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10/8/2014 India Law Journal
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The Cement and Tyre Cartels: What India
Can Learn from the US and EU
Board of Editors
(in alphabetical order) Priya Urs and Rishi Shroff offer a critique
of the manner in which the Competition
Commission of India (hereinafter “the
Advisory Council Commission”) has -
Bishwajit Bhattacharyya tackled the issue of how to take action against cartels under Section 3 of
the Competition Act, 2002 (hereinafter “the 2002 Act”) and how the
C.R.Dua commission could take a leaf out of their US and EU counterparts.
Diljeet Titus
Introduction
Hemant Batra
John Callagy Anti-competitive agreements are most often entered into among competitors in
standard commodity markets like sugar, cement and steel, where price is the
K.K.Lahiri principal criterion for competition, and which are important constituents of a
nation’s economy. This is chiefly because (unlike in the cases of other forms of anti-
K.S.Bagga
competitive conduct) the possibility that government intervention may itself have
Lalit Bhasin anti-competitive effects is foreclosed. Simply stated, competitors in any market are
supposed to compete for the business of their customers, not secretly co-operate
Dr. Linda S. Spedding
to distort market forces and competition.
Martin Rogers
Having rendered two entirely different judgments in two substantially similar cases -
M.L.Sarin the Cement and Tyre cases – the Commission has introduced an element of
uncertainty in the application of Section 3 in the future. Focusing chiefly on the
Prof. V.S.Mani
ambiguity resulting from these and related cases, the authors have excluded from
Rajiv Atmaram the scope of this article other kinds of agreements covered by Section 3,
specifically, vertical agreements and cases of bid rigging.
Rajiv K.Luthra
Rajiv Nayar
Richard Whish has offered countries with relatively new competition regimes a way
forward in enforcing their government’s competition policies. The development of
an effective competition culture, he suggests, must begin with cartel enforcement,
Editors particularly in the contemporary era in which cartelisation is a force that operates on
a global scale. While competition law in India took the form of the Monopolies and
Gitanjali Saraf
Restrictive Trade Practices Act, 1969, initiative for reform began to be considered
Vikramaditya Rai seriously only in 1999, when the Raghavan Committee found this statute lacking in
its ability to address anti-competitive
Sagar S.P. Singamsetty
1. Supra note 6, at 141.

Founder & Managing Editor 2. R. Whish, Control of Cartels and other A nti-Competitiv e A greements COMPETITION LA W TODA Y –
CONCEPTS, ISSUES A ND THE LA W IN PRA CTICE 40, 40-1 (V. Dhall ed., New Delhi: Oxford
Vikrant Pachnanda Univ ersity Press, 2008) at 42.
3. Order No. 1/9/99-CL-V of 25th October 1999.

Associate Editors
practices in the contemporary era of Indian liberalisation. The publication of this
Naina Pachnanda
Report led to the enactment of the 2002 Act, which, heeding the advice of the
Shashank Manish Committee, aimed more ambitiously to prevent anti-competitive practices that
adversely impact economic welfare. The procedure for enforcement under the new
Vishwam Jindal
statute involves a rule of reason analysis, limiting the use of the more limited per se
http://www.indialawjournal.com/volume6/issue-2/article4.html 1/14
statute involves a rule of reason analysis, limiting the use of the more limited per se
rule to hard-core anti-competitive behaviour, including cartelisation.
Editorial Team
Anti-Competitive Agreements under Section 3
Conference Corner
Internship Corner Anti-competitive agreements are prohibited under Section 3 of the Act, providing
that any agreement in its contravention shall be void. The term ‘agreement’ has
Scholarship Corner been clarified in Section 2(b), which adopts a broad definition, offering competition
authorities a degree of ease in prosecuting anti-competitive behaviour like
cartelisation, in line with more advanced competition regimes in other parts of the
world. This definition shall be evaluated in greater detail in the next part of this
article, in comparison with equivalent provisions under US and EU law. The Act
defines the term ‘cartel’ as follows, characterising it as a form of anti-competitive
conduct that harms both consumers and the economy:
“cartel” includes an association of producers, sellers, distributors, traders or

service providers who, by agreement among themselves, limit, control or
attempt to control the production, distribution, sale or price of, or, trade in
goods or provision of services.
The application of Section 3 involves the determination of whether an agreement

has an appreciable adverse effect on competition, a term that is not defined in the
Act. Section 19(3) provides some assistance, offering a number of factors that
consider both beneficial and
4. A . Kumar, The Ev olution of Competition Law in India COMPETITION LA W TODA Y – CONCEPTS,

ISSUES A ND THE LA W IN PRA CTICE 479, 480 (V. Dhall ed., New Delhi: Oxford Univ ersity Press,
2008).
5. Ibid. at 495.
7. S. 3(2), Competition A ct, 2002 [hereinafter ‘2002 A ct’].
8. Section 2(b) states: ‘”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.
See T. Ramappa, COMPETITION LA W IN INDIA : POLICY, ISSUES A ND DEVELOPMENTS (New
Delhi: Oxford Univ ersity Press, 2006) at 51.
9. Section 2(c), 2002 A ct.
10. Section 19(3) states: ‘The Commission shall, while determining whether an agreement has an
appreciable adv erse effect on competition under Section 3, hav e due regard to all or any of the
following factors, namely :-(a) creation of barriers to new entrants in the mark et; (b) driv ing existing
competitors out of the mark et; (c) foreclosure of competition by hindering entry into the mark et; (d)
accrual of benefits to consumers; (e) improv ements in production or distribution of goods or prov ision
of serv ices; (f) promotion of technical, scientific and economic dev elopment by means of production
or distribution of goods or prov ision of serv ices.
harmful effects on competition. Commentators have compared this approach to the

rule of reason analysis in the US, however, as we shall discuss in the next Part, its
application by the Commission has been far from unproblematic.
The Act carves out exceptions for certain categories of horizontal agreements,
including those entered into for the purpose of research and development,
standard setting and specialisation. Yet, under Section 3(3), horizontal agreements
(as in most jurisdictions) are presumed to have an appreciable adverse effect on
competition. This clause includes cartels that undertake a number of anti-

competitive practices, and is comparable to the per se rule used by US competition
authorities. Anti-competitive agreements may also be vertical, involving a different
approach.
Inconsistencies in the Cement and Tyre Cases
In Builders Association of India (hereinafter “the Cement case”), decided in June

