UNIT-1 ANTI-COMPETITIVE

AGREEMENTS

Vishesh Dahiya
Assistant Professor- Law
 INTRODUCTION
The term “Anti-Competitive Agreements” is not defined within
the body of the statute. But, inescapable meaning which can be
gathered from the term is that it is about such agreements which
have the effect of restricting the competition unfairly and
diminishing fair competition within the relevant market.

The CA 2002 frowns upon reducing competition by unfair means.

Anti-Competitive Agreements are expressly prohibited by the
Act. CCI has to ensure that the business conduct of an enterprise
does not include such agreements.
Section-3 of CA 2002 prescribes certain practices which
will be anti-competitive. This provision upholds the idea
that no enterprise/persons or their associations
respectively shall enter into any agreement which relates
to production, supply or distribution of goods/services
which causes an “Appreciable Adverse Effect on
Competition”. Such agreements would be declared void.
 Contents of Section-3
Section-3 of CA 2002 has 5 sub-sections. To better
understand the same, they can be divided into 4 parts.

1. General Prohibition (Section-3(1) and Section-3(2))

2. Horizontal Agreement (Section-3(3))
3. Vertical Agreements (Section-3(4))
4. Exceptions (Section-3(5) and Proviso to Section-3(3))
 General Prohibition
(Section-3(1))
According to this sub-section, any agreement relating to production,
supply, distribution, storage, acquisition or control of goods or provision
of services by enterprises, which causes/likely to cause an appreciable
adverse effect on competition (AAEC) within India is strictly prohibited.

It reads as following:
“No enterprise or association of enterprises or person or association of
persons shall enter into any agreement in respect of production,
supply, distribution, storage, acquisition or control of goods or
provision of services, which causes or is likely to cause an appreciable
adverse effect on competition within India.”
Section-3(1) works as a restraint on the individual freedom to
a contract, in the public interest. It casts a duty on the
enterprises to examine proposals for agreement or
arrangement in light of the effect they would make on
competition.
Applicability of Section-3(1) depends upon the fact whether
any activity relating to production, supply, distribution,
storage, acquisition or control/provision of G/S would have
AAEC or not. If such activity causes AAEC, Section-3(1)
becomes enforceable.
 ESSENTIALS OF Section-3(1)
They are as follows:
1. There should be an Agreement.
2. Agreement should be between enterprise or person
or their associations.
3. Agreement should cause AAEC in India.
 Agreement under Section-3
Agreement: It has been defined under Section-2(b) of the Act as follows:

“agreement” includes any arrangement or understanding or action in concert,—

(i) whether or not, such arrangement, understanding or action is formal or in writing; or
(ii) whether or not such arrangement, understanding or action is intended to be enforceable by
legal proceedings;

This definition is an inclusive definition. It covers not only the conventional meaning of agreement
as given under Section-2(e) of Indian Contract Act 1872 but also includes any “Arrangement”,
“Understanding” or “Action in Concert” between the parties.

Agreement under Section-3(1) can be oral or written. Such agreement may or may not be intended
to be enforceable by law. This relates to such cases where there is no intention of parties to legally
bind themselves; but they have knowledge about the action they would take under the
arrangement or understanding.
 Enterprise
Section-3(1) expressly forbids the anti-competitive agreement between Enterprise, Person or their
associations.

Enterprise: The term has been defined under Section-2(h). It includes Person or Department of
Government which is engaged in any of the following activities:
• Production, storage, supply, distribution, acquisition, control, provision of G/S.
• Investment
• Acquiring, holding, underwriting or dealing with shares, debentures of other securities of any body
corporate.

Such Person/Department may be acting either directly or through its unit/division or subsidiary.

Activities not covered under Section-2(h): Any activity of the Government related to the sovereign
functions of the Government. This includes all activities carried on by the departments of the Central
Government dealing with atomic energy, currency, defence and space.
 Person
Section-3(1) applies to Person. The term “Person” herein not only covers natural persons having rights
but also includes juristic persons who conduct economic activities.

Person: As defined under Section-2(l) includes following entities-

1. Individual
2. HUF
3. Company
4. Firm
5. Association of Persons or Body of Individuals whether incorporated or not, in India or outside
6. Corporation established by or under any Central, State or Provincial Act or a Government company
7. Body Corporate incorporated by or under the laws of a country outside India
8. Co-operative Society registered under any law relating to co-operative societies
9. Local Authority
10. Every artificial juridical person, not falling within any of the preceding sub-clauses
 AAEC in India
The term AAEC has not been defined expressly in the statute. Therefore, to determine
whether any business activity has an adverse effect on competition in relevant market
in India, every case has to be examined individually.
To determine whether an agreement has “appreciable adverse effect on competition”,
CCI shall take into consideration all/any of the following factors as per Section-19(3):
1. Creation of barriers for new entrants.
2. Driving out existing competitors.
3. Foreclosure of market by hindering entry into market.
4. Actual benefits to customers.
5. Improvements in production/distribution of G/S.
6. Promotion of technical, scientific and economic development by means of
production/distribution of G/S.
Section-19(3) is a mandatory provision and CCI needs to apply this provision to
determine AAEC. AAEC is a Question of Fact.
 ANTI-COMPETITIVE AGREEMENTS
are VOID (Section-3(2))
• Section-3(1) lays down the rule that enterprise or person shall not enter into
agreements which cause or are likely to cause AAEC in Indian markets.
• Section-3(2) clarifies the legal position of such anti-competitive agreements
declaring them to be Void. In effect, such agreements are not enforceable by
law. Once declared as such, neither parties to the agreement can perform
their obligations or incur any liability under such agreements. Non-
performance of such agreements would not lead to any cause of action.
• CA 2002 imposes penalty on parties if they enter into anti-competitive
agreements.
• If the agreement is held to be anti-competitive within Section-3(1), then the
whole agreement is construed as void along with all the anti-competitive
clauses having AAEC.
 RULES OF INTERPRETATION applicable to ANTI-
COMPETITIVE AGREEMENTS

Law relating to Anti-competitive Agreements is

interpreted by using 2 rules of interpretation. These rules
of interpretation are:
1. Rule of Reason
2. Per Se Rule
 Rule of Reason
It is a legal approach where an attempt is made to
evaluate the pro-competition features of the restrictive
business practice against its anti-competitive effect in
order to decide whether or not that practice should be
prohibited.

