spokes). The arrangement still leads to collusion in pricing or market strategies, making it equally anti-competitive. Though there may not be a formal agreement between the

7 ‘Horizontal Agreement under Competition Act’ (YNZ Group)

accessed 15 April 2025 8 taxguru_in and Malu T, ‘Understanding Section 3 of Competition Act, 2002: Anti-Competitive Agreements’ (TaxGuru, 2 October 2023) accessed 15 April 2025 competitors themselves, the channeling of coordination through a central hub is sufficient to establish anti-competitive conduct. Adverse Effect on Competition The Competition Commission of India (CCI) has identified several practices that adversely affect competition, especially in markets with limited players or cartel-like behavior. Two significant phenomena contributing to anti-competitive conduct are: Price Signalling: This occurs when one member of a cartel sends signals—explicitly or implicitly—to other members about potential price changes. Such behavior is often designed to prompt aligned pricing without direct communication9.

Tacit Collusion in Oligopolistic Markets: In markets dominated by a few players (oligopolies), firms may engage in tacit collusion, where they independently align their prices or outputs with the expectation that competitors will follow suit, without formal agreement. An example includes two suppliers coordinating their prices through a common distributor, resulting in reduced competition10. Cartels Cartel conduct, considered the most severe form of anti-competitive behavior, is governed under Section 3(3) of the Competition Act. Due to the secretive nature of cartels, direct evidence such as a written agreement is rarely available. Therefore, the CCI relies heavily on circumstantial and indirect evidence to establish the existence of such arrangements11.

The Cement Cartel Case12 • The CCI inferred the existence of a cartel agreement based on the conduct and intent of 9 Agrawal R, ‘Appreciable Adverse Effect on Competition in India - Contouring the Issue’ (Jus Scriptum, 16 January 2024) accessed 15 April 2025

10 ibid

11 ‘Deconstructing the Legal Framework of Cartels in India – ...’ (ICLR) accessed 15 April 2025

12 Builders Association of India v. Cement Manufacturers' Association Case No 29 of 2010

the parties involved. • The parallel pricing behavior across various cement companies was seen as evidence of coordinated action, not mere coincidence. • The “But For” Test was applied, where the CCI held that but for the anti-competitive conduct between the parties, their uniform pricing behavior could not be rationally explained. • Additionally, the uniform price movement across regions—despite different cost factors—and the exchange of sensitive commercial information through a trade association, were taken as strong indicators of collusive conduct. • The Commission emphasized that price parallelism in this context was not a natural outcome of an oligopoly, but rather a manifestation of coordinated behavior in violation of Section 3(3) of the Act13. An illustrative global example can be drawn from the wine industry in California, which produces nearly 60% of the United States' wine.

In times of poor grape harvests, the State government intervenes to stabilize and regulate prices to prevent market disruption. This approach is rooted in what is often referred to as a "Political Doctrine," where state regulation overrides market forces in the interest of public or economic policy. Sharing historical market data—that is, information which is outdated and no longer reflective of current market conditions—is generally not considered to pose significant risks to competition. Similarly, when data is shared in a highly aggregated format, making it difficult to trace back to individual firms, it typically does not raise anti-competitive concerns. This is because such data does not enable participants to coordinate future market behavior or gain unfair competitive insights14. ‘Taxmann’ (https://www. taxmann. com) accessed 15 April 2025

14 ibid

Key Concerns in Horizontal Agreements

1. Restricting Production or Supply

Decisions regarding increasing or reducing production, sales volumes, market entry, or capacity utilization must be made independently by each enterprise. Any collaboration or understanding among competitors on such matters can raise serious anti-competitive concerns. It is advisable to document independent business justifications for such decisions to avoid regulatory scrutiny.

2. Division of Markets

Competitors must avoid both explicit and implicit agreements to divide or allocate geographic territories, product lines, or customer segments. No enterprise should agree—formally or informally—not to pursue another's clients, regardless of the size or significance of those clients15.

3. Bid Rigging

Bid rigging occurs when there is an agreement or understanding that distorts the competitive bidding process or suppresses genuine competition. Common methods include: • Bid suppression – where one or more competitors abstain from bidding; • Complementary bidding – submission of intentionally uncompetitive bids; • Bid rotation – competitors take turns in winning bids; • Agreements not to compete with each other or to eliminate/suppress rival bidders; • Agreements on uniform pricing terms or pricing formulas to manipulate outcomes16 In the A.R. Polymers case, the COMPAT (now merged into NCLAT) overturned the findings of the CCI. It held that both the Commission and the Director General had failed to give Chand A, ‘Snapshot: Horizontal Agreements in India’ (Lexology, August 2023) accessed 15 April

16 ibid

adequate consideration to the specific characteristics of the market for jungle boots, the nature of the tendering process, and the mechanics of rate contract execution. The conclusion of bid rigging based solely on identical pricing was deemed insufficient. The following justifications do not absolve parties from liability in cases of anti-competitive agreements: • Whether the cartel achieved success or not; • That such practices are common in the industry; • Lack of awareness or understanding of the law; • That the agreement was not documented in writing; • That the conduct occurred through a trade association; • Passive attendance at meetings where anti-competitive discussions took place; • Merely following others' lead rather than initiating the conduct17. ii.

