Section 3 of the competition act

1. LAW
COMPETITION LAW
Horizontal agreements under Competition Act
2002

2. Q1: E-TEXT
Module ID: 11 Horizontal Agreements under Competition Act, 2002
Module Overview:
This module will deal with the horizontal agreements covered under the Competition Act,
2002. The module aims to cover the different types of horizontal agreements;describe the
standard of proof for analysing horizontal agreements;discuss the assessment of appreciable
adverse effect on competition due to horizontal anticompetitive agreements;describethe
penalty for entering into such agreements and other important facets of such agreements
covered under the Competition Act in India.
Subject Name: Law
Paper Name: Competition Law
Module ID:11
Pre-requisites:
The readers should have basic knowledge aboutthe importance of competition law and types
of activities which are generally regulated under the competition law. Further, readers are
expected to know the basics of the anticompetitive agreements including types, cartel
conduct, standards of proof and leniency programme to detect cartels. Familiarity with the
reasons for the transformation from the earlier MRTP regime to the present Competition Act
in India will help the readers better understand the contents of this module.
Objectives:
It is important to understand as to why and how collusion between businesses can be harmful
for the consumers and the economy. The objective of regulation of horizontal anticompetitive
agreements is to regulate the collusive practices like price fixing cartels which can raise prices
and are harmful for the consumers. The readers are expected to appreciate the role
competition law can play in regulation horizontal anticompetitive agreements including
cartels which can have pernicious effects on the consumers and the economy. Through the
discussed recent case law related to distribution of drugs, distribution of movies, cement
cartelisation, bid rigging in public procurement, etc., the reader can easily relate the
importance of regulation of cartels and the benefits consumers gain through such control of
anticompetitive practices.
Keywords:
Horizontal agreements, Cartel, Bid rigging, Appreciable adverse effect on competition
(AAEC), CCI.
Module Introduction:
The Indian Competition Act regulates three types of practices: anti-competitive agreements,
abuse of a dominant position and combinations (ie, mergers, acquisitions, and
amalgamations). Broadly, anticompetitive agreements can be divided into horizontal and
vertical agreements. Horizontal agreements which are generally between the competitors at
the same level of doing business can be in different forms like price fixing, controlling
production or quantity or allocating markets. The Act, like the contemporary international
approaches towards the regulation of cartels, also incorporates leniency provisions for the
detection of the cartels.
Learning Outcomes:
Through this module, the readers are expected to understand the provisions related to
horizontal agreements in the Competition Act, including:
v Types of horizontal agreements covered under the Competition Act, 2002
v Provisions regarding Cartels, Joint Ventures and Bid rigging

3. v Standard of proof for analysing horizontal agreements
v Assessment of appreciable adverse effect on competition
v Leniency provisions under the Competition Act
1. MRTP Overview
India was among the first developing countries to have a competition law in the form
of the erstwhile Monopolies and Restrictive Trade Practices (MRTP) Act, 1969i
.
Anticompetitive agreements were also covered under the erstwhile MRTP in India.
MRTP Act used restrictive trade practices (RTPs) as the nomenclature to define such
type of practices. Under MRTP, restrictive trade practice was defined as a trade
practice which has or may have the effect of preventing, distorting or restricting
competition. Cartels which are pernicious form of horizontal agreements were not
defined under the MRTP Act. As decided by Supreme Court in a case discussed in
detail below, no extraterritorial jurisdiction was given toMonopolies and Restrictive
Trade Practices Commission (MRTPC), so it was unable to take action against cases
which emerged outside India having an adverse effect on competition in
India.MRTPC was only empowered to pass and cease and desist orders and it was not
empowered to levy fines and penalties on the violators.
MRTP Act was the law depicting command and control regime in India as was
evident from various provisions like registration of agreements and dominance per se
being considered bad. Section 35 of the MRTP Act, 1969 required every agreement
relating to Restrictive Trade Practices falling within one or more of the categories
enumerated in Section 33(1) of the Act to be furnished for registration within 60 days
of the making of such agreement. The dawn of new competition law in India in 2003
has seen not only the nomenclature change but change in the philosophy of the law
which is in tune with the times and international jurisprudence.
2. Anticompetitive Agreements under the Competition Act
The term ‘agreement’, has been defined broadly in the Competition Actii
. It extends
to a mere ‘arrangement’, ‘understanding’ or ‘action in concert’, none of which need
be in writing or enforceable by law. In a caseiii
, the CCI said that agreement also
includes anticompetitive practice which in this case was the anticompetitive practice
of not offering discounts on the maximum retail price (MRP) of the drugs to the
consumers.The necessity for a broad definition of the term agreement has been aptly
described by Lord Denning in an old caseiv
“People who combine together to keep up prices do not shout it from the
housetops. They keep it quiet. They make their own arrangements in the
cellar where no one can see. They will not put anything into writing nor even
into words. A nod or wink will do.”
Section 3(1) of the Competition Act lays down that 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. The Act prohibits an anti-competitive agreement and
declares that such an agreement shall be voidv
.
3. Horizontal Agreementsunder the Competition Act
The earlier module briefly explained the distinction between horizontal and vertical
agreements which can have anticompetitive effects in the market. Though the