This rule finds its origin in US Supreme Court decision in

Standard Oil Co. of New Jersey v. United States.
[1911]221 US 1.
US Supreme Court in Board of Trade of City of Chicago,
Newjersey v. United States [246 US 231 (1918)]
observed:

“The true test of legality is whether the restraint imposed

is such as merely regulates and perhaps thereby
promotes competition or whether it is such as may
suppress or even destroy competition.”
 BURDEN OF PROOF

In Rule of Reason, the burden of proof is on the Plaintiff

to prove that the agreement is violative of competition
and once the Plaintiff discharges the burden; the
Defendant can escape the liability if it shows that the
same has pro-competitive effects, which would
overweigh any harm to the competition.
 RULE OF REASON- INDIAN PERSPECTIVE
Tata Engineering and Locomotive Co. Ltd. v. Registrar of Restrictive
Trade Agreements [(1977) 2 SCC 55]

Supreme Court of India held that to determine whether restrain

promoted or suppressed competition, 3 matters should be considered:
1. What facts are peculiar to the business to which the restraint is
applied.
2. What was the condition before and after the restriction was
imposed.
3. What is the nature of the restraint and what is its actual and
probable effect.
In Indian competition law regime, Rule of Reason is a
Rule of Construction, wherein the investigating or
prosecuting agency establishes existence of anti-
competitive agreements by considering all the facts and
features of the case.
 PER SE RULE
Per Se rule means finding an illegality on the face of the
agreement or practice. It is a rule of evidence. The rule
requires any particular restraint of trade to be manifestly
contrary to the competition and so does not require an
inquiry into precise harm or purpose for it to be declared
illegal.
To put it more simply, Per Se rule leads the Courts or
authorities to deem/presume that acts or practices specified
by the Act already have an appreciable adverse effect on the
competition and therefore are prohibited.
Per Se Rule finds its origin in US Supreme Court decision in Dry Stone Pipe & Steel
Co. v. US [175 US 211 (1899).

• Northern Pacific R. Co. v. United States [356 US 1]

US Supreme Court explained herein the basis of Per Se Rule as following:

“.. There are certain agreements/practices which because of their pernicious

effect on competition and lack of redeeming value are conclusively presumed to
be unreasonable and therefore illegal without elaborate inquiry as to the precise
harm they have caused. This principle not only makes restrain prescribed in the
Act more certain, but it also avoids the necessity for an incredibly complicated
and economic investigation into the entire history of the industry involves, in an
effort to determine at large whether a particular restraint has been
unreasonable..”
 RATIONALE of PER-SE RULE
US Supreme Court in Jefferson Parish Hospital Sistt. No.
2 v. Hyde [466 US 2 (1984)] observes that the rationale
for Per Se rule is to avoid any burdensome inquiry into
the actual market conditions in situations where the
likelihood of anti-competitive conduct is so great as to
render unjustified the cost of determining whether the
particular case at all involves anti-competitive conduct.
Rule of Reason- Requires to determine whether an agreement or
practice has an adverse effect on competition or not and it must
be examined by considering all the facts and circumstances of the
case. It requires conducting a proper inquiry into the relevant facts
and circumstances of the case at hand. It is a rule of Construction.

Per Se Rule- No such examination or inquiry is required. The

alleged agreement/practice is presumed to be harmful to the
competition and therefore, illegal per se. It is a rule of Evidence.
 POSITION OF THESE RULES IN CA 2002
Though not expressly stated, but in its application and understanding,
it can be observed that these 2 rules of interpretation of Anti-
Competitive Agreements have been utilized by Competition Act 2002.

Section-3(3) of the Competition Act 2002, which deals with

Horizontal Agreements; embodies the Per Se rule of evidentiary
standard.

Section-3(4) of the Competition Act 2002 which deals with Vertical

Agreements; embodies the Rule of Reason approach.
 Types of Anti-Competitive Agreements
Competition Laws usually places anti-competitive
agreements in 2 categories namely-
1. Horizontal Agreements
2. Vertical Agreements

The terms “Horizontal or Vertical” have not been used in

the Act; however the language used in the Act suggests
that agreements referred to in Section-3(3) and Section-
3(4) are horizontal and vertical agreements respectively.
 HORIZONTAL AGREEMENTS
These agreements are entered into between 2 or more
enterprises that are at the same stage of production
chain and the same market.
These are agreements between Producers, between
Retailers or between Wholesalers who are dealing in
similar kinds of products.
These agreements are presumed to cause AAEC if they
fall under Section-3(3)(a) to (d). (Per Se Rule)
According to Merriam-Webster’s Dictionary of Law,
horizontal agreement is an agreement of trade involving
an agreement among competitors at the same
distribution level for the purpose of minimizing
competition.
Such agreement can have direct impact on the prices
which is achieved through price fixation, reduction of
production and sales, contractual prohibition or restriction
on investments. Therefore, they are void per se.
 Section-3(3)
The provision of Section-3(3) reads as following:
(3) Any agreement entered into between enterprises or associations of enterprises or persons or associations of
persons or between any person and enterprise or practice carried on, or decision taken by, any association of
enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision
of services, which—
a. directly or indirectly determines purchase or sale prices;
b. limits or controls production, supply, markets, technical development, investment or provision of services;
c. shares the market or source of production or provision of services by way of allocation of geographical area
of market, or type of goods or services, or number of customers in the market or any other similar way;
d. directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable
adverse effect on competition: Provided that nothing contained in this sub-section shall apply to any
agreement entered into by way of joint ventures if such agreement increases efficiency in production,
supply, distribution, storage, acquisition or control of goods or provision of services.
Explanation.—For the purposes of this sub-section, "bid rigging" means any agreement, between enterprises or
persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision of
services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating
the process for bidding.
 Section-3(3) applies to following Agreements
Section-3(3) presumes that following 4 types of agreements between enterprises,
involved in the same or similar manufacturing or trading of G/S have an appreciable
adverse effect on competition.

1. Agreements regarding Prices: All agreements which directly or indirectly fix purchase
or sale price.
2. Agreements regarding Quantities: Agreements aimed at limiting or controlling
production, supply, markets, technical development, investment or provision of
services.
3. Agreement regarding Bids (Collusive Bidding or Bid Rigging): These include tenders
submitted as a result of any joint activity or agreements.
4. Agreements regarding Market Sharing: These include agreements for sharing of
markets or sources of production or provision of services by allocating geographical
area of market or type of G/S or number of customers in the market.
Under Section-3(3), in case of aforementioned 4 types of
agreements; it is not necessary to prove that they have
an AAEC. Rather, the onus is on the person/enterprise to
prove that the agreement does not fall under the
prohibited category in the enquiry before the CCI. It is
presumed that such agreements have AAEC.
 Horizontal Agreements Covered under Section-
3(3)
These 4 types of Horizontal Agreements are presumed to have an AAEC
under Section-3(3).