2012, the Commission came to the conclusion that a group of cement
manufacturers under the umbrella organisation of the Cement Manufacturers
Association (hereinafter “CMA”) had indulged in cartelisation, in contravention of
Section 3(3) of the Act. Since the cement industry was de-controlled in 1989, and
the subsequent consolidation of cement manufacturers during 2001-02, the
cement industry has been widely characterised as an oligopolistic market, operating
through anti-competitive collusion. Attempts have been made since 1991 to hold
through anti-competitive collusion. Attempts have been made since 1991 to hold
liable cement manufacturers for collusive price setting under the MRTP Act.
However, these efforts were largely unsuccessful.
In 2012, the DG inter alia found that there had been a significant rise in cement
prices over the time period under investigation, and such price increases were
attributed to more than just natural reasons, such as rise in cost of raw materials.
Relying heavily on circumstantial evidence, it concluded that market forces alone did
not determine price, with prices moving “in the same manner and same direction”
pursuant to regular meetings held by members of
11. V. Dhall, The Indian Competition A ct, 2002 COMPETITION LA W TODA Y – CONCEPTS, ISSUES
A ND THE LA W IN PRA CTICE 499, 507 (V. Dhall ed., New Delhi: Oxford Univ ersity Press, 2008).
12. See Section 3(3), 2002 A ct.
14. Section 3(4), 2002 A ct.
15. CCI, 29/2010.
16. P. S. Mehta ed., TOWA RDS A FUNCTIONA L COMPETITION POLICY FOR INDIA – A N
OVERVIEW (New Delhi: CUTS International and A cademic Foundation, 2005) at 157-9.
the CMA. Consequently, the Commission imposed a hefty cumulative fine of Rs.
6,300 crore on the parties.
In stark contrast to this decision, in October 2012, in All India Tyre Dealers’
Federation (hereinafter “the Tyre case”) the Commission found that since the tyre
manufacturing market is highly concentrated and oligopolistic in nature (thereby
making it ordinary for each party to know what the other is doing) meetings held
by the manufacturers did not amount to cartelisation under Section 3(3) of the
Act.
It is settled law in a variety of jurisdictions, including India, that price parallelism

between parties is not enough to prove a claim for cartelisation. Indian law, like the
law of the European Union and the United States, requires “plus factors” in addition
to just similarity in pricing to be punishable for cartelisation under Section 3(3) of
the Act. For this reason, even a superficial examination of the Cement and Tyre
cases paints a perplexing picture.
In both cases, active industry trade associations conducted regular meetings.

Though plant capacities were much higher than what was being produced by both
cement and tyre manufacturers, they still refrained from cutting costs, with Tyre
manufacturers even being accused informally of not passing on the benefit of
excise duty reduction to consumers. In the Cement case specifically, the
Commission found that in addition to likeness in pricing due to prior consultations
between the parties, there was also capacity under-utilisation and production and
dispatch parallelism amongst them. Yet, considering similar facts in the Tyre case,
the Commission was of the view that in the absence of a more “specific pattern”
between the parties, such evidence was, by itself, not enough to infer guilt.
Some analysts have argued that in spite of the Cement and Tyre cases appearing
similar on facts, the clinching difference between the two lies in that cement
manufacturers were guilty for their post meeting conduct in price fixing, whilst it
was the case of the tyre manufacturers that India’s open door policy of tyre
imports ensured that domestic players could not indulge
17.A v ailable at http://indiatoday .intoday .in/story /competition-commission-of-india-slaps-penalty -on-

cement-cartel/1/201872.html.
18. CCI (MRTP), 20/2008.
20. A . Jones and B. Suffrin, EU COMPETITION LA W: TEXTS, CA SES A ND MA TERIA LS (4th edn.,
Oxford: Oxford Univ ersity Press, 2011) at 121.
21. Matsushita Electric v . Zenith Radio, 475 U.S. 574 (1986).
22. A . C. Matthews, The Case of Mixed Signals (December 24, 2012), av ailable at
http://www.businessworld.in/en/story page/-/bw/the-case-of-mixed-signals/693187.37489/page/-1.
in anti-competitive pricing conduct. However, in making a comparative analysis of

these cases, it is crucial to recognise the Commission’s rationale, specifically, its
reliance on circumstantial evidence in both cases to evaluate whether the
reliance on circumstantial evidence in both cases to evaluate whether the
diametrically opposite treatment in these two cases is justifiable.
The OECD Report and Circumstantial Evidence
Members of a cartel realise that their conduct is unlawful and that in the event that
they are caught, the penalty is likely to be significant. It is not surprising for cartel
participants to try and hide their anti-competitive conduct, forcing investigative
authorities to resort to circumstantial communication and economic evidence to
build and prove their case. Perhaps it is in recognition of this reality that the 2002
Act defines “agreement” broadly, bringing within its ambit informal, unwritten
arrangements and similar forms of concerted action.
The Organisation for Economic Co-Operation and Development (hereinafter

“OECD”) has published a paper in 2006, which argues that, in the likely event that
direct evidence is not available, a better practise is to use circumstantial evidence:
“holistically, giving its cumulative effect, rather than on an item-by-item basis.” The
Report observes, however, that the risk associated with the subjective application
of circumstantial evidence - such as mere proof of information exchange - is not in
itself enough to prove “agreement” between parties. Circumstantial evidence may
be relied on, but has to conclusively exclude the possibility that the acts were
independent decisions of competitors.
Remarkably, the Commission cites this Report in both the Cement and Tyre Cartel
cases, but seems to apply its recommendations selectively. An analysis of the
reasoning in these cases suggests that the Commission has failed to set a uniform
threshold to establish cartelisation. The difficulty or inability to accurately measure
whether market forces of demand and supply caused companies to respond in
prices in similar ways cannot directly lead to the inference that such market forces
did not facilitate the determination of price. Communication evidence is evidence
that cartel operators met or otherwise communicated, but does not describe the
23. A shok Chawla, av ailable at http://www.businessworld.in/en/story page/-/bw/the-case-of-mixed-