4. Competition Act itself does not explicitly classify agreements intohorizontal and
vertical agreements, the language used in clauses (3) & (4) of section 3 of the Act
clearly indicates this classification. Section 3(3)vi
of the Competition Act deals with
the horizontal agreements as it covers the agreements between entities engaged in
identical or similar trade of goods or provision of services. It also includes cartels
which will be covered in detail below. The section covers:
a. agreement entered into between enterprises or associations of enterprises or
persons or associations of persons or between any person and enterprise
b. practice carried on by any association of enterprises or association of persons
c. decision taken by any association of enterprises or association of persons
From the above it is clear that section 3(3) of the Act not only covers agreements
entered into between enterprises or associations of enterprises but also the practice
carried on or decision taken by any association of enterprises engaged in identical or
similar trade of goods or provision of services.
In Re Bengal Chemists and Druggists Association(BCDA) case, CCI held that all
actions and practices of BCDA including those relating to issues such as alleged
fixation of trade margins, issuing circulars directing its retailer members not to give
discount on the MRP in the sale of medicines to consumers, conducting raids in order
to ensure strict compliance of its directives, carrying out vigilance operations to
identify the retailers defying the direction issued by it, forcing the defiant members to
shut their shops as a punishment measure etc. would fall squarely as ‘practice carried
on’ or ‘decision taken’ by an ‘association of enterprises’ under Section 3(3) of the
Act.
4. Types of Horizontal Agreements under the Competition Act
The agreements between firms at the same level of production chain are called
horizontal agreements and are covered under section 3 (3) of the Act. As discussed in
the earlier module, horizontal agreements are often due to collusion which can be
explicit or implicit. Collusion implies an attempt by competing firms to recognise
their interdependence and attempt to act together rather than compete and can be
viewed as a move towards joint profit maximisation, normally by controlling the
supply of commodities. Section 3(3) of the Competition Act enlists four broad
classifications of horizontal agreements which are presumed to cause an appreciable
adverse effect on competition (AAEC) in India. Further, this section will describe
these four types of horizontal agreements in details with relevant decided cases in
India.

5. Figure: Types of Horizontal Agreements under section 3(3) of the Indian Competition
Act
4.1 Agreements regarding Prices
A price fixing agreement occurs when competitors make written, informal or
verbal agreements or understandings on prices for selling or buying goods or
services, minimum prices, a formula for pricing or discounting goods and
services, rebates, the magnitude of profit margins, the level of price
increases,and allowances or credit terms. As discussed in the previous
module, agreements related to fixing prices are called naked restraints and are
given harsh treatment by the competition authorities worldwide. As would be
discussed in detail below, the Competition Act also presumes that price
fixing agreements have adverse effect on competition.
4.2 Agreements regarding Quantity / Quality
As discussed in previous module, output or product restriction can be
exercised in various ways including limiting or controlling production,
Fixing Trade Margins and other anticompetitive practices in
distribution for Drugs in India
In M/s Peeveear Medical Agencies, Kerala v. All India Organization of
Chemists and Druggist (AIOCD) and Ors., CCI found All India
Organization of Chemists and Druggists (AIOCD) guilty for fixing trade
margins and limiting and controlling the supply of drugs in the market.
CCI held that AIOCD because of its position as an apex body of
chemists and druggists is having full control over the stockists / retailers
of drugs and medicines all over the country and is able to continuously
engage in limiting and controlling the supply and market and influencing
the prices of the drugs and pharmaceutical products through
anticompetitive practices like insisting upon NOC for appointment of
stockists, fixation of trade margins etc.
In Re Bengal Chemists and Druggists Association(BCDA) case,BCDA
was alleged of issuing circulars which directed the retailers not to give
any discount to the consumers. The CCI observed that the activities of
BCDA inter alia to direct its members to sell drugs only at their MRP is a
palpable anti-competitive conduct and activities of the BCDA are in
conflict with the objects of the competition law as they cause restraint of
trade, stifle competition and harm the consumers.CCI imposed a penalty
of Rs 18.38 crores on BCDA and its office bearers and also directed the
BCDA and its office bearers and executive committee members to
cease and desist from indulging in such anticompetitive practices.