1. Price-Fixing Agreements (Section-3(3)(a))

Price Fixing refers to the process by which competitors agree upon
prices that will prevail in the market for G/S. These agreements
prevents the prices from being fixed by competition in the market.
Thus, causing consumers to pay higher prices for goods than they would
pay in competitive market.
It may involve fixing prices of primary goods or finished products. Such
agreements may fix the price directly or indirectly.
 Case Law on Price Fixation & Limiting Supply
• FICCI- Multiplex Association of India v. United Producers & Distributors Forums [Case
No. 01/2009]
UPDF took a collective decision to not release Hindi films to multiplexes in order to
pressurize them into accepting new terms of revenue sharing ratio. It notified all producers
and distributors to not release new Hindi films to multiplexes.
Complaint was registered with CCI by FICCI. CCI directed Director General (DG) for
investigation. DG’s report stated that UPDF was controlling almost 100% of the market for
the production and distribution of Hindi Motion Pictures which are exhibited in multiplexes.

CCI- It was held that UPDF was acting to fix sale prices by fixing revenue share ratio in
violation of Section-3(3)(a) of the Act. They were also limiting/controlling the supply of Hindi
films by refusing to release them to multiplexes under Section-3(3)(b) of the Act. The
collective decision taken by UPDF was held to be an anti-competitive agreement under
Section-3(3).
2. Limiting or Controlling Production, Supply etc.
[Section-3(3)(b)]
Agreements which limit/control production, supply,
markets, technical development, investment or provision
of services are considered to be anti-competitive
because it creates an artificial scarcity by keeping supply
lower than demand. As a result even the efficient
producers are not able to supply goods in market.
The central idea of competition is that the efficient enterprise which is
able to supply goods at a reasonable price to consumers will increase their
production and the less efficient enterprises will reduce their production
or even go out of business.
Any agreement interfering with this process is anti-competitive, as in such
a situation, less efficient enterprise will pop up by artificial support to
continue in production even though forces of demand and market prices
do not justify their continuance.
An agreement limiting production may lead to a rise in prices of the
concerned product. Similarly, limiting technical development that may
help in lowering the costs of a product, may affect the interests of
consumers.
3. Market Allocation and Sharing [Section-3(3)(c)]
These anti-competitive practices are very restrictive as they do not
leave any room for competition in the relevant market and are
considered per se illegal in most jurisdictions.
Market Allocation is a practice whereby the competitors divide
customers or markets and arrive at non-compete agreements with
each other for sales in those markets. As a result, in one territory,
only one product is available and there is absence of a substitute
product. Buyers are left with no choice but to buy the product
available in their market. Such agreements diminish choice of
customer and are therefore anti-competitive.
4. Bid Rigging or Collusive Bidding [Section-3(3)(d)]
Bid rigging occurs when two or more competitors agree that
they will not compete genuinely with each other for tenders,
allowing one of the members of their agreement to ‘win’ the
tender.
Bid rigging takes place when bidders collude and keep the bid
amount at a pre-determined level. Such pre-determination is by
way of intentional manipulation by the members of the bidding
group. Bidders could be actual or potential ones, but they
collude and act in concert.
Bidding, as a practice, is intended to enable the
procurement of goods or services on the most favorable
terms and conditions. Invitation of bids is resorted to both
by Government (and Government entities) and private
bodies (companies, corporations, etc.). But the objective of
securing the most favorable prices and conditions may be
negated if the prospective bidders collude or act in concert.
Such collusive bidding or bid rigging contravenes the very
purpose of inviting tenders and is inherently anti-
competitive.
 Forms of Bid Rigging or Collusive Bidding
It may take following forms, namely:

1. Agreements to submit identical bids.

2. Agreements as to who shall submit the lowest bid.
3. Agreements for submission of cover bids or voluntary inflated bids.
4. Agreements not to bid against each other.
5. Agreements designating bid winners in advance a rotational basis, or any other basis.

Such agreements may provide for a system of compensation to unsuccessful bidders based on
certain percentage of profits of successful bidders to divide among unsuccessful bidders.
If bid rigging takes place in Government tenders, it is likely to have severe adverse effects on its
purchases and on public spending. Bid rigging or collusive bidding is treated with severity in the
law. The presumptive approach reflects the severe treatment
 BID RIGGING CONSPIRACIES
Bid Rigging Conspiracies usually fall into one or more of
the following categories:

1. Bid Suppression
2. Complimentary Bidding
3. Bid-Rotation
4. Sub-Contracting
 BID SUPPRESSION
In Bid Suppression schemes, one or more competitors who otherwise would be expected
to bid, or who have previously bid, agree to refrain from bidding or withdraw a previously
submitted bid so that the designated winning competitor’s bid will be accepted.

A form of collusion in which a relatively stable set of bidders for contracts which are
routinely tendered agree between themselves which contracts each participant will bid
for and, more importantly, which contracts they will decline to bid for.

For example, a buyer may issue tenders to three bidders, only to find that bidders B and C
decline to tender. On a subsequent cycle, bidders A and C will decline to tender, and so on.
This is a relatively conspicuous form of collusion and it is more likely that bidders A and C
would submit a bid, but on such poor terms that only bidder B’s offer would be acceptable
to the buyer.
 COMPLEMENTARY BIDDING
Complementary bidding (also known as ‘cover’ or ‘courtesy’ bidding)
occurs when some competitors agree to submit bids that are either
too high to be accepted or contain such terms that will not be
acceptable to the buyer.
Such bids are not intended to secure the buyer’s acceptance, but are
merely designed to give the appearance of genuine competitive
bidding.
Complementary bidding schemes are the most frequently occurring
forms of bid rigging, and they defraud purchasers by creating the
appearance of competition to conceal secretly inflated prices
 BID-ROTATION
In bid rotation schemes, all conspirators submit bids but take turns to be
the lowest bidder. The terms of the rotation may vary; for example,
competitors may take turns on contracts according to the size of the
contract, size of bidding companies, etc. A strict bid rotation pattern defies
the law of chance and suggests that collusion is taking place.