Vertical Agreements - Section 3(4) of the Competition Act, 2002 Vertical agreements refer to arrangements between businesses or individuals that operate at different levels of the production or supply chain. For example, such agreements may exist between a raw material supplier and a manufacturer, or between a manufacturer and a distributor or retailer. These agreements govern the terms and conditions of operations at various stages of trade, rather than between direct competitors. In the United States, Section 3 of the Clayton Act addresses inter-brand restrictions concerning the sale of goods, while Section 2 of the Sherman Act deals with restraints imposed by entities holding monopolistic power.

17 ‘Bid-Rigging in Public Procurement: An Indian Perspective’ (Lakshmikumaran & Sridharan: Top Law Firm in India) accessed 15 April 2025 Distinction Between Horizontal and Vertical Agreements The primary difference lies in the market level at which the parties operate: • Horizontal agreements involve entities at the same level of the supply chain, such as two manufacturers or two retailers. • Vertical agreements, in contrast, occur between parties operating at different levels, such as a supplier and a distributor. Section 3(4) of the Competition Act, 2002 deals specifically with vertical arrangements. It applies to agreements between entities in different markets and at distinct levels of the production or distribution process.

These agreements may relate to, Production, Supply, Distribution, Storage, Sale or pricing and Provision of services The following types of vertical agreements fall under Section 3(4): (a) Tie-in arrangements (b) Exclusive supply agreements (c) Exclusive distribution agreements (d) Refusals to deal (e) Resale price maintenance18 Such agreements are considered to violate Section 3(1) if they result in or are likely to result in an appreciable adverse effect on competition (AAEC) in the Indian market. Key Elements of Section 3(4) For Section 3(4) to apply, the following conditions must be fulfilled: • There must be an agreement between enterprises or individuals.

18 The Competition Act 2002, s 3(4)

The parties involved must be functioning at different levels or stages of the supply or production chain. • The agreement in question must cause or be likely to cause a substantial negative impact on market competition19. Types of Vertical Agreements

A. Tie-In Arrangements A tie-in arrangement refers to a contractual condition where the buyer is obligated to purchase an additional product or service as a prerequisite for obtaining the primary, more desirable product. This means the seller offers the sought-after product only on the condition that the buyer also purchases a secondary, often less desirable, product—regardless of the buyer's actual need for it. In Godrej and Boyce Manufacturing Co. Pvt. Ltd20. , the onus of proof lies with the complainant. To establish a per se violation, the following must be demonstrated • The seller conditioned the sale of one product/service upon the purchase of another. • The two items in question are distinct and separate—not components of a single product. • The seller possesses sufficient market power in the tying product to enforce the condition effectively.

In the case against Apple Inc21 , • There must be two separate products/services capable of being tied. • The seller should have economic strength in the tying market to affect competition in the tied market.

19 ibid

20 [2023] 6 S.C.R. 56

21 Case no. 24 of 2021

The tying arrangement must impact a significant volume of commerce22. In Case of Fx Enterprises v. Hyundai Motor India Ltd., Allegations involved Hyundai entering into exclusive supply agreements and refusal-to-deal practices. Additionally, the company was accused of imposing resale price maintenance (RPM) through discount restrictions and tying the sale of accessories like CNG kits, lubricants, and insurance23. The Competition Commission of India held that No violation in exclusive supply or refusal to deal since Hyundai merely required prior permission to engage with competitors—which was never actually denied. The Discount Control Mechanism constituted resale price maintenance, leading to appreciable adverse effect on competition (AAEC), as it limited both intra-brand and inter-brand competition. Tying was established concerning oils and lubricants24.

B. Exclusive Supply Agreements An exclusive supply agreement restricts a buyer from purchasing or dealing in products from any source other than the seller. Typically, this may occur when a distributor or dealer is prohibited from engaging with competitors of the seller. While these agreements can raise concerns, they are not automatically considered anti-competitive. They may be objectively justified, especially when: • A seller seeks to prevent free-riding on its brand or investments, • There is a need to protect the quality of distribution or service, or • To ensure return on investment in a highly competitive market. Intel Case - The Commission clarified that simply requiring a distributor to inform the seller when they engage with competing brands does not amount to an exclusive supply arrangement, especially when no denial or restriction on dealing is imposed.