6. supply, markets, technical development, investment or provision of services.
By controlling the supply or production of goods or services, the cartel is able
to, indirectly, increase prices to maximise their profits.In Builders
Association of India v. Cement Manufactures case, CCI directed the cement
manufacturers to cease and desist from indulging in activities relating to
agreement, understanding or arrangement on prices, production and supply of
cement in the market.
4.3 Market Allocation
Market sharing, or market allocation, is where competitors agree to divide up
markets between themselves. This could be by allocating customers, products
or geographic regions to each other.As discussed in previous module, market
allocating agreements are considered as one of the most restrictive
anticompetitive practices, as they do not leave any room for competition in
the relevant market and are considered per se illegal in most jurisdictions.
Section 3(3)(c) enlist horizontal agreements which are aimed at sharing 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.
4.4 Bid Rigging
The Act provides a definition for bid rigging and it covers agreements having
effect of eliminating or reducing competition for bids or adversely affecting
or manipulatingthe process for bidding vii
.Bid riggingcan cause serious
economic harm as it increases prices artificially, lowers quality and leads to
loss of taxpayers' money. As described in the previous module, there can be
various ways by which bids can be rigged. The bid rigging and collusive
bidding is done to support the cartel member that has been designated to
Cases Related to Films Distribution decided by CCI
CCI found North Indian Motion Pictures Association (NIMPA) guilty of
anti-competitive conduct of imposing compulsory registration of films
before their release and refusing to register films.The CCI held that the
conduct of NIMPA in refusing to register the film in the name of Eros
International Ltd., and not allowing it to exhibit the film by instructing its
members was restrictive in nature. The Commission also ruled that the
compulsory registration of the film with the trade association was an in-
built pressure on the distributor to register its film with the concerned
association as the film could not be released without registration.
In another case the CCI observed that film distribution associations
like KFCC, NIMPA, CCCA, MPA, FDA and Telangana Telugu Film
Distributors Association insist for registration of films before their
release in their territories and holds that such act limit the supplies of
films in different territories and contravene the provisions of section
3(3)(b) of the Act. Such acts are anticompetitive from the aspect that
these actions restrict competition between members and non-
members.

7. ‘win’ the tender bid. Thus, other cartel members may refrain from bidding,
withdraw their bid, or submit bids with higher prices or unacceptable terms.
Competition in a market can be restricted in various other ways of entering into
horizontal agreements which can adversely affect competition in the market. The Act
enlists four types of horizontal agreements as described above. Other examples of
horizontal anticompetitive agreements may be agreements among competitors such as
price guidelines or recommendations, joint purchasing or selling, setting technical or
design standards, and agreement to share business information.
5. Cartelsunder the Competition Act
As also described in the previous modules, Cartels are one of the egregious
anticompetitive practices undertaken by market players. Fighting cartels is on the
priority list of competition authorities worldwide because of their nature and the
effects they have on the consumers and the economy. Unlike the erstwhile MRTP
Act, the Competition Act defines cartels. The main ingredients of the definition of the
cartelviii
provided under the Act are:
i. an agreement which includes arrangement or understanding;
ii. the agreement is amongst producers, sellers, distributors, traders or
service providers i.e. parties engaged in identical or similar trade of goods
or provision of services, and
Bid Rigging in Public Procurement in Railway Tenders
In asuo moto case taken by CCI, the Indian Railways floated tenders for
procurement of feed valves used in diesel locomotives, it was noticed that
all the three bidders quoted identical rates of Rs. 17,147.54 for feed
valves pieces and the quoted rate was further found to be 33% higher
than the last purchase rates. CCI found that the bidders had indulged in
bid-rigging and collusive-bidding in contravention of the provisions of
section 3(1) read with section 3(3) (a) and 3(3) (d) of the Act.
Penalty on Suppliers of Food Preservatives to FCI
In Re: Aluminium Phosphide Tablets Manufacturerscase related to the
allegations of anti-competitive acts and conduct in the tender for
procurement of Aluminium Phosphide Tablets (ALP) required for
preservation of central pool food grains by Food Corporation of India.In
this case,CCI taking suo-motto cognizance from a letter sent by the
Chairman of Food Corporation of India (FCI), imposed a total penalty
of317 crores on three companies supplying aluminium phosphide tablets
(used for storing food grains) to the Food Corporation of India (FCI) for
limiting the supply of the said product in the relevant market under
Section 3(3)(b) and for manipulating the bidding process under Section
3(3)(d) of the Act.