For example, A may submit the lowest bid for contracts let over a
particular time period or for a particular scope of work. The other bidders
will deliberately inflate their bids on the express understanding that their
turn will come. On the expiry of his turn, A will inflate their subsequent
bid in order for it to become bidder B’s turn to win the contracts.
 SUB-CONTRACTING
Subcontracting arrangements are often part of a bid
rigging scheme. Competitors, who agree not to bid or to
submit a losing bid, frequently receive subcontracts or
supply contracts in exchange from the successful bidder.
In some schemes, a low bidder will agree to withdraw its
bid in favor of the next low bidder in exchange for a
lucrative subcontract that divides the illegally obtained
higher price between them.
 SIGNS OF POSSIBLE BID-RIGGING
Bid rigging can be difficult to detect. However, suspicions may be aroused by unusual bidding or
something a bidder says or does. Situations of suspicious behavior include the following (not
exhaustive):
1) The bid offers by different bidders contain same or similar errors and irregularities (spelling,
grammatical and calculation). This may indicate that the designated bid winner has
prepared all other bids (of the losers).
2) Bid documents contain the same corrections and alterations indicating last minute changes.
3) A bidder seeks a bid package for himself/herself and also for the competitor.
4) A party brings multiple bids to a bid opening and submits its bid after coming to know who
else is bidding.
5) A bidder makes a statement that a bid is a ‘complementary’, ‘token’ or ‘cover’ bid.
6) A bidder makes a statement that the bidders have discussed prices and reached an
understanding.
7) A bidder who regularly bids, declines to tender his bid for no obvious reasons.
 CCI DECISIONS on BID-RIGGING
Reference Case No. 01 of 2012 filed by Director General
(Supplies & Disposals), Directorate General of Supplies &
Disposals, Department of Commerce, Ministry of Commerce
& Industry, Government of India
Facts- This case was initiated on a reference made by DG S&D
in respect of a tender enquiry dated 14.06.2011 for
conclusion of new rate contracts for polyester blended duck
ankle boots rubber sole. The reference alleged bid rigging and
market allocation by the suppliers while bidding against the
above tender enquiry.
After a detailed inquiry, CCI held that the bidder-suppliers by quoting identical/ near
identical rates had, indirectly determined prices/ rates in the Rate Contracts finalized
by DG S&D and indulged in bid rigging/ collusive bidding in contravention of the
provisions of section 3(1) read with section 3(3)(a) and 3(3)(d) of the Act.

Further, CCI noted that the parties had also controlled/ limited the supply of the
product in question and shared the market of the product amongst themselves under
an agreement/ arrangement in contravention of the provisions of section 3(1) read
with sections 3(3)(b), 3(3)(c) and 3(3)(d) of the Act.

Accordingly, CCI directed the contravening parties to cease and desist from indulging
in such anti-competitive conduct in future apart from imposing a penalty of Rs. 625.43
Lakhs on eleven companies.
• A Foundation for Common Cause & People Awareness v. PES Installations
Pvt. Ltd. & Ors., Case No. 43 of 2010
The Commission examined inter alia allegations of bid rigging by the bidders in
the tender floated by Hospitals Services Consultancy Corporation for supply,
installation, testing and commissioning of Modular Operation Theatre and
Medical Gases Manifold System to Sports Injury Centre, Safdarjung Hospital,
New Delhi.
The Commission found commonality of mistakes in the tender forms by the
bidders as indicative of collusion amongst them to manipulate the process of
bidding.
The Commission imposed a penalty upon each of the contravening party @ 5%
of the average turnover of the company. However, COMPAT vide its order dated
25.02.2013 passed in Appeal No. 93 of 2012 after considering the aggravating
and mitigating factors reduced the penalty to 3% of the average turnover.
 CARTELS
Cartels are most egregious violations of Competition Law and are
included in the category of agreements which are presumed to have an
AAEC.

Office of Fair Trading, UK: Cartel is an agreement between businesses

not to compete with each other. This agreement is usually verbal and
often informal.

Typically, cartel members may agree upon: prices, output levels,

discounts, which customers they will supply, which areas they will
supply, who would win a contract (bid rigging).
Cartels are inherently harmful because the competitors who are
part of it know that their agreement is unlawful; which gives
them a strong reason to keep it a secret.
Moreover, cartels don’t function under written agreements and
work through arrangements and understandings.
Cartel members work together to keep evidences away from
investigators and enquiring authorities; making it difficult to
institute action against them.
These compulsions have persuaded law makers to presume that
Cartel has AAEC.
Cartels can occur in almost any industry and can involve goods
or services at the manufacturing, distribution or retail level.
The CA 2002 has specifically listed in Section-3(3)(a to d) the
anti-competitive agreements which can be the practices or
decisions of cartels. So within meaning of these provisions,
Cartels are involved in fixing prices, limiting supply of G/S,
market sharing and bid rigging practices.
Cartels are anti-competitive and are presumed to have AAEC.
 CARTELS IN INDIA
As per ICN Special Project Report of 2018 on Cartel Enforcement and
Competition, in India certain sectors are more prone to cartelization and more
infringement decisions have been made by CCI in these sectors. They are:
1. Pharmaceuticals
2. Entertainment
3. Public Procurement
4. Transport
5. Construction/Cement
6. Agriculture/Agro-processing

Other than these sectors, Real Estate and Banking Sector is also considered
prone to cartelization.
 CARTELS under CA 2002
Under Section-2(c) of CA 2002, Cartel is defined as
following:
“cartel” includes an association of producers, sellers,
distributors, traders or service providers who, by
agreement amongst themselves, limit, control or attempt
to control the production, distribution, sale or price of,
or, trade in goods or provision of services;
 ESSENTIALS OF A CARTEL
In any horizontal agreement, the 3 essential ingredients that
constitute a cartel are:

1. Arrangement or Understanding between the competitors.

2. Agreement amongst producers, sellers, distributors, traders
or service providers, that is, parties engaged in identical or
similar trade of goods/services.
3. Agreement aims to limit, control or attempt to control the
production, distribution, sale, price or trade in
goods/services.
 CHARACTERISTICS OF CARTELS
Cartels may operate in many different markets, but they usually have
following characteristics:
1. Usually cartels function in secrecy.
2. The members of a cartel, by and large, seek to conceal their activities to
avoid detection by the Commission.
3. Perpetuation of cartels is ensured through threats. If any member cheats,
the cartel members retaliate to take his business away or can isolate the
cheating member.
4. Another method, known as compensation scheme, is resorted to in order
to discourage cheating. Under this scheme, if a member of a cartel is
found to have sold more than its allocated share, it would have to
compensate the other members.
 CONDITIONS CONDUCIVE TO FORMATION OF
CARTELS
If there is effective competition in the market, cartels would find it
difficult to be formed and sustained. Some of the conditions that
are conducive to cartelization are:
• few competitors
• high entry and exit barriers
• homogeneity of the products (similar products)
• similar production costs
• excess capacity a high dependence of the consumers on the
product
• history of collusion a active trade association
 INQUIRY INTO CARTELS
In exercise of powers vested under Section-19 of the Act, the Commission may inquire
into any alleged contravention of the provisions of Section-3 of the Act which inter-alia
prescribes cartels.
CCI can institute inquiry into alleged cartel arrangement in following instances:
1. Info filed by person/association.
2. Reference by CG/SG/Statutory Authority
3. Suo Motu action
4. Upon receipt of Leniency Application
The Commission, on being satisfied that there exists a prima facie case of ‘cartel’, shall
direct the Director General to cause an investigation and furnish a report.
CCI has the powers of a Civil Court under the Code of Civil Procedure in respect of matters
like summoning or enforcing attendance of any person and examining him on oath,
requiring discovery and production of documents and receiving evidence on affidavit.
 PENALTIES IMPOSED ON CARTELS
As per proviso to Section-27(b), CCI can impose penalty on each member of the
cartel, a penalty of up to 3 times of its profit for each year of the continuance of such
agreement or 10% of its turnover for each year of continuance of such agreement,
whichever is higher. In case an enterprise is a ‘company’, its directors/officials who are
guilty are also liable to be proceeded against.
In addition, the Commission has the power to pass inter alia any or all of the following
orders (Section 27):
• direct the parties to a cartel agreement to discontinue and not to re-enter such
agreement;
• direct the enterprises concerned to modify the agreement.
• direct the enterprises concerned to abide by such other orders as the Commission
may pass and comply with the directions, including payment of costs, if any; and
• pass such other order or issue such directions as it may deem fit.
 LENIENCY PROGRAM
UN Conference on Trade and Development (UNCTAD):

“Hardcore cartels are considered by many to be the most

egregious competition law offence. Leniency Programs are the
most effective tool today for detecting cartels and obtaining
evidence to prove their existence and effects.”
Leniency Programs are designed to give incentives to cartel
members to take the initiative to approach the competition
authority, confess their participation in a cartel and aid the
competition authority.
 INDIA’S LENIENCY PROGRAM
Competition Commission of India is increasingly cognizant of ill-effects of
Cartels and in order to facilitate their detection, it introduced Competition
Commission of India (Lesser Penalty) Regulations, 2009.

Section-46 of the Competition Act 2002 empowers the Commission to

lessen the penalty of any producer, seller, distributor, service provider or
trader involved in any cartel, if he has made full, truthful and vital disclosure
in respect of violations alleged. This enables the Commission to locate and
fix liability of the cartel. The power to lessen the penalty is discretionary.
 PROCESS UNDER 2009 LENIENCY REGULATIONS
STEP-1 APPLICATION TO THE COMMISSION
• Suo Motu Cognizance- CCI can take suo motu cognizance of any matter which as per
the information available to it involves anti-competitive business activities. In such
cases, generally, the business entities or its members, against which Commission has
taken its action, step up to furnish valuable information relating to the cartel in lieu of
reduction in penalty.

• Application by Member of a Cartel- As originally intended by these regulations, any

member of the cartel being an individual or business enterprise, may file an application
for reduced penalty. Such application may be made orally or in writing to the
Commission. This application may also be faxed or e-mailed to the official handle of
Commission. It is mandatorily required that such application must be in accordance
with the Schedule annexed with 2009 Regulations. The said Schedule lays down the
important contents of application.
 CONDITIONS FOR RELIEF
(Regulation-3)

The relief granted under this Program is based on CCI’S discretion. CCI can grant the relief
of the conditions set out in Regulation-3 are fulfilled. They are as follows:

1. The Applicant must cease to engage in any form of participation with the Cartel
against whom he is disclosing valuable information. This condition stands subject to
the directions of Commission.
2. The Applicant must provide vital information which substantially proves that the
cartel has acted in breach of provisions of Section-3 of Competition Act. As per
Section-2(i) of Regulations, information is vital if information or evidence produced
must be true and complete enough to enable Commission to make opinion about
existence of the cartel or contravention of Section-3 of Competition Act 2002.
3. The Applicant must present all such information, documents and other evidences as
Commission requires of him.
4. Applicant must maintain his cooperation with Commission genuinely throughout
investigation stage and through other proceedings instituted by Commission.
5. Applicant must not in any manner conceal, manipulate or destroy relevant
documents which enable establishment of Cartel.

Conditions mentioned above are not exhaustive and Commission may impose more
restrictions or conditions on any applicant depending upon the facts and circumstances
of the matter.
It is important to highlight that most important condition to be adhered to by the Applicant
is to furnish vital information about the functioning of the cartel. If the Commission does
not find the information up to this standard, the rejection of application is imminent. Also,
it must be noted that conditions mentioned above are not exhaustive and Commission may
impose more restrictions or conditions on any applicant depending upon the facts and
circumstances of the matter.

Any departure from adhering to any of these conditions shall effectively disqualify the
Applicant. Furthermore, Commission can still utilize the evidence and information that
Applicant submits.
 STEP-2 FIXATION OF PRIORITY STATUS

There may be a scenario where more than one individual or enterprises

makes application for divulging information on same cartel. Obviously,
Competition Commission would not turn the later applicant away, because
it may so happen that information furnished by such applicant may better
help the CCI to bring down the cartel. Hence, these regulations allow for
multiple filings by different applicants in respect of the same cartel and are
arranged in order of priority of consideration of their applications.
(Regulation-4)

This situation of multiple applications generally arises in matters where the

Enterprise is the Applicant and it has claimed relief for its various members.
PRIORITY STATUS RELIEF OBTAINABLE

1st Applicant Reduction of Monetary Penalty above 50%

up to or equal to 100 % exemption.

2nd Applicant Reduction in Monetary Penalty up to or

equal to 50%.

3rd Applicant Reduction in Monetary Penalty up to or

equal to 30%.
STEP-3 EVALUATION OF APPLICATION & GRANT OF
RELIEF
• After the Priority List is set up, each Applicant is informed of the
Priority Status. Thereafter, Commission starts to investigate the
veracity of the information and evidence furnished by each applicant.
Each application is evaluated in the order of its position in priority
status.

• At this juncture, Commission imposes restrictions or directions to the

Applicant. It may ask the Applicant to adduce more evidence or
information. The prominent concern at this stage to is to obtain
enough evidence to charge the members and the business enterprises
in Cartel with penalty.
• If upon evaluation, Commission believes that information is not
substantial or that the applicant has failed to abide by the directions of
the Commission, then it can reject the application swiftly. Upon rejection
of application of Applicant at higher position, the Applicant below him
ascends to one position higher.