signals/693187.37489/page/-1.
24. Organisation of Economic Co-operation and Dev elopment, Prosecuting Cartels Without Direct
Ev idence of A greement (February 2006).
25. S. 2(b), 2002 A ct.
26. Organisation of Economic Co-operation and Dev elopment, Prosecuting Cartels Without Direct
Ev idence of A greement (February 2006).
27. Matsushita Electric v . Zenith Radio, 475 U.S. 574 (1986) (Supreme Court of the United States).
substance of their communications. Providing pricing information to a third party

trade association is often inadequate circumstantial evidence. Yet, in the Cement
case, the Commission found that examples of such communication were sufficient,
in spite of signs explaining that the conduct of Cement manufacturers was
consistent with their self-interests. Moreover, the oligopolistic market type and
similarity in demand and pricing of almost identical products was seen as a sufficient
justification in the Tyre case, but discarded in the Cement case. In another case, All
India Distillers’ Association v. Haldyn Glass Gujarat and Others, the Commission did
not even send the matter for further investigation by the DG in circumstances
nearly identical to the facts in the Cement case. The allegation in this case was also
of simultaneous price increase by glass bottle manufacturers, which could not prima
facie be explained by price fluctuations of raw materials, and where the market was
homogeneous and oligopolistic in nature.
Unreasonable Fines
The 2002 Act empowers the Commission, upon the discovery of a contravention of
Section, to pass “cease and desist” orders, impose civil penalties, modify
agreements or pass any other order as it may deem fit. For contraventions by
cartels the Commission may impose a maximum penalty of three times the profit or
10% of the turnover, whichever is higher, for every year of such contravention. In
this context, the imposition of a Rs. 6,300 Crore fine in the Cement case has raised
its own concerns, namely, the appropriateness of imposing a uniform penalty on all
stakeholders, the lack of guidelines or regulations for such imposition, and the
absence of a speaking order. Some analysts have argued, for example, that the
http://www.indialawjournal.com/volume6/issue-2/article4.html benchmark of the 3 times of profit under the legislative mandate indicates that the 4/14
benchmark of the 3 times of profit under the legislative mandate indicates that the
ceiling of the penalty on the basis of profits is 300%. Yet, in the Cement case, the
Commission has imposed 0.5 times or 50% of the profit as penalty, which is way
below the ceiling. Curiously, however, for the benchmark of penalty related to
turnover, the Commission has mistakenly
28. Supra note 34.

29. In Re Flat Glass A ntitrust Litigation, 385 F. 3d 350, 2004 (United States Court of A ppeal, Third
Circuit).
30. CCI, 30(146)/2008.
31. Section 27(a), 2002 A ct.
32. Section 27(b), 2002 A ct.
33. Section 27(d), 2002 A ct.
34. Section 27(f), 2002 A ct.
35. Section 27(b) prov iso, 2002 A ct.
36. Z. Mody , The Competition Commission of India’s A pproach to Penalties: The Need for Guidelines
(October 3, 2012), av ailable at http://xbma.org/forum/indian-update-the-competition-commission-of-
indias-approach-to-penalties-the-need-for-guidelines/.
interpreted the absence of discretion and computed the imposition of penalty on

the basis of turnover to be at the rate of 10% and not lesser. Yet, in other cases
such as Film and Television Producers Guild of India v. Multiplex Association of India,
the Commission found that since the contravention was “not extreme”, a symbolic
Rs. 1 Lac penalty was imposed on each of the multiplex owners. Similarly, weighing
the mitigating factors, a comparable decision was arrived at by the Commission in
FICCI Multiplex Association v. United Producers/Distributers Forum. Considering the
number of cases in which the Commission has imposed penalties in itself suggests
the need for the Commission to formulate guidelines for their computation.
Ultimately, recognizing the nascent stage of the development of competition law

that India is in, the inconsistencies in the Cement and Tyre cases raise larger
questions about the role of the Commission, and the foundations required to arrive
at its decisions. In the absence of direct proof in the investigation of cartels, going
forward, the Commission needs to address issues of uniformity and clarity in the
application of a relatively new law. Poor investigation by the DG, coupled with
uncertainty in the appreciation of evidence and imposition of penalty by the
Commission has left industry leaders and legal experts confused. The next Part of
this article seeks to juxtapose Indian law with cartel law from the United States and
European Union, which whose competition law jurisprudence is significantly more
developed.
Appreciating US and EU Law
Unlike Section 3 of Indian Act, Section 1 of the US Sherman Act is a single

sentence, which states: “every contract, combination in the form of trust or
otherwise, or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal”. Judicial interpretation over
the decades has read into this provision the entire gamut of American anti-trust law
as it is known today. In the specific context of anti-competitive conduct, American
courts have held that only those restraints that are “unreasonable” would be hit by
this legislation, and have broadly categorised investigations
37. R. Singh, A naly sing the Impact of CCI’s Order A gainst Cement Companies (June 29, 2012),
av ailable at http://indiacorplaw.blogspot.in/2012/06/analy zing-impact-of-ccis-order-against.html.
38. CCI, 37/2011.
39. CCI, 2011CompLR0079.
40. Supra note 45.
41. S. 1, Sherman A ct 1890.
into four types. First, is what is often referred to as per se illegal, where the
evidence is so strong that it is clear even without a detailed examination that the
parties involved are guilty of impeding competition. Second, a short cut “quick look
analysis” which involves a rudimentary appreciation of proof so as to create a
rebuttable presumption that competition has been affected. Third, a situation
where anti-competitive conduct is not obvious, but there still exists significant
direct evidence such as price increase and output decrease which, when
scrutinized, could establish liability. Fourth, a “rule of reason” analysis, where the
scrutinized, could establish liability. Fourth, a “rule of reason” analysis, where the
court undertakes a detailed study of the facts involved. This analysis may first
require a market to be defined, market power to be demonstrated and then to
determine whether competition has been harmed.
In United States v. Socony-Vacuum Oil Co. Inc., the Court found that parties
stabilised prices by establishing a restriction on supply in such a manner that the
purpose of their collaboration was to raise prices, and that they acted together
solely to fulfil that purpose, thereby making it a per se violation of the Sherman
Act. On the other hand, in Chicago Board of Trade v. United States, the U.S.
Supreme Court laid out the rule of reason test, taking the view that since every
contract in some way restrains trade, one needs to punish only those restraints on
trade which harm competition. In the absence of direct price fixing, the Court in
this case probed the nature and scope of harm to competition and found that
since the restriction applied only a small part of the goods and since the directive in
question had the overall effect of improving market conditions, the parties were
not punished for cartelisation.
The relevant provision under EU law, Article 101 of the Treaty on the Functioning
of the EU (hereinafter “TFEU”), as in the 2002 Act, recognises different types of
agreements that may be anti-competitive, including both horizontal and vertical
agreements. The structuring of these two provisions is considerably similar,

