Anti-Competitive Agreements

By Neelambera Sandeepan & Rohan Zaveri

1. The Law 

Any agreement which causes or is likely to cause an appreciable adverse effect on competition (“AAEC”) is considered an anti-competitive agreement and is prohibited under Section 3 of the Competition Act, 2002 (“Competition Act”).¹ Section 2(b) of the Competition Act defines an agreement as any arrangement or understanding or action in concert, irrespective of whether it is in writing, oral or legally enforceable.² Further, the Competition Act provides for two different types of anti-competitive agreements: (i) horizontal agreements; and (ii) non-horizontal/ vertical agreements, that are regularly scrutinised by the Competition Commission of India (“CCI”).

Horizontal Agreements

Horizontal agreements are those which are entered into between enterprises that are engaged in identical or similar trade of goods or provision of services i.e., direct competitors. Section 3(3) of the Competition Act³ explicitly describes four broad types of horizontal agreements:

1. agreements to directly or indirectly fix purchase or sale prices;

2. agreements to limit or control production, supply, and markets;

3. agreements for allocation of markets or customers; and

4. agreements to rig bids or engage in collusive bidding.

While the statutory provision explicitly states that the aforementioned kinds of agreements are presumed to have AAEC, it is considered to be a presumption which is rebuttable by the parties before the CCI.⁴ Further, the Competition Act also recognizes that parties may collude indirectly through hub-and-spoke arrangements, whereby a central actor facilitates collusion among otherwise competing undertakings, and considers the same as anti-competitive.

Non-Horizontal or Vertical Agreements

Agreements between enterprises which operate at different levels of the production chain in different markets are known as vertical agreements. Not all vertical agreements are problematic under competition law. Instead, only those vertical agreements which cause or are likely to cause AAEC are considered to be anti-competitive under Section 3(4) of the Competition Act.⁵ Further, the said provision provides a non-exhaustive list of vertical agreements which are agreements in the nature of:

1. Tie-in arrangement;

2. Exclusive dealing agreement;

3. Exclusive distribution agreement;

4. Refusal to deal; and

5. Resale price maintenance.

The CCI must undertake a case-by-case assessment of the vertical agreements to assess whether they cause or are likely to cause an AAEC in the relevant market for it to be considered as anti-competitive.

Further, the Competition Act specifically exempts certain categories of agreements from the scope of anti-competitive agreements:

• joint ventures

• agreements that impose restrictions intended to protect the rights conferred under intellectual property laws such as the Copyright Act, 1957,⁶ and Patents Act, 1970,⁷ etc.; and

• agreements relating exclusively to export activities.

2. Commentary

At the outset, it must be noted that not every interaction or agreement between enterprises gives rise to competition concerns. Businesses routinely engage in legitimate commercial agreements, industry engagement and information exchanges. The competition law assessment turns on whether the interaction restricts or is capable of restricting independent competitive decision-making and causing AAEC.

The Competition Act provides a broad and inclusive definition of agreements. Agreements may be direct or indirect, express or tacit, unenforceable and may arise through formal communications, informal exchanges from which a common understanding between two parties may be inferred. Since anti-competitive arrangements are often implemented covertly, direct evidence is not always available. The existence of an agreement may therefore be inferred from the economic context, conduct of the parties and contemporaneous communications. In contemporary markets, evidence of agreements may be found in e-mails, messaging applications, data exchanges, algorithmic coordination mechanisms, and other digital records. Further, parties may be held liable for anti-competitive conduct from the time an anti-competitive agreement or understanding is agreed between the parties, irrespective of whether the intended conduct was fully implemented or commercially successful in the market.

It must be noted that purely unilateral conduct by a single enterprise or agreements amongst enterprises forming part of the same group would ordinarily fall outside the scope of agreements for the purposes of the Competition Act due to absence of any concurrence of intentions with another party.

Horizontal Agreements

In its decisional practice, the CCI has assessed horizontal agreements arising out of unwritten understandings (i.e., meeting of minds) reflected in practices such as tacit coordination⁸, and parallel pricing,⁹ and bid rigging.¹⁰ This approach was affirmed by the Supreme Court of India in the landmark case of Excel Crop Care v. CCI,¹¹ where bid-rigging and collusive bidding in public procurement was found, in the absence of a formal/written agreement, based on the fact that the bidders had quoted identical bid prices in several renders despite differences in production costs, geographical locations, and profit margins. Horizontal agreements in contravention of the Competition Act may arise in various forms, including through one on one meetings between competitors or interactions under the aegis of industry trade bodies such as trade associations and federations, where competing members may take collective decisions.¹² Anti-competitive horizontal agreements may also take the form of algorithmic collusion (through use of algorithms by competitors for coordinating outcomes, fixing prices or other commercial decisions). Further, even standalone exchange of commercially sensitive information between competitors is likely to be seen as anti-competitive horizontal agreement by the CCI. Moreover, the increasing deployment of artificial intelligence (“AI”) in pricing, market monitoring, and business decision-making has given rise to concerns that AI systems may facilitate tacit coordination, enhance cost/pricing-related transparency amongst market players, enable enforcement/ monitoring of coordinated conduct, or otherwise increase the risk of anti-competitive outcomes.

