CHAPTER 2

ProhibitiOn of Certain Agreements,

Abuse of D ominant Position,
R egulat ion of Combinations

Chapter 2 of the Act running from Sections 3 to 6 contairls all the

sub stantive provisions. Public interest is served by healthy competition.
The fundamental right under Article 19(1)(g ) or the Indian Constitution
does not e Xt i2 nd tO shuttiRg out competition.1 Section 3 deals with all anti-
competitive agreements.

PROHIBITION OF AGREEMENTS
Anti-competitivc agreements [S. 3)
The section prohibits an enterprise or a person or any association of
enterprises or persons from entering into anti-competitive agreements.
The section declares such agreements to be void. The section covers
agreements in respect of production, supply, distribution, storage, ac-
quisition or control of goods or provision of services which cause or are
likely to cause an appreciable adverse effect on competition within India.
Sub-section 2 declares that any agreement entered into in contraven-
tion of the provisions contained in sub-section 1 is to be void.
Entering into an agreement is a sine qua non for attracting Section 3(1).
The creditor in this case was providing funds to the State Development
Authority for its project. It, therefore, had the right to impose conditions
regarding terms of the contract to protect its finance. That was not an
anti-competitive agreement.‘

Enterprise [S. 2(h)]

“Enterprise” means a person or a department of the Government,
who or which is, or has been, engaged in any activity, relating to the
1. Mithifesh Garg v Union of India, (1992) 1 SCC 168: AIR 1992 SC 443.
2. Jai Ba!•ii Industries Ltd v Union of India, AIR 2011 Gau 109.

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 10 COhI P ETITI ON LAW

production, storagc, supply, distribution, acquisitiOR OU Control art¡.

cles or goods, or the provisions of scr vices, of any kind, or in investme q
or in the business of acq iiring, holding, underi vriting or dealing
sl ares, dchcnttircs or otlter sccurities of any other body corporate, eiih*,
directly or tliroiigli Orly Of RJOfie of its units or divisions or su bsid¡g _
ies, 1vl etllcr SUCII U IIÎt Or <l ' S or subsidiary is located at the say,
O

place where the enterprisC ÎS lOCllted or .at a different place or difJ**ent

places, but does not include .any activity of the Government relat0ble
the sovereign fu nCtIOflS pÿ } q fyovQCnmCnt ÎflClLldÎfl Il11 •qCtiVities
on by the department s of the Central Government dealing with
ene•sy, currency, defence and space.
Exp/ rital/ou.—For the purposes of this clause,—
(a! “activity” includes profession or occupation;
(f›) “article” includes a new article and “service” includes a new
service;
(i) “unit” or “division”, in relation to an enterprise, includes—
(i) a plant or factory established for the production, storag¢,
supply, distribution, acquisition or control of any article or
goods;
(ii) any branch or office established for the provision of any
service.
The expression “enterprise” has been defined in Section 2(li). l t means
either a person (including a company) or a department of the governnient.
Such entities come within the definition when they are engaged in any of
the rwo kinds of activity, namely, either in reference to coniniodities or
investments. In other words, operatives in the commodity or investnient
markets. The sub-section says that any of them cornes within the defini-
tion when it deals with any activity relating to articles or goods,' nainely,
activity relating to production, storage, supply, distribution, acquisition,
or control of articles or goods or provision of services of any kÎnd. The
investment market would include the business of acquiring, holding, tirt-
derwritirig or dealing with shares, debentures or other sectiritics Of '111}’
body corporate.' The dealing may be done either directly or tliF ollgh
any one or more of its units or divisions of subsidi.aries. Sticli tlIlltS Of
3. The exprcssion “goods” as dcfined in S. 2(i) means goods Us ctcfin0d !*
of Goods ACt, 1930 and includes: i) products m.aniifactured or prticcsscd ils
ii) debentures, stocks and sharcs after allotment, and iii) goods, in1pt›rtcct if
they are to bc SuFylif"J, distrihutcJ or cuntrollccl in I n‹lia. The Exyl‹tti‹ili‹›!!
the sub-scction
tion. An article would mcan an cxistin/; or .1 ncw article and so ;1lSn ,I s¢f'viCC
clude an existing service or a new ser vice. The un it or division of an enterprise
plant or factory establishcd for production, storagc, acqii isition or control of i t'y
or goods and also any branch or office c5t8blishcd for provision of any Shr VICES.
4. The word “shares” has been dcfincd in cl (v) to mcan Phares in thC Sh**+
of a cOmpany carrying voting rights. lt includes any security whicli entitles tÎlC

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 PROl IIltITION OI' CEltTA IN AGR EE81E HTS 11

„ \›,idiarics
may l›c lnc«tcd at the placc wh tt the enterprise is locatcd
[îÎ.1CCS. )1C ù CtlVlt}’ C¢jy y tj |jy the Act would not include
y rait g of tt c govcrmncnt relating te ÎtS SOYCrcign functions, including
cti ›/jt jC5 Cù YÊ lCCÎ /f\ !*}’ Â CÇ II ITICI1ES Cù lÜ g Wlt[ï atomic cncrgy, cur-