warranting a discussion of the manner of their implementation. Article 101(1)
prohibits collusion between undertakings which have as their object or effect the
prevention, restriction or distortion of competition within the common European
market, and which may adversely affect trade between Member States (an
42. A lcoa Steamship Co. v . Nordic Regent 326 U.S. 310 (1945).
43. 310 U.S. 150 (1940).
44. 246 U.S. 231 (1918).
additional factor not relevant in the Indian context). For this prohibition to apply,
then, the following need to be established:
i. The existence of undertakings;

ii. Collusion in the form of an agreement, decision or concerted practice;
iii. An appreciable effect on competition; and
iv. An appreciable effect on trade between Member States.
Once these are established, the agreement is declared void to the extent that its
prohibited clauses cannot be severed from the remainder of the agreement. This is
unlike its Indian counterpart which states that any agreement in contravention of
Section 3(1) shall be void in its entirety.
Article 101(3) provides for exceptions to the application of the Article 101(1)
prohibition. This envisages cases in which the beneficial aspects of the agreement
outweigh its restrictive effects. The agreement may contribute to improving
production or distribution, or to technical or economic progress. It may result in an
improvement in consumer welfare. Most importantly, the agreement must be
indispensible to the attainment of these benefits, and must not afford undertakings
the opportunity to eliminate competition in the concerned market. Initially, this
provision was used by the Commission to issue individual exemptions to
undertakings. However, subsequently, this exclusive discretion afforded to the
Commission was discarded, and national competition authorities and courts have
now been afforded a comparable power.
The initial burden of proof lies on the complainant or authority to establish a case
under Article 101(1), following which the burden shifts to the concerned
undertaking to prove the criteria for exemption under Article 101(3). The standard
of proof required by the Commission to confirm an infringement is ‘sufficiently
precise and coherent proof’. The primary problem faced by competition authorities
in the prosecution of cartels in the EU, as in India, has been in the collection of
evidence. Until the 1980s, the European Commission
45. C.F. supra note 28, at 120-1.

46. Section 3(2), 2002 A ct.
47. L. F. Pace, EUROPEA N A NTITRUST LA W (Cheltenham: Edward Elgar, 2007) at 83.
was largely unsuccessful in detecting and prosecuting cartels despite the allocation of substantial
resources, leading to a change of strategy in the 1990s.
Defining the Scope of ‘Agreement’
As is the case under Indian law, American anti-trust law requires the establishment
of an “agreement” between the parties before any claim of cartelisation can be
investigated and penalised. As has already been discussed, the Indian 2002 Act has
adopted an inclusive definition of “agreement”, and looks at it in the broadest
possible terms. An appreciation of the decisions in the Cement and Tyre cases, in
light of American case law, better highlights the conditions under which tacit
arrangements between parties could amount to agreement for the purposes of
cartel law.
In Interstate Circuit, Inc. v. United States, a group of film distributers and exhibitors
agreed to take uniform action and impose restrictions on other licensees, thereby
forcing them to raise admission ticket prices and depriving those unwilling to accept
the said restrictions from exhibiting the most popular new releases. The U.S.
Supreme court came to the conclusion that acceptance by competitors of an
invitation to participate in a plan, the necessary consequence of which, if carried
out, is restraint of interstate commerce, is sufficient to establish an unlawful
conspiracy.
However, in Theatre Enterprises v. Paramount Distributing, the Court opined that

though parties acting in unanimity may imply conspiracy, inferences must be subject
to business behavior. Parallel business behavior is not conclusive by itself, because
each of the parties may have independent and sound business reasons for acting
similarly to one another. Though the DG found circumstantial evidence of apparent
conspiracy in both the Cement and Tyre cases, the Commission failed to appreciate
that though market conditions might have forced all the players to respond to
prices like one another, this did not automatically exclude the possibility that they
might have been acting independently. This is especially true in markets for
homogenous commodities, where price movements are similar under competitive
conditions.

51. 306 U.S. 208 (1939).
52. 346 U.S. 537 (1954).
The Commission found support of meetings between parties in the Cement case,
which on facts it concluded was enough to show agreement. However, reference
may be made to Todd v. Exxon Corp., where the U.S. court of Appeal, 2nd Circuit,
dealt with sensitive pricing information being exchanged between parties, similar to
the Cement and Tyre cases. In the Cement case, the Commission found that the
exchange of pricing information within the association was sufficient to prove
complicity, without going into the actual nature of the information exchanged. In
effect, it failed to consider three crucial factors related to such information, as laid
down by the court in Todd. First, one ought to consider the time frame of the
data, with current data having greater potential to affect future prices and facilitate
price conspiracies. For example, in a case like Blomkest Fertilizer Inc. v. Potash
Corporation of Saskatchewan, the Court found that price verification merely
involved discussion as to past prices and did not therefore imply an agreement to fix
prices in the future. Second, the specificity of the data, because the greater the
specificity, the greater the possibility of its use in tacit conspiracy to stabiles prices.
Third, the public availability of the data, because public data may create a pro-
competitive effect of facilitating transparency in the market by allowing buyers to
compare products.
Article 101 of the TFEU prohibits collusion between undertakings, concerted

Article 101 of the TFEU prohibits collusion between undertakings, concerted
practices, and decisions taken by associations of undertakings. It is important to
note that, in spite of this distinction, what this provision punishes is joint and not
individual action. Section 3(1) of the 2002 Act makes mention of agreements only,
but Section 3(3) applies the presumption of collusion to agreements and decisions,
and specifically includes cartels. The principle underlying this interpretation of Article
101 is the fact that every economic operator in a market must independently frame
its policy. As a result, while the degree of collusion among entities may differ, the
element of collusion is essential to a determination under Article 101. The
provision’s inclusion of three seemingly different forms of collusion does not affect
its application. Thus, as observed by the Commission in the Anic Partecipazioni case
there is no requirement that a particular agreement fall under one of these three
categories.
53. 275 F.3d 191 (2d Cir. 2001).