• Furthermore, it is required of the Commission that application once

admitted must be rejected on strong grounds like sustained non-
cooperation or substantial lack of evidentiary value in the information
submitted. And, no applicant shall be denied a fair opportunity of hearing
before his application is rejected by the Commission.
 DETERMINANTS OF RELIEF
The quantum of relief under the regulations shall be dependent upon following factors:

1. Stage at which Application is made- Stage of proceedings helps ascertain the usefulness of
evidence furnished. If the Commission has already instituted investigation against the alleged
business enterprise, then granting full exemption from penalty is not a sound decision. The haste
with which an Applicant appears before the Commission; signifies his intent to cooperate.
Therefore, early application can lead to better relief.

2. Evidence with Commission- Once the Commission orders investigation; it begins to gather cogent
evidence by itself. So, it is understandable that Commission shall not allow relief to any Applicant
for such information/evidence which Commission already possesses.

3. Quality of Evidence/ Information- Vitality of evidence is important. Unless evidence is strong and
complete, relief may not be obtained. The regulations clearly specify that information/evidence
must be vital. Such information must be strong enough to prove establishment of cartel. In absence
of such quality of evidence, relief shall not be granted.
 LENIENCY DECISIONS by CCI
• In Re: Cartelization in respect of tenders floated by Indian Railways for supply of
Brushless DC Fans and other electrical items. [Suo Motu Case No. 03 of 2014 ]

• Brief Facts- 3 electrical equipment supplier companies- Pyramid Electronics, Kanwar Electricals and Western
Electric and Trading Company had cartelized their resources in respect of obtaining tenders and supplying
Brushless DC fans and other electrical goods to Indian Railways. Investigation began after CCI took suo motu
cognizance of the matter upon receiving information from Superintendent of Police, Anti-Corruption HQ, CBI in
New Delhi. Pyramid Electronics applied for leniency and made relevant disclosures about bid-rigging and modus
operandi of the cartel.

• Order- The evidence produced by the applicant (Pyramid Electronics) was strong enough to prove contraventions
under Sevtion-3 of Competition Act 2002. CCI, however, did not accede to the requests of the applicant and
granted it 75% reduction in penalty solely for the reason that Applicant had made its request for leniency after
commencement of investigation process against it.
• Cartelisation in respect of zinc carbon dry cell batteries market in India Vs. Eveready Industries India Ltd &
Ors. [Suo Motu Case No. 02 of 2016 ]

• Brief Facts- CCI took suo motu cognizance of the matter upon info received. Later, Panasonic Energy India Ltd.
filed an application under Lesser Penalty Regulations 2009. Panasonic alleged that there is a cartel between
Panasonic Energy India Ltd, Eveready Industries India Limited and Indo National Ltd which controlled
distribution and prices of zinc-carbon dry cell batteries in India. It was alleged that due to fall in value of
Indian Rupee in international markets, the input cost of manufacturing these dry cell batteries had increased.
To set this off, the aforementioned companies decided mutually to fix retail price of such batteries in India.
After investigation was instituted, Eveready Ltd and Indo National Ltd presented their applications respectively.

• Order- CCI decided that Panasonic Ltd was the first company to file application and furnish evidences.
Contravention of Section-3 was proved with the help of evidences furnished by Panasonic Ltd so 100%
reduction in penalty was granted. In respect of remaining 2 applicants, Eveready received 30% reduction in
penalty because it had abided by the directions of CCI and gave corroboratory evidences which added
significant value. It was placed higher in priority list because it had made its application under 2009
Regulations just 3 days after investigation commenced. On the same grounds, Indo National Ltd was granted
20% reduction in its penalty for providing substantial corroboratory evidences.
• In Re: Cartelisation by broadcasting service providers by rigging the bids
submitted in response to the tenders floated by Sports Broadcasters. [Suo Motu Case No. 02 of 2013]

• Brief Facts: In this case, applications for leniency were filed by Globecast India Pvt ltd and Globecast Asia Pvt Ltd which
alleged establishment of a cartel between aforementioned broadcasting companies with Essel Shyam Communications
Ltd aka Planetcast Media Services Ltd. These aforementioned companies were broadcasters in India and had
proceeded to exchange information of commercial and confidential nature related to pricing of broadcasting services.
This was done to perform bid-rigging in various tenders offered to broadcast many sporting events in India mainly in
years 2011-2012. Investigation ensued and later Essel Shyam also filed for leniency.

• Order- CCI awarded 100% reduction in penalty to first applicant Globecast for bringing the matter to its notice.
Globecast had furnished true and complete information/evidences which led CCI to make prima facie opinion about
establishment of cartel. Furthermore, Globecast gave strong evidences to prove bid rigging, role of ex-employees,
email correspondences signifying exchange of price sensitive information etc. to prove contravention of Section-3 of
Competition Act 2002. CCI also granted 30% reduction in penalty to Essel Shyam for providing some valuable
information related to exchange of information between itself and Globecast which constituted a wrongful exchange of
information within terms of the Act.
DRAWBACKS OF INDIA’S LENIENCY PROGRAM

1. Prolonged Process- One ascertainable aspect of every case in which relief has been granted by CCI is that there has
been considerable passage of time from filing of application and actual receipt of relief. For instance, in case of
rigging of tenders for broadcasting Sports events, the matter was brought to the notice of CCI in 2013 and the
decision of relief was made 5 years later in 2018. It is difficult to proceed with business when your business is under
constant scrutiny and surveillance.

2. Lack of Innovation- This Leniency Program has limited incentives. Exemption from full punishment is the only viable
incentive for the members. But, to ensure greater participation from the members of cartel, other jurisdictions have
introduced more innovative mechanisms, like Leniency Plus. According to this program, a member being investigated
as part of a cartel may be allowed the relief of exemption of lesser penalty if he provides full and true information
about another cartel which is yet out of scrutiny of the Competition Regulator. This program is currently in operation
in jurisdictions of UK, US, Singapore and Brazil.