}jC jçOçd “}3CfiSOl1” HS CHU ÎO 12d jJj $CCtjO{J ÿ jS takcn to include an

; ,idi r o ll . l, ‹1 Hilidu undiVÎdcd family, a C O mpa ny, a firm,
incorporated qt iini ftcor por ated association of persons or body of
individuals, govern- tirent COflipan l es and government corporation s,
foreign bodies corporate, a rcgistered cooperative society, a local
authority and an artificial juridi-
Cd} pe rson not f il ll i tl g w i t hi f l l il y of t he abo e listed categories. ’

$yruice [S. 2(x)]

The word “service” has been defined to mean a service of any descrip-
tion which is made available to potential users. lt includes the provision
of services in connection with the business of any industrial or com-
mercial matters such as banking, communication, education, financing,
insurance, chit funds, real estate, transport, storage, material treatment,
processing, supply of electrical, or other energy, boarding, lodging, en-
tertainment, amusement, construction, repair, conveying of news, or in-
formation and advertising.
The decision of the Supreme Court under the Consumer Protection
Act in LDA v M.K. Giiptn6 , highlights some of the aspects of the concept
of service. The court said that the word “service” has a variety of mean-
lflgs. It may mean any benefit or any act resulting in promoting interest
or happiness. The service may be of the nature of commercial, profes-
sional, public, domestic, legal, statutory, etc. Since the concept is of very
wide import, it should be understood in the context of the enactment in
to receive shares with voting rights and also stock except where a distinction between
shares and stock is made expressly or by implication.
5. “person” includes—
(i) an individual¡
(ii) a Hindu undivided family;
(iii) a company;
(ir) a firm¡
(r) an association of persons or a body individuals whether incorporated or not, in
India or outside India;
tri) any corporation established by or under sny Central, State or Provincial Act or
a Government company as defined in Section 617 of the Companies Act;
(rit) any body corporate incorporated by or under laws of a country outside India;
(ciii) a cooperative society registered under any law relating to cooperative societies,
{iz) a local authority;
(x) every artificial juridical person not far within any of the preceding sub-clauses.
6. {1994) 1 SCC 243: (19941 80 Comp Cas 714.

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r
COM PETITION LAW
12

ivhicli it is used. The word potential would include the existing

q ”“*â
service may attract.
also the e.xtended market that a
ligt-eeiiieiits Wllicl are lihely tO leave adverse •I'tect on
com§etitiO Il [S. 3(4)1
This su b-section gives the list of agreements or a rra ngements
are likely to have an a ppreciable adverse effect on competiti OR. T he
ment may be amongst cnterprises or persons at different stage s C_i t
of the chain of production in different markets ä DU tTl £ty Ç e j et
of production, supply, distribution, storage, sale or price of, ot trad iJ
e
goods or provision of services. Such agreement or arran gement inclfi d„ .
1. tie-in arrangement;
2. exclusive supply agreement;
3. exclusive distribution agreement,
4. refusal to deal, and
S. resale price maintenance.7
It has been held that an agreement or concerted practice between in-
surance companies such as that at issue, which consisted of a mutg â l
exchange of information that made possible an increase in premiuins tO,
compulsory civil liability vehicle insurance that was not justified by mar-
ket conditions, and which infringed national rules on the protection of
competition, could also constirute an infringement of Article 81 EC if, i»
the light of the characteristics of the national market at issue, there was a
sufficient degree of probability that the agreement or concerted practice
could have an influence, direct or indirect and actual or potential, on the
sale of the insurance policies in the relevant Member State by operators
established in other Member States and that influence was not insignifi-
cant; and that any individual could by virtue of Article 81 rely on the
invalidity of an agreement or practice prohibited under that article and,
where there was a causal relationship between the agreement or practice
and the harm suffered, claim compensation for that harm.'
As for the question of damages for the loss sustained by the affected
consumers, the statement of law was as follows:

7. In addition, bid rigging and predatory pricing are also agreements or arra
pge-
ments of the same nature. See, Akash Choubey & Sourabh Mishra, Com pet itio H
Glancing Bfffé, Looking Ahead, (2004) PL Web Jour 17. Bajaj Auto Ltd v DGfJt, (2008)
the ppellan*
12 5CC 122:
indulged AIR 2008or
in distorting SCrestricting
2269, notice for enquiry
completion didmanner
in any not allege Lendingato bring abOU
or that
manipulation of prices, erc not maintainable (M RTP Act}. M gn(redi v
Adri• tico
k-
Assiciirazioni RA, 2007 Bus LR 188 (ECJ), an agreement between insurance underta
C
ings routed in increase of premiums for compulsory civil liability for vehicle inS*RS°*° '
that was not justified by market conditions was an infringement of EC Reg u1ät ÎO • RS
8. M anfredi v Llo yd Adriatico Assicurazioni SpA, 2007 Bus LR j8 8 (ECS), COU
of Justice of the European Communities.
 PROHI B ITION OF CERTfil N fiGRÏiE M ECTS 13