8. iii. the agreement aims to limit, control or attempt to control the
production, distribution, sale or price of, or, trade in goods or provision
of services.
Thus, cartel is one type of horizontal anticompetitive agreement provided under the
Act and is presumed to have an appreciable adverse effect on competition. A cartel is
said to exist when two or more enterprises enter into an explicit or implicit agreement
to fix prices, to limit production and supply, to allocate market share or sales quotas,
or to engage in collusive bidding or bid-rigging in one or more markets.
6. Exceptions & Exclusion
Under the Competition Act, there are certain provisions which provide for the
exemptions and carve out exclusion from the provisions of the horizontal agreements.
These provisions are as follow:
a. Efficiency enhancing joint ventures are not treated as illegal.As per the proviso
to section 3(3) of the Act, the prohibition on horizontal agreements does not
apply to joint ventures if such joint ventures increase efficiencies in production,
supply,distribution, storage, acquisition or control of goods or provision of
services.
b. Section 54 of the Act states that by the Central Government’s notification,
certain classes of enterprises may be exempted from the purview of the Act. The
government can exempt any class of enterprise in public interest or security of
State, any practice or agreement arising out ofinternational treaty and any
enterprise performing sovereign functions.
For example, under this provision, the liner shipping agreements, which are
generally horizontal in nature and aim at fixing freight rates passenger fares over
different shipping routesalso amongst other things, were given exemption for
one year in Indiaix
in 2013.
c. Export cartels are exempted under the provisions of the Actx
. Since exports do
not impact markets in India, agreement between exporters, in spite of being
horizontal, are exempted. Such exemption to export cartels is provided in laws of
various countries.
d. Section 3 (5) of the Act states that provisions of section 3 would not restrict the
right of any person to restrain any infringement of, or to impose reasonable
conditions, as may be necessary for protecting his rights conferred upon him
under certain Acts. These Acts are the Copyright Act, 1957, the Patents Act,
1970, the Trade Marks Act, 1999, the Geographical Indications of Goods
(Registration and Protection) Act, 1999, the Designs Act, 2000 and the
Semiconductor Integrated Circuits Layout Designs Act, 2000. Thus, the law
recognises the special position of intellectual property rights and in order to
facilitate their protection, it permits reasonable restrictions in the agreements
imposed by their owners for the protection of intellectual property rights under
specified Indian IP lawsxi
.
e. The activities of the Government of India relatable to “sovereign functions”,
including all activities carried on by departments of the Central Government
dealing with defence, space, atomic energy and currency, are outside the scope
of the Competition Act.
7. Joint Ventures
The proviso to section 3(3) states that “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 ,

9. distribution, storage, acquisition or control of goods or provision of
services.” This gives an exemption for joint ventures.
The term ‘joint venture’ implies a positive arrangement which is aimed at increasing
the synergies and efficiencies of the parties to the joint venture. Such exemption to
joint ventures is justifiable economically also and it is important for enterprises to
enter into arrangements which enhances their efficiencies and is beneficial to the
enterprises. Such efficiencies can lead to joint research & development, innovation,
economies of scale & scope and can ultimately be beneficial to the consumers.
8. Standard of Analysis
Horizontal Agreements are presumed to have an appreciable adverse effect on
competition under the Competition Act. The onus of proof is on the person or the
enterprise concerned to prove that the agreement does not fall under the prohibited
category. The presumption contained in section 3(3) of the Act is rebuttable
and the opposite parties may produce evidence to controvert the presumption
contained therein.xii
It is pertinent here to mention the observations of CCI regarding
the burden of proof in a recent case dealing with fixing of prices of drugs. The CCI
observedxiii
:
“Once existence of the prohibited agreement, practice or decision
enumerated under section 3(3) is established, there is no further need
to show an appreciable adverse effect on competition because in such
a case, a rebuttable presumption of law is drawn that such conduct
has an appreciable adverse effect on competition and is therefore
anti-competitive. In effect, the onus of proof shifts on to the opposite
parties to show that the impugned conduct does not cause an
appreciable adverse effect on competition.”
Cartels, by their very nature are secretive and thus it is difficult to find the direct
evidence of their presence. The orders of the CCI clearly point that CCI relies on
circumstantial evidence, both economic and conduct-based, to reach its decision on
the existence of a cartel agreement. It can be seen with time CCI is adopting a more
economics based analysis. In two of the early cases, the tyre cartel casexiv
and
Deutsche Bankxv
, the CCI held that the existence of an agreement must be established
‘unequivocally’. In these cases it appears that CCI was following the standard of
‘beyond reasonable doubt’ for proving the existence of an agreement. Later, in the
soda ash cartel and shoe cartel casexvi
, the CCI observed that the standard of proof
required for establishing the existence of an agreement is one of ‘balance of
probabilities’. Circumstantial evidence concerning the market and the conduct of
market participants may also establish an anti-competitive agreement and suggest
concerted actionxvii
.