Non-Horizontal or Vertical Agreements

The CCI has also assessed a slew of different vertical agreements including agreements between suppliers/ OEMs and their distributors,¹³ distributors and their dealers,¹⁴ and agreements of suppliers/ producers with online intermediation platforms.¹⁵ As on date, the CCI is also investigating digital market cases involving vertical restraints in agreements between the sellers on e-commerce platforms and the e-commerce platforms¹⁶ and marketplaces.¹⁷ It is pertinent to note that only those vertical agreements that cause or are likely to cause AAEC are considered to be anti-competitive. To ascertain whether vertical agreements cause or are likely to cause AAEC, the CCI adopts a rule of reason analysis to assess the implications in terms of the factors set out under Section 19(3) of the Competition Act.¹⁸

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1. Competition Act, 2002, Sec. 3.↩︎

2. Competition Act, 2002, Sec. 2(b).↩︎

3. Competition Act, 2002, Sec. 3(3).↩︎

4. Rajasthan Cylinders and Containers Ltd. v. Union of India & Anr., 2018 SCC OnLine SC 1718.↩︎

5. Competition Act, 2002, Sec. 3(4).↩︎

6. Copyright Act, 1957.↩︎

7. Patents Act, 1970.↩︎

8. Builders Association of India v. Cement Manufacturers’ Association & Ors., CCI Case No. 29/2010, Order dated 20 June 2012, Para. Available at https://www.cci.gov.in/antitrust/orders/details/738/0↩︎

9. In Re: Ministry of Corporate Affairs v. Apollo Tyres Ltd. & Ors., CCI Reference Case No. 08 of 2013. Para. 109, Available at https://www.cci.gov.in/antitrust/orders/details/765/0.↩︎

10. In Re: Cartelisation in the supply of LPG Cylinders, Suo Motu Case No. 01/2014 Para. 98-99, Available at https://www.cci.gov.in/antitrust/orders/details/722/0.↩︎

11. Excel Crop Care Ltd. & Ors. v. CCI, (2017) 8 SCC 47. Available at https://www.cci.gov.in/legal-framwork/judgements/8/0↩︎

12. See generally: Builders Association of India v. Cement Manufacturers’ Association & Ors., CCI Case No. 29/2010, Order dated 20 June 2012, Available at https://www.cci.gov.in/antitrust/orders/details/738/0; and Competition Commission of India v. Coordination Committee of Artists and Technicians of West Bengal Film and Television Industry & Ors., (2017) 5 SCC 17, Available at https://www.cci.gov.in/legal-framwork/judgements/7/0?utm; and In Re: Bengal Chemists and Druggists Association, Suo Motu Case No. 02/2012, Order dated 11 March 2014, Available at https://www.cci.gov.in/antitrust/orders/details/818/0.↩︎

13. See generally: Neha Gupta vs. Tata Motors, Shamsher Kataria v. Honda Siel Cars India Ltd. & Ors., Case No. 03/2011, Order dated 25 August 2014, Available at https://www.cci.gov.in/antitrust/orders/details/848/0; and FX Enterprise Solutions India Pvt. Ltd. v. Hyundai Motor India Ltd., Case Nos. 36 & 82 of 2014, Available at https://www.cci.gov.in/antitrust/orders/details/791/0↩︎

14. In Re: M/s K.C. Marketing Vs. OPPO Mobiles MU Private Limited. Case No. 34 of 2018. Available at: https://www.cci.gov.in/antitrust/orders/details/224/0↩︎

15. Make My Trip India Pvt. Ltd. & Ors. v. Federation of Hotel & Restaurant Associations of India (FHRAI) & Ors., Case No. 14/2019; and OYO Hotels & Homes Pvt. Ltd. v. FHRAI & Ors., Case No. 16/2019. Para. 213, Available at https://www.cci.gov.in/antitrust/orders/details/1069/0.↩︎

16. National Restaurant Association of India v. Zomato Limited & Anr., Case No. 16 of 2021. Available at: 1620211652180990.pdf↩︎

17. In Re: Delhi Vyapar Mahasangh and Flipkart Internet Private Limited and Ors., Case No. 40 of 2019. Available at: https://cci.gov.in/antitrust/orders/details/110/0↩︎

18. Competition Act, 2002, Sec. 19(3).↩︎