To sct the critc ria for dctcrmining the cxtcnt of the dam«gcs for harm
ement or practice prohibited under Article 81 EC, but
1) it folloived front the principlc of cqriivalencc that if it was possible to
ttv3 rd p«ï*t i cular dam«gcs sucl as cxcmplary or yunitivc damagCs irt do-
nncstiC actions simil3r tO û Ct1Ons foundcd on tl c conlmunity compCtit Î Of\
ules, itmust also tte possiblc to award sucli dainagcs in actions founded
Ofi comnlunity
rulc5, hut colnniuliity law did not present national courts
steps to cilsurc that the protection of the rights guaranteed
§y cOn› munity law did not entail the u• iust enrichment of those who
and 2) it followcd from the principle of effectiveness, and
(fOtTl t 8 lg1 t
of individuals to seek compensation for loss caused by
contract or by conduct liahle to restrict or distort competition, that
in|ured persons mtlst be able to seek compensation not only for actual
IOS$ (d ff Uf Illft ll emergeiis! but also for loss of profit !lucrnm cessansl plus

intcrest.’

s•‹•ment [S. 2(6)j

According to this clause the term “agreement” includes any under-
standing 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.
It has been held that the provisions of the Act are not attracted when
the agreement between the parties has been entered into even before the
grant of the requisite licence. The Competition Act would have no. ap-
plication to an agreement about a subject-matter which requires a license
and an application for the licence is still pending."
It has been noted in an Article" on the subject under Section 34 of the
(Singapore) Competition Act, 2004:
According to the Section 34 guideline, the term ‘agreement’ has
a wide meaning and includes both legally enforceable and non-
enforceable agreements, whether written or oral. All that is required
is that parties arrive at a consensus on the actions each party will
take. The Section 34 guideline further explains that a 'decision’ by an
association of undertakings may include its recommendations to its
9. Ibid. Abuse D ominant Position by SJSTfC.com Pte Ltd, re, 2010 SG CCS 3,
liability in terms of fine was imposed upon the enterprise for its abuse of dominance in
contravention of the Act by resorting to agreements which were collectively referred to as
the *<< tlliVe agreements". The enterprise was a ticketing service provider. The restric-
tions under the *exclusive agreements” were found to be harmful to competition.
10. P.G. Ndroyanon v Union o[ India, (2005) 3 MU 210: (2005) 3 CTC 582.
11. “The Practice of Competition Law”, Law Society of Singapore, Law Gazette,
june 2006 (2).

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 I4
mn whcthcr tlcct of the recoq
ale the HCtÎVÏt y of i
or co -o rdi fl
the ‹o nduct recirients which are gentp{
in so ppi nercia
,ec;ab e eftcct on compctition with¡
C
J
includB direct of indirect priC• fixing, colluSÏ ve tJq,
jpggpor ket or limiting @C contepJlÎng production q
dering, s›aring ir cumsf33ces, to exchange p$jqJ
tandards whose purposc it o raisJ
q( Membership where the #ffect g{
mcnib CfSl l Î is to uiidertaking concerri• d , t !
yom may table effect on gqp !
S ection 34 g uid# Iine
S Ï2t yj tJ t, using indicative

the Co etition c = mi s, jon of Singapore’s ’CCL’)

t-hresholds,
nexe an appreciable restriction of co••petit‘
O tmple,
under Section 34—f O <
il the aggregate market share of the
parties
ro the agreement does not exceed 20 peu cent of any of
relevant
markets affected by the agreemeiit where the arrangemc i
un dertakin gs.
mmdc is between competing The key consideration jg
ndertaking for the purposes of t£c
« ›« sing whcther aii enfity is an u is engaged in commercial or eco-
$g@pn 34 prohibition is whether it
pq ¡C actiYity relating to goods and services.

Dzrs inc observed in one of the cases on the subject: 2

Lord
People who combine togetlier, to keep up prices, do not sliout it
from the liousetops. They kecp it quiet. They make their own arrange-
ments in the cellar where no one can see. They will not put anytliifïg
into writing nor even into words. A nod or wink will do. Parliament
as well is aware of this. So it included not only an agreement properly
so called, but any arrangement, however intozmal.
Dealing with an argument that no agreement was in place between
the parties, the Commission (UK) heJd tfiat it was not necessary for it to
establish the presence of an agreement intended as legally binding upon
the parties. It is enough that there is a necessary consensus between the
parties for lines of their mutual action or absentation from action iii
o marktt . lt is ccztainlç not necessary for the agreement to be made
single individual can create an impact upon the market
atraclted co f]t 14

12. Rf! l'$tYfY of P

cetrictive
ER ï06J. fl962J 1 WLR 1460. 82/gS3,
(1982) O] tJS4/28, without the beR0Êt OÏ 8 Ï
› ere were fefms and conditions which
P!7 %>
the dealers wc/c cxpcctgd
ir admiasioit jjjtp
Î980 0} 1377/î 6, conccrtcd action /or prévention
 P ROH I BITION OF CERTA IN AGREEh I ENTS 15

’ Even where no harm has been immediately caused by the agreement,

be attracted if such harm is likely to arise in future. What
pgs to be seen is the object or effect of the arrangcment. It is also no de-
svas
e that harm to COITI Ctition not intended by the parties. Where
fenc
the object or intention is objectionable, it would be no defence to say
that ad vers e effect iVflS produced or caused in fact. The nature of the
pO
Act e C nomi legislation, the Commission would have to make an eco-
on the basis of practical experience (empirical evidence)
nom ic ana lysis
«nd not theory for formulating its decisions. Strict standards of proof
ble doubt are not to be applied. Businessmen have their
beyond reasona
O¥V fl methods of escapism. Where a violation appears to be reasonably

probable, the Act can be applied.