10. From the decided cases till date, it can be seen that CCI examines conduct based as
well as economic evidence in cases related to horizontal agreements. Example of
conduct based evidence examined by CCI include evidence of meetings between
competitors, doubtful sharing of documents, similar or identical bidding prices,
membership and role of trade associations and any history of cartelisation in India or
other jurisdictions. Example of economic evidence examined by CCI include the
level of market concentration, trends in capacity utilisation by the enterprises, parallel
movement of prices, and variations in cost-structures across firms.
9. Assessing Appreciable Adverse Effect on Competition
Section 19(3) of the Act states that the CCI shall while determining whether an
agreement has an appreciable adverse effect on competition under section 3, have due
regard to all or any of the following factors, namely: -
a) creation of barriers to new entrants in the market;
b) driving existing competitors out of the market;
c) foreclosure of competition by hindering entry into the market;
d) accrual of benefits to consumers;
e) improvements in production or distribution of goods or provision
of services;
f) promotion of technical, scientific and economic development by means
of production or distribution of goods or provision of services.
As listed above, there are six different set of factors which are specifically mentioned
in section 19(3) of the Act. These factors are worded generally and thus prescribe
broad tests to be applied while assessing AAEC. Broadly these set of factors can be
divided into positive and negative factors. The first three set of factors in this list can
be classified as negative factors which mainly relate to the concept of entry barriers.
Entry barriers can be divided into structural entry barriers related to economic nature
of the industry and strategic entry barriers related to behaviour of the incumbent firms
in the market. The aim of considering the negative factors is that market players get a
level playing field. The rest of the three factors listed above can be classified as
positive factors which aim at promoting competition. It shows that CCI need to
Cement Cartel Case decided by CCI
In Builders Association of India v. Cement Manufactures case, CCI relied upon
the settled jurisprudence in other jurisdictions as well as on the guidelines of
international agencies such as the OECD in support of its decision that cartels
can be prosecuted without direct evidence of agreement and on the basis of
circumstantial evidence alone.CCI directed the cement manufacturers to cease
and desist from indulging in activities relating to agreement, understanding or
arrangement on prices, production and supply of cement in the market. Further,
CCI directed the Cement Manufacturers Association (CMA) to disengage and
disassociate itself from collecting wholesale and retail prices through the
member cement companies and also from circulating the details on production
and dispatches of cement companies to its members, as sharing of prices
facilitates cartelisation. Besides these directions, heavy monetary penalties have
also been imposed on all the 11 major cement manufacturersas well as on the
CMA. The CCI imposed a penalty of over Rs 6,000 crore on 11 leading cement
producers after finding them guilty of forming cartels to control “prices,
production and supply” of cement in the market.