54. 203 F.3d 1028 (8th Cir. 2000).
57. [1999] ECR I-4125.
What is interesting about the application of Article 101 is that, unlike competition
laws in other countries, the existence of the agreement is not difficult to establish
– it is the process of identifying the terms that restrict competition. In any case,
large undertakings which become susceptible to huge penalties are more likely to
conceal the existence of collusion altogether, instead of using Article 101(3) to
defend their actions as having beneficial effects. As a result, the burden often falls
on the Commission to establish that the market behaviour of concerned
undertakings is a reflection of anti-competitive agreement, in one form or another.
The Commission thus faces the challenge of maintaining a clear distinction between
agreements, concerted practice and decisions that are unlawful and anti-
competitive on the one hand, and policies that have been adopted independently
by each undertaking, on the other.
Expectedly, the term ‘agreement’ itself has been given a broad definition, as in the
Indian context. The definition adopted by the Commission was laid down in Bayer
AG v. Commission, and is worthy of mention:
‘the existence of of the subjective element that characterises the very concept
of the agreement, that is to say a concurrence of wills between economic
operators on the implementation of a policy, the pursuit of an objective, or the
adoption of a given line of conduct on the market’.
This definition, and the EU’s approach in general, suggests that as long as direct or
indirect evidence is suggestive of a concurrence of wills and the intentions of
parties, the form that such agreement takes is irrelevant. Even an agreement that
is no longer in operation can result in the prosecution of a cartel if its negative
effects continue to be felt in the concerned market.
In addition to explicit agreements among undertakings, the scope of Article 101(1)

has been expanded by the use of the term concerted practice – which effectively
captures informal agreements among undertakings. Thus, even if a form of collusion
falls short of the definition of an anti-competitive agreement, undertakings can be
reprimanded for concerted practice.

59. Case T-41/96, [2000] ECR II-3383.
60. Case T-41/96, [2000] ECR II-3383.
61. Supra note 28, at 142-3.
62. T. Soames, A n A naly sis of the Principles of Concerted Practice and Collectiv e Dominance: A
Distinction without a Difference? 415 (2nd Series, R. Greav es ed., A ldershot: A shgate Dartmouth 2003)
at 422.
As early as 1972, in ICI v. Commission (Dyestuffs), the European Court of Justice

explained the inclusion of this term in Article 101(1), stating that it was meant to
avoid:
avoid:
co-ordination between undertakings which, without having reached the stage

where an agreement, properly so called, has been concluded, knowingly
substitutes practical co-operation between them for the risks of competition’.
In this view, then, it is not necessary for the Commission to establish the existence
of an agreement or plan among undertakings. It is simply necessary to prove that
there existed reciprocal co-operation or contact intended to influence the conduct
of competitors in such manner as to make it anti-competitive. Perhaps the most
important distinction between an anti-competitive agreement and concerted
practice lies in the different standard of proof attached to each. While the mere
existence of an agreement is sufficient to prosecute under Article 101(1), the
nature of a concerted practice is such that it must be implemented in the market
for the competition authority to act. Thus, as was clarified in the Polypropylene
Case, there can be no case of concerted practice if the undertakings concerned
only planned to co-ordinate their conduct but did not actually execute this
intention. However, as a result of this characterisation of concerted practice, there
is no clarity as to where the conceptual line between agreements and concerted
practice lies.
Section 3 of the 2002 Act does not include this catch-all phrase to overcome the
difficulties associated with proving the existence of an agreement – contributing to
problematic decisions, such as that rendered by the Commission in the Cement
case. While Indian law has, equally, interpreted the scope of “agreement” broadly,
the absence of the term “concerted practice” and the understanding of how
collusion takes place absent direct evidence, may have created a considerable
hurdle in addressing these forms of collusion.
Appreciable Adverse Effect and Plus Factor Analysis
Once the hurdle of establishing agreement has been crossed, Indian law creates a
presumption of an “appreciable adverse effect on competition”. Though this may
prima facie appear to echo the per se test under US law, given the Commission’s
decisions in Cement and Tyre, the
63. Cases 48, 49 and 51-7|69, ICI v. Commission [1972] ECR 619.
64. Cases 48, 49 and 51-7|69, ICI v. Commission [1972] ECR 619.
66. Polypropylene [1986] OJ L230/1.
position is not as clear as one would hope. Had this presumption meant that cartels
are guilty in all cases, as a plain reading of Section 3(3) suggests, the Commission
ought to have found in favour of the existence of cartels in both Cement and Tyre
as soon as they concluded the existence of agreements in each case. However,
given that it undertook an analysis of price parallelism and plus factors, it appears
that the presumption for cartels under Indian law may still be amenable to a U.S.
“rule of reason” investigation. This idea has also been echoed by the Indian
Supreme Court in R.S. Nayak v. A.R. Antulay and Sodhi Transport Co. v. State of
Uttar Pradesh, where it held that “the presumption is not in itself evidence but only
makes a prima facie case for the party in whose favour it exists. It is not laying
down a rule of conclusive proof.”
Given the understanding that the Indian presumption is not the same as the per se
rule, perhaps the Commission failed to appropriately balance the pro-competitive
and anti-competitive effects before reaching its decision in both the Cement and
Tyre cases, as mandated by section 19(3) of the Act. Unlike a per se case like
Palmer v. BRG of Georgia Inc., where the Court came to the conclusion that in
facts involving two firms allocating markets to one another, the revenue sharing
formula arrived at by them was for the purpose of raising the price and hence was
a per se violation, all cases needing a “rule of reason” investigation ought to
consider pro-competitive effects as well. In Broadcast Music, Inc. v. CBS, Inc., for
instance, the court found that the granting of blanket licenses would not be illegal
because the principal purpose was to give a practical and pro-competitive solution
because the principal purpose was to give a practical and pro-competitive solution
to manage copyrights. In short, in this case the license scheme was acceptable
because it was unavoidable for the activity. In Addyston Pipe and Steel Co. v.
United States, the Court held that a restraint might be justified where it is ancillary
to a primary pro-competitive purpose of an agreement, and is worth it to bring
about the pro-competitive purpose.
In NCAA v. Board of Regents of the University of Oklahoma, horizontal restraints on

competition were essential to an industry if the product was to be available at all.
However, the Court found that this arrangement had anti-competitive
consequences insofar as