Drfel*$ p )fi-COfffpe tt JtfP 8 ff£fJOf4T

According to Section 2(c) “cartel" includes any association of produc-

M rs, Sellers, distributors, traders or service providers who, by agreeing
amongst themselves limit, control or attempt to control the production,
distribution, sale or price of, or trade in goods or provision of services.
The Supreme Court noted the malpractice and formation of a cartel
having the effect of price escalation of an essential public service like
generation of electricity. The court reminded the State of its duty and
asked for adopting appropriate preventing measures. Consumers and
public should not have to bear unwarranted higher electricity generation
costs due to a malpractice in award of a government tender and forma-
tion of a cartel. Unless a power generation company takes all measures
to cut down malpractices, the generation cost of electricity is bound to go
higher and the same would be passed on to consumers. A company, by
the name Maha Genco, had been encouraging formation of a cartel for
bringing about higher cost of transportation of coal.
The court suggested that a public sector undertaking should take ad-
equate and appropriate measures to prevent such activities.'5 Bidding
contractors cannot form a cartel. Where they do so and even so there
bids are considered and they are given the opportunity to match their
rates to those of the lowest tenderer, the court said that public interest
SâOuld be given priority." The Supreme Court held that the extent of
interference by the superior courts in the award of contracts through
te ndering process should be limited where the public sector undertaking
has exercised done fide discretion even if the tendering process revealed
the existen ce of a cartel. Mere quotation of identical prices and the at-
titude of three tendering companies after the bidding could not lead to

B.S.N. JoShi Sons Ltd v A/oy Mr£ia, {2009) 3 SCC 458: AIR 2009 SC 1797.
16. B.S.N. Joshi U Sons Ltd v Noir Coal Services Ltd, (2006) 11 SCC 548: AIR 2007

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 1
CO M P rTIT ION 1.AW CHA p,

Hoc conclusion th.St tllcrc cxistcd * " " '•a' 'ome othpp
7
satisf.actory cvidencc.'

T) c n . xit»unt /cc «grccmcnts, as pric* **'^6 agreements, have been

of the US Sherman Act. Ty,
autliority on Ù ie }3OÎ1lt ÎS the US Suprême Court decision in Arizona y

Respondent foundations for medical care were organised by the re-

spondent M aricopa County Medical Society and another medica J soci-
ety to promote fee-for-service medicine and to provide the
with a competitive alternative to existing health insurance P *>>• T he
foundations, by agreement of their member doctors, established the
maximum fees the doctors may claim in full payment for health serv ces
provided to policy-holders of specified insurance plans. Petitioner State
of Arizona filed a complaint against respondents in the Federal District
Court, alleging that they were engaged in an illegal price-fixing con-
spiracy in violation of Section 1 of the Sherman Act. The District Court
denied the State’s motion of partial summary judgment, but certified for
interlocutory appeal the question whether the maximum fee agreements
were illegal per se under Section 1 of the Sherman Act. The Court of
Appeals affirmed the denial of the motion for partial summary judgment
and held that the certified question could not be ariswered without evalu-
ating the purpose and effect of the agreements at a full trial. It was held:
The maximum fee agreements, as price-fixing agreements, were per
se unlawful under Section 1 of the Sherman Act.
(a) The agreements did not escape condemnation under the per
se rule against price-fixing agreements because they were
horizontal and fixed maximum prices. Horizontal agree-
ments to fix maximum prices are on the same legal—even if
not economic—footing as agreements to fix minimum or uni-
form prices." The per se rule was violated here by a price re-
straint that tended to provide the same economic rewards to all
practitioners regardless of their skill, experience, training , or
willingness to employer innovative and difficult procedures in
individual cases. Such a restraint may also discourage entry iritO
the market, and may deter experimentation and new develO§-
ments by individuel entrepreneurs.

17. Union of India v Hindustan Development Corpii, (1993) 3 SCC 499: AIR l 9q4
5C988.
18. 73 LEd 2d 48: 457 US 332 (1981}.
19. Kie[er- Steit art Co v Joseph E. Seagram dr Sons Inc, 9S LEd 219: 340 US 211
11950); Albrecht v Herald Co, 19 L Ed 2d 998: 390 US 145 (1967).
 PROlliBiTiou or c zRTA]i‘4 AGREESI ENTS 17
(g)Nor did the fact that doctors, rathcr then non-profcssionals, are

ti( thC J)Pf 3d GUI C. R CS OfldCntS d jt} Jj t p ; jtjj t{j; t ¿}jp $jj ¡j} jty tj{
the professional scrviccs their mcmhcrs providccl was enhanced
by tllc pricc rcstraint’° and thcir ¿1;jjjjj that the price restraint
would make it easier for customCf S to pay did not distinguish
the medical profession from any othcr providcr of goods or

That the judiciary has had little antitrust experience in the

health care industry is insufficient reason for not applying the
per se rules here. “[T]he Sherman Act, so far as price-fixing
agreements are concerned, establishes one uniform rule applica-
ble to all industries alike."2'
(d) The per se rule was not rendered inapplicable in this case for the
alleged reason that the agreements in issue had pro competitive
justification. The anti-competitive potential in all price-fixing
i agreements justifies their facial invalidation even if pro competi-
tive justifications are offered for some. Even when respondents
were given every benefit of doubt, the record in this case was
not inconsistent with the presumption that respondents’ agree-
ments would not significantly enhance competition. The most
that can be said for having doctors fix the maximum prices is
that doctors may be able to do it more efficiently than insurers,
but there is no reason to believe any savings that might accrue
from this arrangement would be sufficiently great to effect the
competitiveness of these kinds of insurance plans.
(e)Respondents’ maximum fee schedules did not involve price-fix-
ing in only a literal sense. As agreements among independent
competing entrepreneurs, they fitted squarely into the horizon-
tal price-fixing mould.