11. contemplate as to whether the action leads to benefit to consumers, improvements in
production or technical or scientific improvement leading to economic development.
Thus, both set of factors need to be taken in to consideration while determining the
appreciable adverse effect on competition. CCI tends to balance these factors to
analyse whether the conduct in question is anticompetitive by causing appreciable
adverse effect on competition. As earlier discussed, the rule of presumption regarding
AAEC in section 3(3) of the Act shifts the onus on the opposite party to rebut the said
presumption. In FICCI Multiplex Association of India case, CCI has held that the
factors mentioned in section 19(3) may be considered by the Commission while
rebutting the presumption of anticompetitive agreements.
10. Extraterritorial Jurisdiction
Section 32 of the Act grants the CCI extra-territorial jurisdiction over anti-
competitive conduct which has an appreciable adverse effect on competition within
India. Any anticompetitive activity taking place outside India but having an
appreciable adverse effect on competition within India shall be subject to the
application of the Competition Act. The CCI in such cases can pass such orders as it
deems fit.
An enabling provision has been provided whereby the CCI, with the prior approval of
the Central Government, may enter into arrangements and memorandum of
understanding with foreign agenciesxviii
. CCI can enter into cooperation agreements
with competition authorities in other countries. It has entered into agreements with
jurisdictions like EU, US and Australia. Such cooperation arrangements are very
helpful as they help in mutual organisational learnings, good collaborations for
detection of anticompetitive practices and greater enforcement of competition laws.
Such cooperation and extra-territorial jurisdiction is pivotal in taking action against
Extraterritorial Jurisdiction: Comparison of MRTP and new Competition
Act in India
InAmerican Natural Soda Ash Corporation(ANSAC) v. Alkali Manufacturers
Association of India, it was held that MRTPC cannot take action against
anticompetitive conduct arising from outside India.
In 1996, an associationof Indian soda ash manufacturers complained to the
MRTPC that ANSACwas a cartel that was charginglow prices for its exports to
India. MRTPC ordered injunction against the import of ANSAC’ssoda ash. On
the issue of the extraterritorial reach, this case was clubbed with another one in
the Supreme Court. The Supreme Court did not go into the allegation of
cartelisation, but instead held that the wording of the MRTP Act did not
give the MRTPC any extraterritorial jurisdiction. The MRTPC therefore could
not take action against foreign cartels.
Section 32 of the Competition Act empowers CCI to take action over anti-
competitive conduct taking place outside India, provided the conduct causes
AAEC in India. Thus, CCI can take action against international cartels if there is
an AAEC in India.

12. hard core international cartels and in proper utilisation of cooperation agreements
with agencies of other jurisdictions.
11. Remedies
The Act gives wide discretion to CCI to frame the remedies to overcome the
anticompetitive situation due to horizontal anticompetitive agreements. Following
orders can be passed by CCI in case of anticompetitive agreements:
a) As per section 33 of the Act, during the course of inquiry, the CCI can pass
interim order restraining a party from continuing with anti-competitive
agreement.
b) CCI may direct a delinquent enterprise to discontinue and not to re-enter
anticompetitive agreement.
c) CCI may also direct modification of such anticompetitive agreement so as to
remove the anticompetitive effects.
d) CCI may impose a penalty up to 10% of the average turnover for the last
three preceding financial years of the enterprise.
e) Section 27 (b) of the Competition Act, 2002 distinguishes between cartel and
other anticompetitive agreements in terms of imposition of penalty. In case of
a cartel, the CCI can impose on each member of the cartel, a penalty of up to
three times its profit for each year of the continuance of such agreement or up
to ten percent of its turnover for each year of continuance of such agreement,
whichever is higher.
f) Section 48 of the Act incorporates individual liability and provides for
liability of individuals who were actively and/or passively involved in the
contravention of the provisions of the Act by the company that they were in
charge of, and wereresponsible for the conduct of the business of the
company.
g) CCI can 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
h) CCI may pass such other order or issue such directions as it may deem fit.
The enforcement of cartels is a civil law process under the Act. The Act does not
provide for criminal liability other than for wilful default in implementing orders of
the commission. In case of searches and seizures, certain prior procedural
permissions are required to be taken from criminal courts. There is an element of
personal liability under the Act. Further, it is pertinent here to mention that new
Companies Act provides for a bar on directorship if found guilty under an offence
under the Competition Act.xix
In Re Bengal Chemists and Druggists Associationcase, the office bearers and
executive members of the BCDA were found to be guilty of the contravention of
section 3 and penalties were levied on the BCDA and its those office bearers who
were directly responsible for running its affairs and play lead role in decision making
@10% and on the executive committee members @7%, of their respective
turnover/income/receipts.
From the above, it is clear the CCI has got wide discretion in designing the remedies
so that the anticompetitive effects of the agreements are taken care of. Unlike
erstwhile MRTPC, the CCI can impose penalties and has got the discretion to pass
any order as it deems fit in the case.
12. Leniency Provisions
The leniency programmes have been proved to be a powerful tool in the hands of
competition authorities worldwide for detecting, investigating and proving the

