ANTI COMPETATIVE AGREEMENTS
Author- PARUL DWIVEDI, Student at UPES, DEHRADUN
ABSTRACT
An Anti-competitive agreement is a legal contract in which an individual (typically an employee) agrees not to engage in certain competitive activities for a certain period of time after the end of their employment or business relationship. Anti-competitive agreements are often used to protect a company’s proprietary information, trade secrets, and other confidential information.
Anti-Competitive Agreement are typically enforced through the legal system. If an individual violates the terms of an Anti-competitive agreement, the company can file a lawsuit seeking an injunction to prevent the individual from continuing to engage in the prohibited activities. If the injunction is granted, the individual will be prohibited from engaging in the specified activities until the injunction is lifted or the anti-competitive agreement expires.
However, Anti-competitive agreements are not always enforceable. In order for an Anti-competitive agreement to be enforceable, it must be reasonable in scope and duration, and it must be necessary to protect the legitimate business interests of the company. If a court determines that an Anti-competitive agreement is overly restrictive or not necessary to protect the company’s interests, it may not be enforceable.
Overall, Anti-competitive agreements can be a useful tool for protecting a company’s confidential information and competitive advantage, but it is important to ensure that they are reasonable and enforceable.
KEYWORDS: Anti-Competitive Agreement, Cartels, Bid Rigging, Price Parallelism, Prima facia.
Agreement under competition law: It is an arrangement or understanding of action in concert. Any Communication between competitors, either in person or by telephone, letters, e-mails or through any other means is considered as Agreement[1]. It can be in both forms- oral and written. It needs not to be enforceable by law.
NOTE:- Even a Wink or Nod is considered as a Agreement in ACA.
There are two type of Agreement: Horizontal and Vertical.
HORIZONTAL AGREEMENT
Horizontal Agreement including Cartels[2] (A Combination of a group of people for a common work) which: Fix prices, try to control the production, distribution or development etc., It also include Bid rigging/ collusive bidding and also allocate the areas/customers.
WHAT DO YOU MEAN BY CARTEL?
Cartel is a association of producer, seller, distributor and provided who try to limit or control the every course of action i.e., production, distribution, sale, price or trade[3] of goods etc. Main object of the Cartel is to harm consumers, economy by sudden increment in the prices. This is a kind of Horizontal Agreement which cause adverse[4] effect on competition. For the Consumers Cartel results as increased prices, bad quality and there is very less or approximately no choice for consumers in goods and products.
For example – All the motor companies announced on the same day that the price of all products are increasing. So it is suspicious for the people and it could be a cartel.
Evidence to prove Cartel: The Cartel’s existence may be proved by Direct evidence or indirect evidence or combination of both. Also there is some additional evidence which easily proves that the increment in prices or any suspicious activity are result of meeting of minds
Price parallelism ( increase the price by all market players at the same time ) is also one of the main factor to prove without the direct evidence that the act is result of cartel.
BUILDER ASSOCIATION OF INDIA V. CEMENT MANUFACTURERS[5]
In this Case Builders Association of India is a informant. Informant files a case against 11 cement manufacturing companies i.e., ACC, Ambuja, Ultratech etc. that they are violating the Sec. 3 & Section 4 of the Act. Informant also said that the cement manufacturing companies signed an agreement regarding price control and quantity control. The Companies decided to increase the price of Cement in the market. Then CCI found this case as prima facia[6] and direct the DG to investigate the matter.
DG reported it as a Cartel and also mention that these Cement Manufacturing companies are indulged in MRTP activities and violate Section 3(3)(a) Price Controlling and Section 3(3)(b) Quantity Controlling.
CCI observed that Cement Manufacturer used to meet and discuss about the retail prices , wholesale prices and collect all the information. That’s why Price Parallelism is there. There is a violation of Section 3(3)(a) & 3(3)(b) of Act and imposed penalty on manufacturers and cease this practice
WHAT DO YOU MEAN BY BID RIGGING?