Prin )xing agreements, not criminal offence

It has been observed that a price fixing agreement, in the absence of
any aggravating features, or a mere undeclared participation in a cartel
has never been a criminal offence in England either at the common law
or under any statute, at any time relevant to this issue. Hence, there was
no question of extradition.°°

20. Cftipg and distinguishing Goldfar h v Virgitiia State Burt 421 US 773, and
NOfiOiial Societ y of Professional Engineers v United States, 431 US 679.
21. United States v Socony•Vacuum Oil Co, 84 L Ed 1l29: 310 US 150 (1940),
22. Norris v tout of the Ltnife8 Styles o/ America, (2007) I WLR 1731: 2007
EWHC 71: 2008 UKHL 16 {HL).

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 COM PET l TION LA tCHgp
18

y„ „,y O„»;«»ii-»••c•i:i:»• •••‹• u ^(^

-I S )!
atCS cases in ivhich there is a presumpti on tha,
Sud-sectÎOf1 Û incorpor
an act ÎS O
«nti-conipetitivc ri turc. The presumption applies to cases
in u lrich an agreement Iras Petn cntcrcd into between enterprises or .
s or with any person, including cartels, engaged il
SO ci$tit nS of pcrson ar of goods or provision of services or they
identica l or sini il tfi3dC
adopted any practice or taken any decision wliich has any of the follow.
ins effects:
1. Directly or indirectly determines purchase or sale prices.
2. Limits or controls production, supply, markets, technical devel p.
2
menr, investment or provision of services. 3
3. Shares the market or sources of production or provision of ser-
vices, by any way of allocation, of geographical area of market, or
type of goods, or services or number of customers in the market
or in any other similar way.
4. Directly or indirectly results in bid rigging or collusive bidding.
lt is to be presumed from such practices that they shall have an appre-
ciable adverse effect on competition.
The E xplanation appended to the sub-section explains the concept of
bid rigging. It says that bid rigging is a method which has the effect of
eliminating or reducing competition for bids or adversely affect or ma-
nipulate the process of bidding.

Agreements increasing efficiency proviso to sub-s. (3)j

The proviso to the sub-section makes this saving that the provisions of
the sub-section are not to 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 services. 24 There
is no automatic exemption in favour of joint ventures. The exemptioll
is subject to the condition of increased efficiencies. The joint venturers
23. Glaxo Smith Kline Services Unlimited v Commission of the Europe *
Communities, 2010 Bus LR Digest D87, agreement intended to restrict parallel tri2dPt
the question was to constitute an anti-competitive object, it is necessary for the agi**‘
ment to the detrimental to the final consumers, two sets of price system pts sought
be enforced, no such detriment was found to be there in this case. The consumer
have been affected if the restriction applied to price and supply.
2A. Pergan Hil(ssIof[e Sur Industrielle Progesse GmbH v CommiSSiOtt of tt‹
European Communities, 2008 Bus LR 1085, the decision of the commission wds Ofl the
point of restriction or distortion of competition, the decision referred to the und erta
ing’s participation is a cartel, the decision did not address to the u ndertaking and it w0*
not mentioned in the operative part. The undertaking applied for remov8l Of rt /eré'aces
to it in the published decision. Restrictions on the commission’s powers to publish deci-
sions and the commission’s obligation of professional secrecy were under d iSCllSS* >• The
applicant was allowed to have the references removed.
P ROHI BITION OF CERTAI N AGR EE II ENTS

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 19
to show not only more gain to themselves but
increased production or rendering of services.°* also public

yep( „,p¡oit |S. 3(3))

appended to sub-section explains the following
pC#ptS to a certain extent.
C

genient (tying arrangezu ents)

