The document discusses anti-competitive agreements under the Competition Act in India. It covers what the Act prohibits, including anti-competitive arrangements between businesses like cartels that fix prices or allocate markets. Horizontal agreements between competitors like price fixing are prohibited. Vertical agreements between businesses at different levels can also restrict competition. The Indian Contract Act also addresses restrictive agreements but has exceptions for reasonable restraints like non-compete clauses for outgoing business partners. The Competition Act aims to promote fair competition for consumer welfare while preventing monopolies formed through anti-competitive collusion.

1. Anti Competitive Agreements
under the Competition Act
By
Upasana Venkatasubban
Legal Manager
EscrowTech India Pvt Ltd

2. Introduction
Competition laws are introduced to regulate the manner
in which businesses are conducted in India, so as to
create a level playing field with effective competition in
the market.
The underlying intent for this statute is for businesses to
compete on merit, and not with the aid of anti-
competitive agreements or conduct.

3. What does the Competition Act Cover?
The Competition Act is not intended to prohibit competition in the market. What the Act
primarily seeks to regulate, are the practices that have an adverse effect on competition
in the market in India. In addition, the Act intends to promote and sustain competition in
markets, protect consumer interests, and ensure freedom of trade in India.
At the heart of the Act are various activities that will be prohibited as being anti-
competitive. The activities comprise:
• (a) Anti-competitive arrangements;
• (b) Abuse of dominant position; and
• (c) Mergers and acquisitions that have an appreciable adverse effect on competition in
India.

4. Anti-Competitive Arrangements
Anti-competitive arrangements are those that have as their object to, or actually
effect in preventing, restricting or distorting competition in any market in India.
Such arrangements cover not only agreements, but also decisions made by
association of persons / enterprises, as well as the conduct of parties acting in
collusion.
Adverse effect on competition refers not to a particular list of agreements, but to
particular economic consequences which may be produced by quite different sorts
of agreements in varying time and circumstances.

5. Anti-Competitive Arrangements (contd.)
It generally refers to any action which operates to the prejudice of the public
interests by unduly restricting competition or unduly obstructing due course of
trade.
Any act which essentially obstructs the free flow of commerce between the states,
or restricts, the liberty of a trader to engage in business, including restraints of
trade aimed at compelling third parties and strangers involuntarily not to engage
in any other trade, is said to have an appreciable adverse effect on competition.

6. HORIZONTAL AGREEMENTS (CARTELS)
Cartel is defined in Section 2(c) of the Competition Act. "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.
Cartels are agreements between enterprises (including a person, a Government
department and association of persons/enterprises) not to compete on price,
product (including goods and services) or customers. The objective of a cartel is
to raise price above competitive levels, resulting in injury to consumers and to
the economy. For the consumers, cartelization results in higher prices, poor
quality and less or no choice for goods or/and services. An important dimension in
the definition of a cartel is that it requires an agreement between competing
enterprises not to compete or to restrict competition.

7. Types of Horizontal Agreements
• Which directly or indirectly determine purchase or sale prices
Price fixing either directly or indirectly is prohibited. Agreements that are entered
into with the sole purpose of defeating competition through fixing prices are
prohibited as it is not in the best interests of the consumer. The prohibition under
this head relates to price fixing and pricing methods.
• Limit or control production, supply, markets, technical development,
investment or provision of services
Any agreement that stipulates the amount of production or restricts the market
where the goods or services are to be offered is prohibited.

8. Types of Horizontal Agreements (Contd.)
• Share 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
If the retailers/distributors mutually enter into an agreement dividing the market by
geographical areas amongst themselves and supplying only to those customers, or if they
mutually agree to offer only particular goods or services to the deterrence of the
consumers, such an agreement is prohibited.
• Directly or indirectly results in bid rigging or collusive bidding
The explanation to Section 3(3) defines bid rigging as any agreement that has the effect of
eliminating or reducing competition for bids or adversely affecting or manipulating the
process for bidding. Collusive bidding though not defined means an attempt by conspiring
bidders to circumvent rules and laws laid down to ensure free and competitive bidding.

9. VERTICAL AGREEMENTS
Vertical restraints are agreements or concerted practices entered into between
two or more companies each of which operates, for the purposes of the
agreement, at a different level of the production or distribution chain, and
relating to the conditions under which the parties may purchase, sell or resell
certain goods or services.
Since there is a great chance that vertical anti-competitive agreements may not
be anti-competitive, regulators require a systematic economic assessment of
whether pro-competitive or anti- competitive effects of a vertical agreement will
dominate when these agreements involve enterprises with a significant market
share.

10. Types of Vertical Agreements
• Tie-in arrangement - includes any agreement requiring a purchaser of goods, as a
condition of such purchase, to purchase some other goods;
• 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;
• 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;
• 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;
• 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.

11. INDIAN CONTRACT ACT, 1872
The Indian Contract Act follows the general principle of common law regarding
agreements restricting trade or profession and declares all agreements in
restraint of trade as void subject to an exception.
• Agreement in Restraint of Trade are Void – Every agreement by which any one
is restrained from exercising a lawful profession, trade or business of any kind,
is to that extent void.
• Rights of Outgoing Partners to Carry on Competing Business- A partner may
make an agreement with his partners that on ceasing to be a partner, he will not
carry on a business similar to that of the firm within a specified period or within
specified local limits

12. INDIAN CONTRACT ACT, 1872 (Contd.)
• Sale of Goodwill after Dissolution - Any partner may, upon the sale of the
goodwill of the firm, make an agreement with the buyer that such partner will
not carry on a business similar to that of the firm within a specified period or
within specified local limits.
The Act envisages such contract at various stages of the partnership i.e. while it
is commenced, while it is continuing, upon anticipation of the dissolution or at
the time of dissolution.
Therefore, all agreements in restraint of trade will be valid provided they are
reasonable in the interests of the parties and in the public interest.

13. Conclusion
Anti-competitive agreements do harm the competition in the market as it could
lead to monopoly or provides unfair advantage to the business enterprise.
However, these competitive agreements are not always injurious to business and
at times such agreement may result in consumer welfare.
The role of competition commission is of great importance with respect to anti-
competitive agreements.
An enterprise cannot form an agreement that prohibits its competitors from
entering or stopping him to have unfair advantage of the market that will
ultimately harm the consumers.