13. existence of cartels. Leniency provisions are based on the premise that successful
prosecution of cartels requires evidence which can be easily supplied by a member of
the cartel. Such provisions were not under the MRTP law. In India, the provisions for
lesser penalty are contained in section 46 of the Act and the framed regulationxx
. The
framed regulation provides for a full and well thought-out leniency programme and
procedure. It provides for imposition of a lesser penalty, if any producer, seller,
distributor, trader or service provider included in any cartel, which is alleged to have
violated the provisions of the Competition Act, with respect to anticompetitive
agreements:
a) has made a full and true disclosure in respect of the alleged violation;
b) such disclosure is vital;
c) such party continues to co-operate with the CCI till the completion of the
proceedings before the CCI.
d) the disclosure should be made before the report of the investigation by the
Director General, as directed by the CCI, has been received.
As per the regulations, “vital disclosure” means full and true disclosure of
information or evidence by the applicant to the Commission, which is sufficient to
enable the Commission to form a prima-facie opinion about the existence of a cartel
or which helps to establish the contravention of the provisions of section 3 of the
Actxxi
. As per the framed regulation, the first applicant might be granted up to 100%
immunity, the second applicant up to 50% and the third applicant up to 30%
immunity, if the prescribed conditions are fulfilled. The provisions contain a
discretionary immunity even if all other conditions were fulfilled. This seems to be
the main reason for non-acceptability of leniency programme in India till date.
13. Summary
This module dealt with the provisions related to the horizontal agreements under the
Competition Act in India. Horizontal agreements are the agreements between the
competitors at the same level and can be in different forms like price fixing,
controlling quantity or quality, market allocation and bid rigging. Keeping in view
their nature and effect on competition, such agreements are presumed to have an
appreciable adverse effect on competition. Cartels are also included in such
agreements. Act rightly recognises and exempts situations where there can be
cooperation agreements or joint ventures which have efficiency enhancing effects.
The Act also contains provisions for the leniency which are in line with the
international developments to devise an effective framework for detecting cartels.

14. i
The new competition regime, with a more competition infusing approach and detailed
principles, dawned with the enactment of the Competition Act, 2002 in India. The MRTP Act,
1969 was repealed in 2009 and the Competition Act became fully functional in 2009.
ii
Section 2 (b) of Indian Competition Act, 2002 defines agreement as:
"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
iii
In Re Bengal Chemists and Druggists Association, (Suomoto Case No. 02 of 2012 and Ref.
Case No. 01 of 2013) CCI order dated 11/03/2014.
iv
RRTA v. W. H. Smith and Sons Ltd.,
v
Section 3(2) of the Competition Act, 2002
vi
Section 3(3) of the Competition Act, 2002 states that “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.”
vii
Explanation to the section 3(3) "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.”
viii
Section 2 (c) of the Competition Act, 2002 defines cartel as: “"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. Since the
enforcement of Competition Act, a large number of cartel cases have been decided by the
CCI.”
ix
Ministry of Corporate Affairs Notification New Delhi, 11th
December, 2013, S.O. 3641(F),
available at: www.mca.gov.in/Ministry/pdf/so3641_11122013.pdf
x
See Section 3 (5) (ii) of the Competition Act, 2002.
xi
See Section 3 (5) (i) of the Competition Act, 2002.
xii
FICCI Multiplex Association of India v. United Producers/Distributors Forum and Ors, CCI
order dated25/05/2011
xiii
In Re Bengal Chemists and Druggists Association, (Suomoto Case No. 02 of 2012 and Ref.
Case No. 01 of 2013) CCI order dated 11/03/2014.
xiv
All India Tyre Dealers Federation v. Tyre Manufacturers, CCI order dated 16/01/2013

15. xv
NeerajMalhotra v. Deustche Post Bank Home Finance Ltd. &Ors., CCI order dated
02/12/2010
xvi
M/o Commerce, Govt. of India v. M/s Puja Enterprises &Ors., CCI order dated 06/08/2013
xvii
All India Tyre Dealers Federation v. Tyre Manufacturers, CCI order dated 16/01/2013
xviii
See section 18 of the Competition Act, 2002
xix
For details, see Schedule V of the Companies Act, 2013
xx
Competition Commission of India (Lesser Penalty) Regulations, 2009
xxi
Regulation 2(i) of the Competition Commission of India (Lesser Penalty) Regulations,
2009