3. No Withdrawals- Competition Law Review Committee of 2018 remarked that many times, cases falling under 2009
Regulations are matters of purely commercial disputes and in many cases there is no contravention of Section-3 of
Competition Act 2002. In such cases inability of withdrawing the application would unnecessarily drag the applicant
into the process of investigation and inquiries. It also leads to unnecessary expenditure of effort by CCI.
 VERTICAL AGREEMENTS (Section-3(4))
Vertical Agreements are agreements between
enterprises that are at different levels of the production
chain, for instance, agreement between manufacturer
and distributor.
Since they are part of Section-3(4), Rule of Reason
approach is applied in their case and therefore they are
not generally treated as anti-competitive per se. Such
agreements are considered illegal only if they result in
appreciable adverse effect on competition.
Most common types of vertical agreements are those which relate
to supply, distribution, production, purchase and sale of G/S. These
agreements impose potential restrictions on members.
Restrictions included in vertical agreements can be of following
nature:-
1. Seller is not supplying goods to any body else but the specific
buyer in the territory.
2. Purchaser agrees to not buy goods from other providers.
3. Condition imposed upon resale of products regarding price,
location or consumer.
 Section-3(4)
Any agreement amongst enterprises or persons at different stages or
levels of the production chain in different markets, in respect of
production, supply, distribution, storage, sale or price of, or trade in
goods or provision of services, including—
(a) tie-in arrangement;
(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refusal to deal;
(e) resale price maintenance,
shall be an agreement in contravention of sub-section (1) if such
agreement causes or is likely to cause AAEC in India.
Legality of Vertical Agreements under Section-3(4)

Vertical Agreements are not per se anti-competitive unless they

perform such activities which are expressly prohibited under
Section-3(4).
For a vertical agreement to be anti-competitive, it must cause AAEC
and include any of the following:
1. Tie-in Arrangement
2. Exclusive Supply Agreement
3. Exclusive Distribution Agreement
4. Refusal to Deal
5. Resale Price Maintenance
• Explanation.—For the purposes of this sub-section,—
• (a) “tie-in arrangements” includes any agreement requiring a purchaser of goods, as a
condition of such purchase, to purchase some other goods;
• (b) “exclusive supply agreement” includes any agreement restricting in any manner the
purchaser in the course of his trade from acquiring or otherwise dealing in any goods other
than those of the seller or any other person;
• (c) “exclusive distribution agreement” includes any agreement to limit, restrict or withhold the
output or supply of any goods or allocate any area or market for the disposal or sale of the
goods;
• (d) “refusal to deal” includes any agreement which restricts, or is likely to restrict, by any
method the persons or classes of persons to whom goods are sold or from whom goods are
bought;
• (e) “resale price maintenance” includes any agreement to sell goods on condition that the
prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller
unless it is clearly stated that prices lower than those prices may be charged.
 TIE-IN ARRANGEMENT
(Section-3(4)(a))
It means imposing a condition on the purchaser of
goods, to purchase some other good in addition to the
good which purchaser intended to buy.
Examples:
1. Requiring a person to keep fixed deposit with the
bank while allotting him a locker.
2. Requiring a stabilizer to be bought along with the
electrical appliance.
This practice is used by the enterprises to utilize the
popularity of a product (tying product) to promote the
sale of less popular product (tied product).
Tie-in arrangement removes buyer’s choice to buy the
tied product. If such agreement leads to AAEC, then, CCI
can hold such agreement to be void under Section-3(2).
 FX Enterprises vs Hyundai Motor India Ltd
Facts: FX (Informant) informed CCI (Opposite Party) that Hyundai had
entered into agreements with its dealers. As per these agreements,
Hyundai imposed following conditions:
1. That the Dealer shall allow discounts on the Hyundai cars in
accordance with the mechanism set by Hyundai. Non-adherence
to that mechanism would lead to imposition of penalty by
Hyundai on that dealer. (Resale Price Maintenance)
2. That the Dealer shall mandatorily use the oils/lubricants
mandated by Hyundai and if some other oil/lubricant is used
then, penalty shall be imposed on the dealer. (Tie-in
Arrangement)
CCI- CCI found both of the aforementioned conditions to be violative of
Section-3(4)(a) and (e) of the CA 2002.

The Commission broadly elaborated the ingredients essential for a "tie-in-

arrangement":

1.Presence of two separate products or services capable of being tied.

2. The seller must have sufficient power with respect to the tying product to
appreciably restrain free market competition in the market for the tied
product.
3. The tying arrangement must affect a "not insubstantial" amount of
commerce.
Decision- CCI had made following decisions:
1. Imposition of penalty on the dealers for handing out more discounts over
their goods would lead to Resale Price Maintenance because this would
lead to an entry barrier for dealers. It was held to be violative of Section-
3(1) of CA 2002.
2. Imposition of penalty on the dealers for using oil/lubricants other than the
ones mandated by Hyundai would amount to a Tie-in Arrangement. This
condition in the light of overall business and sales made by Hyundai would
lead to hinderance in improvement of production/supply of oils/lubricants
for cars. Other manufacturers of oils/lubricants for cars are also producing
goods of same grade and quality. But, such tie-in arrangement would lead
to sale of only those oils/lubricants which are mandated by Hyundai. It was
held to be violative of Section-3(4)(a) of CA 2002.
 EXCLUSIVE SUPPLY AGREEMENT
Exclusive Supply Agreement refers to any agreement which restricts the
purchaser in the course of his trade from acquiring or otherwise dealing
in any goods other than those of the seller or any other person.

Example: Buyer asks the manufacturer not to manufacture identical

goods for any other buyer without his consent.

Exclusive supply agreements are also known as 'single branding'

agreements. Under EU Competition law, an agreement that induces the
buyer to purchase more than 80% of his requirement from a particular
seller/supplier constitutes a 'single branding' agreement.
Since, vertical agreements are not presumed to have AAEC,
CCI in its working shows that vertical agreements under
Section-3(4) can be anti-competitive only if the firm imposing
such agreements has enough market power to foreclose the
competition for other participants in the relevant market.
Without enough market power, restrictions imposed under
exclusive supply agreements will not be able to produce anti-
competitive effect big enough to badly affect the relevant
market.
 MARKET POWER
Market Power as a concept is not defined under the Act. However,
substantial market power or dominant position is determined on
consideration of factors such as market share, size, resources, the
importance of competitors, economic power, commercial
advantages, vertical integration, consumer dependence, entry
barriers, market structure, and market size.