22 ‘CCI Directs Investigation against Apple Inc.. ’ (azb, 8 March 2022) accessed 15 April 2025 23 Nluo C, ‘FX Enterprise Solutions India V Hyundai Motor India: Satisfying the Rule of Reason? ’ (CCL, NLUO, 9 September 2020) accessed 15 April 2025

24 ibid

III. Refusal to Deal Refusal to deal is addressed under Explanation (d) to Section 3(4) of the Competition Act, 2002. This provision essentially refers to situations where parties engage in agreements that limit, either directly or indirectly, the ability to buy from or sell to specific individuals or groups. Such arrangements may influence market dynamics and accessibility. Although it is common for manufacturers to engage only with specific dealers or distributors— often for economic efficiency or logistical convenience—this practice in itself does not always constitute a restrictive trade practice, especially under earlier legislation like the MRTP Act,

1969. However, when refusal to deal is not based on genuine commercial justifications and

results in discriminatory trading conditions, it may raise anti-competitive concerns. In Case of RRTA v. Bata India Ltd25, a manufacturer of leather and rubber canvas footwear, had entered into agreements with small-scale manufacturers for the supply of shoes under the Bata brand. The agreements imposed several conditions: • Manufacturers were restricted from sourcing raw materials and components from suppliers not approved by Bata. • They were required to use moulds provided by Bata exclusively for production intended for Bata’s supply. The Monopolies and Restrictive Trade Practices Commission (MRTPC) held that such clauses amounted to restrictive trade practices, as they limited the manufacturers' freedom and were detrimental to public interest.

The arrangement was considered anti-competitive as it constrained sourcing options and imposed exclusivity obligations that served the dominant party's interests at the expense of competition. Resale Price Maintenance is defined under Explanation (e) to Section 3(4) of the Competition Act, 2002 as:

25 RRTA v Bata India Ltd (1976) 46 Comp. Cas.71(India)

"Any agreement to sell goods on the condition that the resale price to be charged by the purchaser shall be the price stipulated by the seller, unless it is expressly stated that prices lower than the stipulated price may also be charged. " In essence, RPM refers to situations where a seller imposes a condition on the buyer to maintain a fixed resale price—whether it is a minimum or a maximum—restricting the buyer’s ability to set prices based on prevailing market conditions. This limits the buyer’s autonomy, even though ownership of the goods has been transferred upon sale26. Such pricing restrictions can distort market competition and are viewed unfavorably under competition law frameworks. If the buyer is not allowed to adjust resale prices independently, it can hamper pricing flexibility and efficiency in the market27.

Key Judicial Precedents: Registrar of Restrictive Trade Agreements Case28: In this case, the respondent had introduced a clause that enforced a uniform sale price for their footwear products across India, without any provision allowing the resale of goods at a price lower than that specified. The tribunal found this to be a restrictive trade practice, categorizing it as a form of price line maintenance that limits market competitiveness. Hindustan Lever Ltd. Case29: It was argued that the term "stipulated price" refers to a fixed or standard price dictated by the seller, not allowing for price variations. The contention was that if the seller only mentions a maximum price, it should not amount to a stipulated price unless there's an express condition mandating adherence to it30.

26 Jus Corpus, Jus Corpus / About AuthorMore posts by Jus Corpus and Corpus M posts by J, ‘Legal Status of Resale Price Maintenance in India’ (Jus Corpus, 26 October 2022) accessed 15 April 2025

27 ibid

28 [1979]49COMPCAS781

29 AIR1977SC1285

30 ibid

CONCLUSION

Competition laws are designed to safeguard the integrity of market competition rather than protect individual competitors. The MRTP Act lacked a clear definition of restrictive trade practices and failed to provide robust provisions addressing key anti-competitive conduct such as cartels, price-fixing, collusion, refusal to deal, and predatory pricing. Recognizing these shortcomings and based on expert recommendations, there emerged a pressing need for comprehensive legislation to ensure fair competition and curb anti-competitive behavior— leading to the enactment of the Competition Act, 2002. This Act presumes certain restrictive practices to be inherently anti-competitive and establishes a legal framework for identifying and addressing such behavior. It categorizes and defines various forms of anti-competitive practices while also offering a regulatory mechanism to deal with them.

The term "agreement" under the Competition Act is interpreted broadly to encompass both formal and informal understandings, as parties—particularly in cartel arrangements—often avoid putting agreements into writing or deliberately attempt to conceal their existence. Although the Competition Act of 2002 has made significant strides in tackling anti-competitive conduct, it still lacks precise definitions for critical concepts such as "relevant market" and "market definition. " These ambiguities limit the Act's practical enforcement and clarity. To enhance its effectiveness, it is imperative that these gaps are addressed. Additionally, the Competition Commission of India (CCI) must be sufficiently empowered and equipped through statutory provisions to effectively regulate and adjudicate various anti-competitive practices in the evolving economic landscape.