7ïa », ar‹a•
This hi s been given the meaning of what is called “a compulsory pur-
ly, a buyer is compelled
ch0se”, namethings o( his choice. Theto purchase something if he wants
E xplaiiatioti says that a tie-in ar-
r n6 m nt
includes an agreement requiring a purchase of goods as a
cofldition of such purchase, or
to purchase some other goods.
$ tyin or g “tie-in” “tied sale” arrangement has been defined as
. f1 ; i $ r e¢ment by a party to sell one product... on the condition that
t| c 1›uyet alSO \JFChaSCS ù diffcrcnt (or ticd) product, or at least agrees
g t ge will not pUrclias0 that [ticd] product from any other supplicr”.' 6
pnditioflil4g tl al›ility C o liCCnSC Ofle Of lTlore itelTlS Of iRtCl-
l‹ciua1 property on the liccnsce’s purchase of another item of intellectual
gropcrty or gocÚ S OF :t SCfViCC l13S bccn I cld in some cases to constitute
i11‹gal tyifig. Although tying arrangements may result in anti-competitive
effccis, such arrangements can also result in significant efficiencies and
pro coiTipctitivc licncfits. ln the exercise of their prosecutorial discretion,
t| c agencies will consider both the .anti-compctitive effects and the ef-
£cicncics atiributalilc to .a tic-in. The agencies would be likely to chal-
lcnge a tyiiig arra ngciiiciit if 11 the seller lias market power in the tying
yroduct, 2) tlic arrangcnicnt lt«s en aJ›’crsc cffcct on competition in the
relevant market for the tied pmduct, and 3) efficiency justifications for
tlic :irrangcincnt do not outweigh the anti-competitive effects. The agen-
cies will trot presume th:it a patent, copyright, or trade secret necessarily
confcrs market pow'cr upon its owner.
The case came before the Appeal Court is Image Technical Services
!›« s! Eaitiii‹ni Koilel: Co.*' The 9th US Circuit Court of Appeal af-
firmed the judgment of the lower court holding Kodak liable for mo-
lloQolising and attempting to monopolise the market for servicing its
photocopicr and niicrographic equipment, but it vacated a substantial
por tion of the damages award and modified the injunction against
JiOdllk. The facts were that the Kodak manufacturers sold and serviced

- °*• • t' 'tti£a Kakl.•or, A Eareu•ell to Cartels.- Practical ConsiderdtioHS (2 JO)

FL (Cb} January 19.

- • **/›ttan Kodak Co v Image Technical Seriûce fric 119 LEd 2d 265: 504 US 451
it°s u
-*- 9' US App Lcxis 22606 t9th Cir, 26-8-1997).

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 cox‹PET \ TION ”
20
aphic equip ment. They also rna,.
‹n
higl$.$/, lU 1 1e p]joto copicrs snd ice its equipment, arratlg2$
icrog
tt pCe SSppy tO serv
ufactured ro duce othCF QftS
on a pro
›viii› othcr on the open market. Beginnifl g l J
ased
pur‹ili19go
the early
and Koda k began *C* increasing competition from inde.
2< for
ISOs)
S, organisers ( servicing of it5 equipment s.
en dent service k responded to the competition by ceasing i
the Koda
ISOs› found that parts to ISOs, penalising Kodak eq
prior practice of lired ISOs and pressuring parts manufacturers
ment o»•ners whO alleged that the prohibited ISOs f£Om cornpetin
to sell to ISOs. It
Was ss and allowed Kodak tO maintain at least 80
effectively for service busine
per cent of the service market. Supreme CourtTechnical
had heldServices
in the eailie,
In !›
The
decision, namely, Eastnsan Kodak Co v I d8<
market could exist for the parts or service oJ
that a separate anti-trust equipment,
single brand Of 8 durable and that it was a question of fact
as to whether Kodak
had power in the after market for its own equip-
ment. On appeal, Kodak conceded that it controlled at least 50 per cent
of the parts market through its patent and other proprietary rights, and
the court found that this market share supported the attempted monopo-
lisation claim. In addition, the ISOs introduced sufÏicient evidence thai
Kodak had inhibited them from obtaining parts through other sources to
support a jury conclusion that Kodak controlled 65 per cent or more of
the parts market—a share large enough to support the monopolisation
claim. Although Kodak’s market 5hare would not Support an inference
of market power if there were no barriers to entry to the parts market,
the court quickly disposed of any such argument, noting that “Kodak
has 220 patents and controls its designs and tools, brand name power
and manufacturing capability.”°’ These factors, combined with Kodak’s
contractual arrangements with other parts manufacturers, its high share
of the service market and economies of scale, “support a finding of high
barriers to entry by new manufacturers and to increased output by cs-
tablished suppliers”.

This kind 3f agreeme ll t m«a IS an exclusive dealing agreement. The

purchaser is required to effect all his trade purchases from one seller.
The Expfn»ation says that such an agreement includes any agreernen
restricting in any manner the
acquiring or otherwi se dealingpurchaser in the course of his trade
in any goods other than those of the sell**
or any other person.

28. 119 LEd 2d 265: 504 US

451 (199t).
29. (1997) US App Lexis 22608.
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 PRO111 D I TION OI' CL RTA I N AC jt rI! FI F.NTS

This c»tcgory cn braccs sclc sclling or cxclusivc sale aycncics. The

Î SÇOS II Î OU S11 C UN gOOtl S.

The
part ÎCS lU il horizontal relatÍOllSliip (a “horizontal restraint”) does not
„ e ¢sSari1j catisc the arrangcmcnt to be anti-competitive. As in the case
OU jOÎ flt ventures aniong horizontal competitors, licensing arrangements
;1n1Ofl SUCI1 competitors may promote rather than hinder competition

¡f t hey e SUlt in inte rative efficiencies. Such efficiencies may arise, for
e qd tl i ple,
from the realisation of economies of scale and the integration
0 { C niplementa
ry research and development, production, and marketing
c•pabÎlities.
Following the general principles horizontal restraints often will be
evaluated under the rule of reason. In some circumstances, however, that
analysis may be truncated; additlonally, some restraints may merit per
se treatment, including price fixing, allocation of markets or customers,
agreements to reduce output, and certain group boycotts.