69. AIR 1986 SC 2045.
70. AIR 1980 SC 1099.
71. 498 U.S. 46 (1990).
72. 441 U.S. 1 (1979).
73. 175 U.S. 211 (1899).
74. 468 U.S. 85 (1984).
individual competitors lost their freedom to compete, prices were higher and
output was lower than they would otherwise be. It was ultimately held to be illegal
under a “rule of reason” analysis. It is submitted that in both the Cement and Tyre
cases, the Commission took into account plus factors apart from price parallelism to
examine anti-competitive conduct, but failed to evaluate whether any pro-
competitive justifications such as the manufacturers’ association’s concern of anti-
dumping, taxation and import prices outweigh such anti-competitive conduct.
Whilst in Cement, the Commission wholly ignored the possibility of pro-competitive
benefits, in Tyre, parties were let off on other grounds.
Evidentiary Standards
Whether in an attempt to prove the existence of an anti-competitive agreement or

concerted practice, investigative authorities in the EU most often utilises
documentary evidence that supports the assertion that parties: (a) agreed to
behave in a particular way in the market, and (b) that information was exchanged
about their future intentions, allowing for coordinated market behaviour
(suggesting concerted practice). The standard of proof in both cases is low; the
Commission has only to prove the participation of an undertaking at a meeting
where the impugned anti-competitive activities were discussed. Regulation 1/2003
has provided the Commission substantial powers of investigation in obtaining
necessary evidence, however, there has developed a body of case law that has
effectively restricted its powers in protec ting the fundamental rights of concerned
undertakings.
In many cases, however, the Commission is challenged by a lack of sufficient or any

documentary evidence. In these cases, the existence of an agreement may be
inferred by market behaviour coupled with other factors. It is important to note
that in these cases, neither sparse evidence nor mere inference from market
behaviour is alone sufficient, but together, they furnish an inference of collusion.
This analysis is similar to the plus factor analysis discussed in the context of US law.
For example, in the Sugar Cartel case, wherein the Commission proved the
existence of a cartel during the 1970s with reference to a concerted practice to
protect the Dutch market (based on the conduct of Dutch producers) and the
correspondence between Belgian producers and distributors forbidding export to
the
75. A v ailable at http://thefirm.money control.com/story _page.php?autono=777173.

76. G. Monti, EC COMPETITION LA W (Cambridge: Cambridge Univ ersity Press, 2007) at 330.
Netherlands. In this case, as in the Cement case, there was no direct evidence of
the existence of a cartel, but it was prosecuted as concerted practice
nevertheless.
More interesting are cases in which no documentary evidence is available

whatsoever to prove the existence of the cartel. These are the cases in which the
inclusion of concerted practice in Article 101 becomes significant. In the Dyestuffs
Case, for example, the Commission inferred the existence of an agreement using
only the behaviour of undertakings. The only evidence presented suggested that
undertakings met and discussed prices, increased prices simultaneously by similar
percentages, and used similar language in their instructions to subsidiaries. Upon
appeal, the Court reiterated this position, clarifying that when the behaviour of
firms does not reflect their expected behaviour in conditions of competition, an
inference of collusion may be made. What makes this case problematic is that the
Court also, separately, referred to evidence of collusion. It must also be kept in
mind that in circumstances of this sort, the concerned undertakings must be
afforded the opportunity to offer alternate explanations for their parallel conduct,
making the precedent value of this case suspect.
This position was clarified subsequently in the Wood Pulp Case wherein the
Commission inferred the existence of concerted practice using only similar prices,
similar price announcements and a common system of regular price announcements
by firms. The Court in this case clarified that where collusion is the only possible
explanation for price parallelism, an inference of express collusion may be made by
the Commission. In this case, the Court considered the opinions of economic
experts, who alluded to the possible operation of other factors – price
announcements could have been a reaction to consumers’ needs in an oligopolistic
market.
Joint Ventures: The Efficiency Exception
The proviso to Section 3(3) of the Indian Act provides an exemption to

agreements entered into by way of joint ventures, in the event that such joint
ventures increase efficiency in production, supply, distribution, storage, acquisition
or control of goods or provision of
78. Suik er Unie [1975] ECR 1663.

79. Cases 48-57/69 ICI v . Commission (Dy estuffs) [1972] ECR 619.
81. Woodpulp [1993] ECR I-1307.
services. In Yogesh Ganeshlaji Somani v. Zee Turner Ltd., for example, the
Commission came to the conclusion that based on the nature of the market
structure and the circumstances under which the join venture was formed,
efficiency reasons justify it in the facts of the case. U.S. anti-trust law does not
provide for a blanket efficiency justification for joint ventures, and they are dealt
with as ordinary agreements that may or may not be anti-competitive. For instance,
in United States v. Topco, the U.S. Supreme court found the joint venture to be
per se illegal because it involved an agreement between competitors at the same
level of the market structure to allocate territories in order to minimize competition.
Similarly, in Rothery Storage and Van Co. v. Atlas Van Lines, Inc., the court came to
the conclusion that joint ventures should be penalized in cases where they
decrease output rather than increasing efficiency. In the facts of the case the
court found that the policy was an ancillary restraint to achieve efficiency and
therefore could not be held to be a violation of Section 1 of the Sherman Act.
Given the specific exemption under Indian law, what is important in all joint venture
cases is that the Commission ought to ensure that cartels do not escape liability by
creating and shielding themselves behind a single corporate form. This means that if
separate decision makers get together and agree to make the same decision, the
market place is deprived of independent centres of decision-making, and cannot be
permitted. However, genuine circumstances of single entity joint ventures
promoting efficiency in the market must be acceptable. Thus, it is submitted that
even before the Commission inquires into and decides on efficiency of the joint
venture, it must first decide whether or not the alleged venture is a genuine single
entity deserving the benefit of the exemption. In American Needle v. NFL for
entity deserving the benefit of the exemption. In American Needle v. NFL for
example, football teams formed “NFL Properties” to jointly manage their intellectual
property and granted an exclusive license to Reebok for their merchandising needs.
The American court investigated whether or not there was a loss of “centres of
decision-making” after the venture was formed. On facts it found that actors in the
case had sufficient separate economic interests to justify treating their agreement
as a contract between them instead of as a joint venture because the teams
continued to compete with each other even after it was formed.
83. CCI, 31/2011.