In its decisional practice, the CCI has considered factors such as

market share, the structure of the market, duration of the
agreement, entry barriers , etc. while determining market power for
assessment of agreements under Section 3(4) of the Act.
The CCI's decisional practice further reveals that market shares
are often considered as a crucial indicator of market power. For
assessment of exclusivity clauses under Section 3(4) of the Act,
the CCI may require firms to hold at least 30 percent market
share in the relevant market to deem it as sufficient market
power to cause AAEC.
This is in line with the assessment of vertical restraints under EU
competition law, where the Guidelines on Vertical Restraints
provide that vertical restraints are likely to raise competition
concerns only when the market share thresholds exceed 30%.
 Shamsher Kataria vs Honda & Ors.(2011)

Facts- Shri Shamsher Kataria (“informant”) had filed an

information with the CCI alleging anti-competitive
conduct by 3 Car Companies, namely Honda Siel Cars
India Ltd (“Honda”), the Volkswagen India Pvt. Ltd
(“Volkswagen”) and Fiat India Automobiles Ltd (“Fiat”),
in not allowing sale of the spare parts in the open market
and restricting the after sales market for repairs and
maintenance of their cars to the detriment of consumers
and independent repairers.
The informant has alleged that the 3 car companies named above are
indulging in anticompetitive practices by:
a) Not making available the genuine spare parts of automobiles freely
in the open market manufactured by them.
b) Not making freely available the technological information,
diagnostic tools and software programs required to maintain
service and repair the technologically advanced automobiles
manufactured by them to the independent repair workshops. The
repair, maintenance and servicing of such automobiles could only
be carried out at the workshops or service stations of the
authorized dealers of these car companies.
Effect- By placing restriction on the availability of
genuine spare parts and the technical information/
know–how required to effectively repair, maintain or
service the automobiles manufactured by them; the said
car companies and their respective dealers refuse to
supply genuine spare parts and technological equipment
for providing maintenance and repair services in the
open market and in the hands of the independent
repairers.
CCI Decision- It ruled against the Car manufacturers and made following
important observations:
1. CCI found that car makers, by routinely restricting independent
repairers/garage owners from accessing their own brand of spare parts and
repair tools, ensured that their authorized dealer network is the only
available service option for their customers. This led to foreclosure of
competition in the repairs market and allowed each car maker to exploit its
market power by charging exploitative high prices for spare parts and
ancillary repair services.
2. CCI concluded that since most of clauses in agreements requiring authorized
dealers to source spare parts only or their approved vendors is anti-
competitive in nature and by restricting access of independent repairers to
spare parts and diagnostic tools and by denying the independent repairers
access to repair manuals, the agreements entered into between and
authorized dealers have violated Section 3(4)(b), 3(4)(c) & (d)) of the Act.
 EXCLUSIVE DISTRIBUTION AGREEMENT
An exclusive distribution agreement is defined under Section 3(4)(c)
of the Act as an agreement that restricts, limits, or withholds the
supply or output of any goods or designates any area or market for
the sale or disposal of goods. It works as a restriction on the seller of
g/s.
An exclusive distribution agreement can also be identified either as a
territorial restriction, where the seller agrees to sell his products
only to one distributor in a particular group of consumers or in a
particular territory. This is quite prominent in the pharmaceutical
sector where chemists are exclusively appointed for institutionalized
sales to large buyers like hospitals etc.
 REFUSAL TO DEAL
Recognized under Section-3(4)(d), Refusal to Deal means any agreement which
restricts a person/class to whom goods are sold or from whom goods are
bought.

Businesses have the right to use their discretion in choosing whom to do

business with. However, if this choice is made through a conspiracy with another
competitor, business, or individual, they will likely be in contravention of the law.

A refusal to deal is a violation of competition law because it harms the boycotted

business by cutting them off from a facility, product supply, or market. By
harming the boycotted business in this way, the competing businesses controls
or monopolizes the market by unreasonably restricting competition.
Illustration- Enterprise A is an enterprise in the market for
lead used to make pencils. Enterprise B is a major
manufacturer of pencil in the market but its production is
dependent on supply of lead by enterprise A. Enterprise A
suddenly refuses to supply lead to B because a new
company, C has entered the pencil market in direct
competition to B and though A can supply to both B and C, A
refuses to deal with B on entry of C in market. In such
situation B can approach the Commission with information
filed under Section 3 (4).
 RESALE PRICE MAINTENANCE
It means any agreement to sell goods on condition that the
prices to be charged on the re-sale by the purchaser shall
be the prices stipulated by the seller unless it is clearly
states that prices lower than those prices may be charged,
shall be deemed re-sale price maintenance agreement.
The re-sale price maintenance may take any of the
following three forms:
1. A fixed price at which the product is to be sold.
2. A minimum, below which the product may not be sold.
Resale Price Maintenance is a negation of the right of the
buyer to re-sell the goods at a price he considers
appropriate, considering the market conditions, after the
seller has transferred the property in the goods sold to
the buyer.
This prevents the resale price to be determined by the
market competition.
 Jasper Infotech Private Limited (Snapdeal) v. KAFF Appliances
(India) Pvt. Ltd. (Kaff) [Case No. 61 of 2014]
FACTS: Plaintiff/Informant (Snapdeal) is an e-commerce platform. Defendant (KAFF) was a brand dealing in
kitchen appliances and sold its goods, both online and offline. The Informant sold KAFF’s goods at a discounted
price, aggrieved by which KAFF issued a caution notice to Snapdeal, to not sell their goods below the minimum
operating price. In turn, Snapdeal filed an information alleging violation of Section 3(4)(e) of the Act and the CCI
directed the DG to investigate the matter.

DG’s investigation report made following observations:

1. DG defined the two relevant markets in this case as the ‘market for chimneys’ and ‘market for hobs’ in India,
noting that the competitive nature of the markets
implied that KAFF did not possess sufficient market power to cause an appreciable adverse effect on
competition.
2. DG concluded that it was not ideal for either the company or its dealers to consistently sell products at a
particular price. Therefore, resale price management was done by KAFF.
3. DG also noted that since Jasper Infotech is only a market platform that does not perform any material
functions, it does not form part of the vertical chain and therefore cannot be subjected to a vertical restraint
under Section 3(4)(e) of the Act.
 ISSUES
CCI faced following issues in this matter:

1. Whether Section 3(4)(e) of the Act would apply to Online market platforms?
2. Whether resale price management by KAFF result in anti-competitive effect on the concerned
market?
 DECISION
• CCI laid down following rulings in respect of aforementioned issues:
• Issue 1- CCI held that online market platforms provide sourcing and grievance redressal
opportunities to consumers, which would indicate that they form part of the value chain even
though they did not have literal ‘ownership’ of the goods. Thus, within a modern online
market, these platforms form a part of the vertical chain. Finally, CCI held that online market
platforms, and as a corollary, agreements between manufacturers/distributors and e-commerce
players can be examined under Section 3(4) read with Section 3(1) of the Act
• Issue 2- The CCI examined the evidence presented to them and found that the dealers were not
required to adhere to a minimum price. Discounts offered online where also funded by the retailers
themselves. Thus, as against the dealers, the CCI concluded that there was no imposition of a
resale price maintenance agreement. CCI lastly ruled that there was no evidence of any
appreciable adverse effect on competition by the action of KAFF.
• JUDGMENT- Plaintiff’s case was denied.