Exclusive dealing in context o f intellectual property

In the intellectual property context, exclusive dealing occurs when a
license prevents the licensee from licensing, selling, distributing, or using
competing technologies. Exclusive dealing arrangements are evaluated
under the rule of reason.' 0 In determining whether an exclusive dealing
arrangement is likely to reduce competition in a relevant market, the agen-
cies will take into account the extent to which the arrangement 1) pro-
motes the exploitation and development of the licensor’s technology, and
2)anti-competitively forecloses the exploitation and development of, or
otherwise constrains competition among, competing technologies.
The likelihood that exclusive dealing may have anti-competitive effects
is related, inter alia, to the degree of foreclosure in the relevant market,
the duration of the exclusive dealing arrangement, and other character-
istiCs of the input and output markets, such as concentration, difficulty
to entry, and the responsiveness of supply and demand to changes in
price in the relevant markets. If the agencies determine that a particular

30. Tat H pa Electric Co v Nashville Coc/ Co, 5 LEd 2d 580: 365 US 320 (1960)
(C Vd lU8tÎ ng legality of exclusive dealing under S. 1 of the Sherman Act and S. 3 of the
Clayton Act and evaluating legality of exclusive dealing under S. 5 of the Federal
Trade CO ftlmission Act).

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 z:
cxclisivc ‹le.ming :irr.ingénieur ‹»ay li.wc ° * ti-c°mpetitivc cffect,

•pP ïcatio„
of t li.at Technology), incrcasc Jicc' r°’ icc itivc^ ' °** *F OF
flhä ncc

TI i, mcans the rc(usal to deal with a particular buycr or seller.

Consunier PrOtCCt ÎOfl, 19fi6 «nd the Monopolies and Restrictive
Practices Act, 1969 alrcady have this category in the list of unfait
practices. The Lx plaiiatioii says that this category includes >>/ agr¢g.
ment which restricts, or is likely to restrict by any method the person
of classes of persons to whom goods are sold or from whom goods are
bought.
Respondent organisation of dentists in Indiana promulga JÇ y

ted
requiring its members to withhold x-rays from dental insurers in con-
section with evaluating patients’ claims for bene£t. The Federa l Tf3de
Commission (FTC) issued a cease and desist order, ruling that the po}i
constituted an unfair method of competition in violation of Section 5 of
the FTC Act, since it amounted to a conspiratorial restraint of trade in
violation of Section 1 of the Sherman Act. The Court of Appeals vacated
the FTC’s order on the ground that it was not supported by substantial
evidence, holding that the FTC’s findings that respondent’s x-ray poJjcy
was anti-competitive were erroneous; that the findings were inadequate
because of the FTC’s failure to define the market in which respondent
allegedly restrained competition and to establish that respondent had the
power to restrain competition in that market; and that the FTC erred in
not determining whether the alleged restraint on competition among den-
tists had actually resulted in higher dental costs to patients and insurers.
The Supreme Court held as follows: 1) The FTC’s factual findings re-
garding respondent’s x-ray policy are supported by substantial evidence.
There is no dispute that respondent’s members conspired among them-
selves to withhold x-rays, and the FTC’s finding that competit ion among
dentists with respect to cooperation with insurers’ requests for
was diminished where respondent held sway also finds adequate su e ort
in the record. 2) Eva luated under the Rule of Reason, the FTC's /gC-
tual findings are sufficient as a matter of law to establish a YÏOliltÎOfl
ÑCCtlOfl 1 O( tllfi Shcf iTl an Act, i.c. an iinreasonable restreint of trade,
hence a violation of Section 5 of the FTC Act. Respondent’s x-ray policy
cook tÀC“ ÎOffl2 OÎ fl llOfÎzont al agreenicnt among its membe rs to w ith-
hold from their customers a partictilar service that they desired. Abse
some countervailing pro competitive virtue, such an agreement c annot
 PROI I I DITI ON OF CE RTA J N AG R E F.St ENTS 23

; undcf tllC RUIC OU Pca son. The <onclusinn is net yrccludcd

ti e
Market in which rcspond-
, licç edly
f rcspondent’s
I olicy rcst›ltcñ n orc costly the patients and
' would li.wc clioscn if the
tjf ict lo l Nor dO J ll*Scd i›on-compctitivc “quality of
p lls t ClCf .9t lOl is justif y rcs ›onJcnt’s x-ra y ynlicy. AnJ whcthcr o

c. rc f¢SppndCnt’s policy was consistcnt with Indiana’s supposed policy

' $¡just Sky ÎIf11ÏSSlOl1 of x-rays te insurcrs, it vas riUt immUfï isecÎ from artti-
t f uSt/$cr
utiny Anti-coinpctitive collusion among primate actors, even
consistent with state policy, acquires anti-trust immunity only
when Ît ÎS actually supervised by the State, and there is no suggestion of
sion here.”
suCh supervi
l
R‹ fusa tO supply petrol to a person who came to the pump with his
ï › e h1cl* »aS held to be a consumer wrong." The stockiest who used to
All detergents, soaps, chemicals, etc manufactured by the appellant, filed
thel r complaint before the Commission when their agreements were ter-
minated by the appellant. The charge was that such trade practice re-
sulted in preventing, distorting or restricting competition amongst the
dealers which may have the effect of imposing upon consumers unjusti-
fied COStS and burdens. The Commission passed a cease and desist or-
der against the appellate without notice to them (suo motu) and without
compliance with principles of natural justice. The Supreme Court set
3
aside the order of the Commission because of such non-compliance. ’