Bid Rigging[7] is “any Agreement between any kind of person[8] or enterprises who are working in similar areas (production, trading of goods & provision of services) which can affect the competition of bids or manipulate the bidding.
Such bid Rigging is happen by intentional manipulation by the member of bidding group.
RAJASTHAN CYLINDER &CONTAINER LTD. V. UNION OF INDIA[9]
Informant files a case said that all the 50 manufacturer made a similar/same bid or approximately same bid. He also said that the manufacturer found a association and they had a meeting just a few days before the bidding.
CCI held them guilty for the violation of Section 3 of the act to entering into an Agreement to indulge in bid rigging. Then Appeal was made to Supreme Court of India. SC also given the same judgement.
VERTICAL AGREEMENT
Any Agreement between person or enterprises[10] in respect of production, distribution, storage, sale, price or trade of goods includes: Tie-in arrangements[11], Exclusive Supply/Distribution[12], Refusal to deal, Resale price maintenance shall be anti-competitive if they caused appreciable adverse effect on competition in India.
- Tie-in Arrangement – When Customer buy a product they want but they need to buy a product from different markets which they may not want to buy. It is anti-competitive in nature.
Bundling is different of tie-in arrangements, as bundling means the product from the same market which the customer usually buy together. E.g., A bicycle because it is sold together with tyres.
SHRI SONAM SHARMA VS. APPLE INC. & ORS.[13]
In this case it was distinguished that the Apple company has signed distribution agreement with Indian subsidiary of Apple Inc. U.S.A. and Vodafone limited and Bharat Airtel limited. That’s why Apple iPhone will only available in the GSM network of Airtel & Vodafone and only through the particular distributor.
It will violate Section 3 and Section 4 of Competition law and also cause an appreciable adverse affect on competition in the market. There is also a tie-in Agreement between those companies which is found by DG during investigation
- Exclusive Supply Agreement – This Agreement stop customer/buyer to buy a product/goods from any other seller.
INTEL CASE: The CCI held that a requirement to inform the dealer while the distributor deals with products belonging to the dealer’s competition can not quantity to an exclusive supply agreement.
- Exclusive Distribution Agreement – This Agreement bound the supplier. Supplier can only sell his products to only one distributor to resell in particular territory. The supplier is also bounded by the territory.
BAJAJ CASE: Allocation of geographical area/ Customer to its distributor amount cause an exclusive Distribution Agreement.
- Refusal to deal[14] – It is a violation of Competition law. Everyone have a right to choose the person with whom they want to do business with. But if this choices are made through conspiracy with another competitors or force then it is contravention of law. It also harm the businesses or player by boycotted them from supply, distribution or trade. Refusal to deal is unreasonably restricting competition.
SPARE PART CASE: There is an agreement between the OEM & local OES. Companies joined hands with OES and preventing them to supply spare parts of that motor vehicle in the market. Which held that agreement cause refusal to deal.
- Resale price maintenance[15] – In this producer forced the reseller to sell the product at such fixed price or low price. Because of this reseller can not compete that’s why this is Anti-competitive in nature.
INTEL CASE: In this case also Suppliers provided the retail price to distributor according to guidelines given but it is totally upto the distributor and they are free to decide the resale price of product/goods.
Vertical Agreements are judges on Rule of Reason[16]. Six factors are given following to prove that it is a vertical Agreements. These are also the exception which is stated under Section 19(3) of Competition Act.
- Whether the Agreement drives out all the Competitors.
- Whether the Agreement blocked entry of new entrants in the market.
- Has the competition also come to a standstill due to the ban on entry?
- Has there been any benefit to the customer?
- Has there been any improvement in production, economy and development due to the agreement?
- Any development in technology, scientific research or economy because of Agreement.
