What are Anti-Competitive Agreement?

The ideal market is the one in which various market participants are independent and act as competitive restrain on each other. This economic liberty of market participants is sine qua non for preserving free and unfettered competition in any market. Some time the market participants with an objective to make more money instead of competing with each other on merits may enter into agreements to restrict competition. The Supreme Court delivered an important judgment in Competition Commission of India vs. Co-ordination Committee of Artists and Technicians of W. B. Film and Television and Ors. On March 7, 2017.

The SC confirmed the findings of Competition Commission of India CCI in an analysis of anti-competitive agreements enshrined in section 3, described below, of the Competition Act, 2002 Act. It held that while conducting an analysis of anti-competitive agreements, the first and foremost aspect that needs to be determined is the relevantmarket. This term as such does not appear in section 3; therefore, until this judgment was pronounced once an agreement fell under any of the four categories of section 3(3)3 it was presumed to cause appreciable adverse effect on competition without requirement of any further proof. The judgment has magnified the burden of proof on the CCI to define the relevant market, which is not only difficult to determine, but also has an element of subjectivity in its determination.

Section 3 of the Act prohibits and also declares the agreements between two or more enterprise or person or association of persons, which have an appreciable adverse impact on the competition as void. The section, further categorizes agreements into two categories, namely – Horizontal Agreements and Vertical Agreements.

Horizontal Agreements: These kinds of agreements are known as horizontal agreements because the parties to the agreement are at the same level of production in the same market. These kinds of agreements are per se illegal and it is not necessary to show that the agreement in the issue is anti-competitive or not. A typical example of anti competitive horizontal agreement would be agreement between two manufacturers of coal that they will not compete on price with each other.

Vertical Agreements: Vertical agreements are those agreements which are amongst enterprises or persons at different stages or levels of the production chain in different markets. These agreements are not per se illegal and in order to establish that they are anti-competitive it must prove that such agreement causes or is likely to cause an appreciable adverse effect on competition in India.

 The Act prohibits an agreement between an enterprise and a person causing or is likely to cause an appreciable effect on competition within India. As the definition of person under the Act includes an individual, it leads to possible interpretation that consumers can be a party to anti-competitive

The regulation of anti competitive agreements by the Act has perceptible loopholes and could be strengthened further. Moreover, the Act has some inherent ambiguities which must be rectified. However, if taken as a whole the Act is good step in the direction of preserving free and fair trade in India and efforts of Government for creating a effective legal framework through which anti competitive behavior of firms can be easily detected and prevented from hindering the competition certainly deserves appreciation.

Aishwarya Says:

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