84. 405 U.S. 596, 608 (1972).
85. 792 F.2d 210, 229 (D.C. Cir. 1986).
86. 130 S. Ct. 2201 (2010).
Leniency and Whistleblower Provisions
The marked trend towards greater prosecution of cartels in the EU during the
second half of the 1990s was largely a result of the leniency policy that was
adopted following the Cartonboard Case. During the period 1982 – 1991, the
market shares and prices of competitors in the manufacture of carton-board
remained relatively stable, as a result of concerted practice among twenty-three
companies in Europe, which met regularly to discuss market shares and production
quotas, and to exchange confidential information. As a consequence, prices rose to
higher levels than they would have under conditions of competition. The
Commission’s ability to take action against this anti-competitive activity was
supported crucially by the participation of Stora, one of the members of the cartel,
which provided the requisite evidence necessary to prosecute from an early stage.
It was following this case that the Commission issued a Notice in 1996, officially
bringing into effect the whistleblower policy it had only informally adopted until
then. The underlying logic was that, much like collusion, leniency was in the best
economic interest of colluding firms. It recognised three levels of co-operation:
i. The first undertaking to provide full documentary evidence of a cartel

before an investigation has been commenced, and which, upon such
disclosure, immediately ceases such activities, is entitled to 75-100%
reduction in fines;
ii. An undertaking which provides full documentary evidence of a cartel once
the investigation has commenced is entitled to 50-75% reduction in fines;
iii. Other undertakings which co-operate at a later stage are entitled to 10-
50% reduction in fines.
What made the use of this policy all the more successful was the fact that many
cartels involving companies operating on a global scale would immediately volunteer
as whistleblowers upon the discovery of their anti-competitive behaviour in a
jurisdiction outside the EU (particularly in the US).
Despite the apparent success of this policy, it was not perfect. While cases have
reiterated the Commission’s exercise of discretion in applying these reductions in
fines subjectively in
87. [1994] 5 CMLR 547.

individual cases, many undertakings were of the opinion that it resulted in an

unacceptable degree of uncertainty in the relief afforded to them in their capacity
as whistleblowers. As a result, a revised notice was issued in 2002, which offered
even larger rewards to chief whistleblowers in its provisions. In order to ensure
greater clarity as to the relationship between the information provided and the
leniency offered, the revised policy provided that the evidence would need to be
sufficient to allow the Commission to carry out an investigation (motivating it to
undertake a dawn raid, perhaps), and to discover a case of collusion.
undertake a dawn raid, perhaps), and to discover a case of collusion.
Another issue addressed in the revised policy is the immunity offered to a cartel’s
ringleader. The Commission clarified that immunity would be equally available to the
primary participants in the cartel, as long as there was no evidence of coercion in
ensuring the participation of other undertakings in the agreement. While this
provision affords greater clarity on the issue, due to evidentiary difficulties in
establishing this fact one way or another, it is likely to continue to pose a problem
in the future.
Section 46 of the 2002 Act offers undertakings involved in a cartel an opportunity

to provide ‘full and true disclosure’, provided that such disclosure is vital to the
prosecution of the cartel. This provision offers the Commission considerable
discretion in making offers of leniency to whistleblowers, providing that lesser
penalty may be imposed ‘as it may deem fit’. In light of the EU experience with its
own leniency guidelines, it is evident that the objective underlying Section 46 is
unlikely to be fulfilled. Whistleblowers will only be willing to extend their co-
operation to investigative authorities when there is certainty as to the amount of
fine reduction that will become available to them. Additionally, this reduction must
be so substantial as to create an economic incentive for whistleblowers to choose
to approach the Commission instead of continuing to engage in anti-competitive
behaviour. Moreover, unlike in the EU, Section 46 does not specifically provide
immunity to the ringleaders of cartels – the position on this point is yet to be
clarified.
Critique

92. [2002] OJ C45/3.
95. S. Rab, INDIA N COMPETITION LA W: A N INTERNA TIONA L PERSPECTIVE (Gurgaon: Wolters
Kluwer (India) Pv t. Ltd., 2012) at 97.
The Cement and Tyre cases are landmark decisions in cartel jurisprudence in India.
Whilst we must recognise that cartel enforcement in India is relatively new, the
manner in which the Commission has used circumstantial evidence in these cases
has created a problematic jurisprudence.
In the absence of direct evidence, as in most cases dealing with cartels, collusion is
required to be proved in more creative ways. Given prima facie evidence of price
parallelism in both the Cement and Tyre cases, the Commission conducted an
analysis of various plus factors from which it could be inferred that parties acted in
concert to raise prices. The fact that such agreement was inferred from
circumstantial evidence is in keeping with competition jurisprudence in the US and
EU, and is itself not problematic. Yet, both these jurisdictions have set clearer
standards that offer predictability in their application.
As a result of the vastly different conclusions reached in the Cement and Tyre
cases, the problem really seems to be the lack of a well-defined evidentiary
standard to be applied by the Commission in the future when dealing with cartels
that operate without adopting explicit agreements. By lowering its standard in
relying on circumstantial evidence, it is submitted that the Commission perhaps
failed to take into account situations where natural market conditions might cause
firms, operating independently, to act in similar ways. In US law, attention is paid to
the substance of the information exchanged, rather than the mere fact of
information exchange. In such cases, EU law recognises the importance of
conducting an economic analysis of this possibility – a cartel can only be punished
where the possibility of factors other than anti-competitive motivations may cause
undertakings to behave similarly in the market.
Though borrowed from EU law, the expression “appreciable adverse effect” under
Section 3 of the 2002 Act creates a unique presumption under Indian law that
does not seem to reflect comparable provisions under either US or EU
jurisprudence. Where commentators on the Indian statute seem to suggest that
jurisprudence. Where commentators on the Indian statute seem to suggest that
this presumption demands the use of the per se rule (as in the US), the manner in
which analysis has been carried out in the Cement and Tyre cases illustrates a lack
of clarity in the Commission’s use of the rule of reason even in cases where this
presumption should technically apply.
To compound the difficulties created by the reasoning of the Commission in the

