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Anti-competitive agreements

Anti-competitive agreements

What is an Anti-Competitive Agreement –

An anti-competitive agreement is an agreement having appreciable adverse effect on competition. Anti-competitive agreements include, but are not limited to :-

(i) agreement to limit production and/or supply;

(ii) agreement to allocate markets;

(iii) agreement to fix price;

(iv) bid rigging or collusive bidding;

(v) conditional purchase/ sale (tie-in agreement);

(vi) exclusive supply/distribution agreement;

(vii) resale price maintenance;

(viii) refusal to deal.

Section 3 of the Competition Act, 2002 contains provisions regarding anti-competitive agreements.

It is provided under Section 3(1) 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. Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void.

Section 3(3) provides 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:

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.

For the purposes of this sub-section, “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;

Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including—

(a)  tie-in arrangement;

(b)  exclusive supply agreement;

(c)  exclusive distribution agreement;

(d)  refusal to deal;

(e)  resale price maintenance,

shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.

Definition of related terms –

(a)  “tie-in arrangements” includes any agreement requiring a purchaser of goods, as a condition of such purchase, to pur­chase some other goods;

(b)  “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;

(c)  “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;

(d)  “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;

(e)  “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;

Non-applicability of Section 3 of the Competition Act, 2002 –

(i)  the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under—

(a)  the Copyright Act, 1957 (14 of 1957);

(b)  the Patents Act, 1970 (39 of 1970);

(c)  the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);

(d)  the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);

(e)  the Designs Act, 2000 (16 of 2000);

(f)  the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000).

(ii)  the right of any person to export goods from India to the extent to which the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for such export.

Anti-competitive agreements

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