SHRI SAMSHER KATARIA V. HONDA SIEL CAR LTD.[17]
Some Car manufacturing company such as Honda, Volkswagen etc. signed an anti competitive agreement with OESs ( Original Equipment Suppliers) and prevent them to provide the spare part and tools of their manufacturing motors in the open market. Which also somewhere proves that it caused an abuse of dominance. It is also harming the local market somehow.
These two (Abuse of dominance & Harming Market ) are the main approaches for Vertical Agreement. So In this case it is a Vertical Agreement.
CCI held that they have to submit the Penalty of 2% of average turnover from last three years and also spare parts should be available to the open market for convenience of pubic.
RULES IMPLEMENTED IN THE INTERPRETATION OF ANTI COMPETATIVE AGREEMENTS
There are two rules which is interpreted in Anti-competitive agreement
- RULE OF REASON: The Rule of reason is a legal approach by competition authorities or the courts where an attempt is made to evaluate the pro-competitive features of a restrictive business practice against its anti-competitive effects in order to decide whether or not the practice should be prohibited.
v RULE PER SE: The practices or the act is assumed prohibited in Rule per se. Anti-Competitive Agreement are the basic nature of rule per se so it is irrelevant to consider that there is no violation of Competition law.
CONCLUSION
This Act’s main objective is to prevent the illegal practices which cause Anti Competitive Agreement and create harm to the market. This can happen only when everyone has the right to work with full freedom. The competitive market is the main aim of the act. Act want to provide everyone a fair chance to play and This can only happen if the cartel is completely dismantled and act to be followed by all. All the parties while doing business in India should keep in mind that there should not be any illegal thing in the agreement and anything which can harm anyone. There should be no anti-competitive element in the agreement. How to avoid anti-competitive agreement, its training should be given to companies in India.
REFRENCES
- Competition Act,2002 [Section 2(b), 2(c), 2(x), 2(h), 2(l), 3(4)(c), 3(4)(d), 3(4)(e) ]
- Clayton Act,1914
- Sherman Act, 1890
- www.legalserviceindia.com/ Rule of Reason
- www.casemine.com/ Shri Shamsher Kataria V. Honda Siel pvt.ltd. & Ors. CCI Case no. 03/2011/ Section 19(1)(a) of Competition Act, 2002
- https://indiankanoon.org/ Shri Sonam Sharma vs Apple Inc. Usa & Ors on 19 March, 2013
- Refusal to deal/ www.amsshardul.com/
- www.mondaq.com / section 3(4)(c) of Competition Act,2002
- blog.ipleaders.in/ Meaning of Vertical Agreement/ Section 3(4)(e)/bid rigging
- IndiaCorpLaw/ https://indiacorplaw.in › 2012/06/ Summary of CCI’s Order Against Cement Companies/ Builder Association of India V. Cement manufacturers
- Rajasthan Cylinder & Containers Ltd. V. Union of India/ www.latestlaw.com/ Indiankanoon.org
[1] Section 2(b) of Competition Act, 2002 enforced with effect from 19-06-2003
[2] Section 2(c) of Competition Act,2002
[3] Section 2(x) of Competition Act, 2002
[4] Ramakant kini vs. L.H. Hiranandani Hospital (2014)
[5] IndiaCorpLaw/ https://indiacorplaw.in › 2012/06/ Summary of CCI’s Order Against Cement Companies
[6] https://www.collinsdictionary.com prima facia is used to describe something which appears to be true when you first considered it.
[7] blog.ipleaders.in
[8] Section 2(l) of Competition Act, 2002 enforced with effect of 31-03-2003
[9] www.latestlaw.com
[10] Section 2(h) of Competition Act, 2002
[11] Vertical agreements under Competition Act, 2002 – iPleaders
[12] www.mondaq.com / section 3(4)(c) of Competition Act,2002
[13] https://indiankanoon.org/Shri Sonam Sharma vs Apple Inc. Usa & Ors on 19 March, 2013
[14] www.amsshardul.com / section 3(4)(d) of Competition Act, 2002
[15] Blog.ipleaders.in/ section 3(4)(e) of Competition Act,2002