Cement and Tyre cases, India’s weak whistleblower and leniency provisions fail to
provide adequate incentive to firms to provide stronger and more reliable
circumstantial evidence on the basis of which the Commission could reach more
legally sound conclusions. Not only is India’s leniency scheme under Section 46 of
the Act discretionary at the hands of the Commission, but the law as it stands
today also fails to provide any sort of guidelines to assist the Commission when
exercising such discretion.
There exists a widespread consensus today that anti-competitive agreements,

particularly hard-core cartel agreements, are a threat to consumer welfare and the
economy. This effect has extended beyond national limits, owing to the
globalisation of cartels. As a result, the prosecution of cartels has become the
subject of international policy, led chiefly by the OECD. In this larger context, the
improvement in the success of the detection and prosecution of cartels in one
jurisdiction has a significant and positive effect on their prosecution under other
competition regimes, particularly in the context of multinational corporations that
operate on a global scale, and are able to escape detection of their anti-
competitive behaviour owing to the scale of their operations.
At a policy level, it is incumbent upon the State to evolve a comprehensive

framework for the implementation of competition law within India. Based on this
policy, it is the responsibility of the Commission to give effect to relevant provisions
in a manner that is consistent and predictable. Most recently, the imposition of the
Rs. 6,300 Crore fine in the Cement case has currently been stayed and as the
matter is pending before the Competition Appellate Tribunal, the outcome of this
proceeding will have far-reaching consequences for the prosecution of cartels in
India, and the manner in which the Commission will investigate similar cases in the
future.
PRIYA URS is presently an LLM Candidate at The Faculty of Law, Cambridge University & RISHI
SHROFF is presently an Associate with Khaitan & Co. in Mumbai, India. They may be reached at
priyaurs.nls@gmail.com and rishishroff@gmail.com respectively.
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10/8/2014 India Law Journal

Current Issue | Archives | Submissions

1. Supra note 6, at 141.

3. Order No. 1/9/99-CL-V of 25th October 1999.

“cartel” includes an association of producers, sellers, distributors, traders or

The application of Section 3 involves the determination of whether an agreement

4. A . Kumar, The Ev olution of Competition Law in India COMPETITION LA W TODA Y – CONCEPTS,

harmful effects on competition. Commentators have compared this approach to the

competition. This clause includes cartels that undertake a number of anti-

Inconsistencies in the Cement and Tyre Cases

In Builders Association of India (hereinafter “the Cement case”), decided in June

It is settled law in a variety of jurisdictions, including India, that price parallelism

In both cases, active industry trade associations conducted regular meetings.

17.A v ailable at http://indiatoday .intoday .in/story /competition-commission-of-india-slaps-penalty -on-

in anti-competitive pricing conduct. However, in making a comparative analysis of

The OECD Report and Circumstantial Evidence

The Organisation for Economic Co-Operation and Development (hereinafter

23. A shok Chawla, av ailable at http://www.businessworld.in/en/story page/-/bw/the-case-of-mixed-

substance of their communications. Providing pricing information to a third party

28. Supra note 34.

interpreted the absence of discretion and computed the imposition of penalty on

Ultimately, recognizing the nascent stage of the development of competition law

Appreciating US and EU Law

Unlike Section 3 of Indian Act, Section 1 of the US Sherman Act is a single

agreements. The structuring of these two provisions is considerably similar,

i. The existence of undertakings;

45. C.F. supra note 28, at 120-1.

Defining the Scope of ‘Agreement’

However, in Theatre Enterprises v. Paramount Distributing, the Court opined that

50. Supra note 6, at 141.

Article 101 of the TFEU prohibits collusion between undertakings, concerted

53. 275 F.3d 191 (2d Cir. 2001).

In addition to explicit agreements among undertakings, the scope of Article 101(1)

58. Supra note 28, at 141.

As early as 1972, in ICI v. Commission (Dyestuffs), the European Court of Justice

co-ordination between undertakings which, without having reached the stage

Appreciable Adverse Effect and Plus Factor Analysis

In NCAA v. Board of Regents of the University of Oklahoma, horizontal restraints on

68. Supra note 3, at 40.

Whether in an attempt to prove the existence of an anti-competitive agreement or

In many cases, however, the Commission is challenged by a lack of sufficient or any

75. A v ailable at http://thefirm.money control.com/story _page.php?autono=777173.

More interesting are cases in which no documentary evidence is available

Joint Ventures: The Efficiency Exception

The proviso to Section 3(3) of the Indian Act provides an exemption to

78. Suik er Unie [1975] ECR 1663.

83. CCI, 31/2011.

Leniency and Whistleblower Provisions

i. The first undertaking to provide full documentary evidence of a cartel

87. [1994] 5 CMLR 547.

individual cases, many undertakings were of the opinion that it resulted in an

Section 46 of the 2002 Act offers undertakings involved in a cartel an opportunity

91. Supra note 6, at 148.

To compound the difficulties created by the reasoning of the Commission in the

There exists a widespread consensus today that anti-competitive agreements,

At a policy level, it is incumbent upon the State to evolve a comprehensive

© 2007 India Law Journal Permission and Rights | Disclaimer

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