Resale prire maintenance RPM

“Price” in relation to the sale of any goods or to the performance of
any services includes every valuable consideration whether direct or in-
direct or deferred and includes any consideration which in effect relates
to the sale of any goods or the performance of any services although
ostensibly relating to any other matter or thing.
This is a concept of in monopoly law and refers to cases in which the
dealers are told at what price they will deal in the goods. The Explanation
says that this category includes any agreement to sell goods on the condi-
tion that the prices to be charged on resale by the purchaser shall be the
price stipulated by the seller unless it is clearly stated that prices lower
than the indicated prices may be charged.34
3l. fTC v Indiana 'ederation of Dentists, 90 L Ed 2d 445: 476 US 447 (1956).
31. S‹ZfNiâ Service Station v Badriprasad Purohit, 1992) 1 CPJ 432,
33. HiHdtt5tan Lrrer Ltd v D GIR, (2001) 2 SCC 474: A IR 2001 SC 661.
34. ppy fJ ond Woolen Mills Ltd v M it TP Co»iiiiissiox, {1993J 2 SCC 3J0: (1993) 78
Comp Cas 471, the definition of rcstrictive trade practice under S. 2(o), MRTP Act, was
held to be exhaustive and not inclusive.
 :‹ COht P ETITION DA\V
l
The décision ivhctlicr a tratle practice is restrictive or not hJ tg
rivcd :it fay ,ipplying tlic rule of rcason and not on the doc trine tha
rc'striction as to arc:i or pncc will herr se bc a restrictive trgdg pra
kcsalc princ maintes:trice is ill .Ï À Ÿ ÏÛ n “COmmodities
*ti ,
into the cliaiiiicls of tr.ille .mal .ire oivncd by dealcrs”. 6 It ha
prr se i11cp:ll ftir a liccnsor of :in intcllcctual property right in a P' oda„
ïo fiX .1 1iccl1sC‘’s res0lc pricc of tllat product.’ 7 Consistent with th
ciplCs Set lot th th ScCtiOli 3.4, the ilgeilcics iV ill en force télé
:ip•:tin:st resalc price iiiaintenancc in the intellectuel pr pe ty

Practice
According to Section 2@) “practice” means practice relati{lg t O ,$$
carrying on of any trade by a person or an enterprise.

Trade practice [S. 2(ii), MRTP Act] (repealcd)

The definition of trade practice in the MRTP Act was as fo llCiwi.
trade practice” means any practice relating to the carrying R (
any trade and includes—
(i) anything done by any person which controls or af fects the pt¡Ce
charged by, or the method of trading of, any trader or class Of
traders;
(ii) a single or isolated action of any person in relation to any trade.”
It was held that this definition was wide enough to include any “trade
practice” if it is in relation to the carrying on of a trade. If the result of
any action or what could reasonably (low from it is to re5trict trade in
the monner indicated, it would undoubtedly be struck by the provisions
of the'Act."
Section 2(ni) of the Competition Act defines only “practice” which
includes any practice relating to the carrying on of any trade by a person
or an enterprise.

Trade
The concept of “trade” has been stated in the following words in
Section 2(s):
35. D L F• Universo f Ltd v D G ltivesti3atioii atid RegistrationÌ, (2008) 7 SCC 5 ”’
AIR 2008 SC 2244, a decision under S 2(o), MRTP Act, 1969. 40
36. Dr h1iles Medicnf Co v /ofnt D. Park U Sons Co, 55 L Ed J02: 220 US
(1911). 373,
37. ’ United States z Utiivis Letis Co, 86 LEd 241 (1942); 5 t//y / CD!*"””
$
1408: 316 US SCC 227: AU t977
Corpn v Vtiited States,’84 LEd 852: 309 US 436 (19401.
38. H i›iditsian Lever Ltd v MRTP Conitnis sion (1977) 3
1285.
 25
- t r, dc” mcans any trndc, Business, industry, prnfcssinn or GCCU-
relating to the prodtiction, supply, distribution or control nf
ggÜ S nnd incIt›dcs the prnvisinn nf amy services.

$J ni haViitg Cffcct of forrning a cartel

,t dcciS‹•'› nf the SUÇrcinc Court i ri‹lCr Sccti‹›ns J3(I)(ri), 35 and 37

t of ihc (for„ cr) "vtltTP Oct is rc1cv•ant to thc C‹›mrctitir›n \ct also. The
¡ q cision yrocccdCd ùS (Ollo vs:
¡ s«ti•n 3J(!)(*I regards en agreement to ttc one relating to restrictive
a8ooorn t Ht No purchase or sale of goods or to
,end Cr for Sale or purchase of goods only at prices or on terms or condi-
tions agreed upon amongst the sellers or amongst the purchasers. Such
p Agreeme nt amongst the sellers or amongst the purchasers relating to
purc Îjase or sale or to the prices in respect thereof may be regarded as the
forlYi ation of a cartel.
SectiOrl 33(1)(d) refers to two classes of agreements. One class is an
¡, Agreement to purchase goods or to tender for the purchase of goods only
at prices or on terms or conditions agreed upon between the purchasers.
The other class is an agreement to sell goods or to tender for the sale of
goods only at prices or on terms or conditions agreed upon between the
sellers. In other words, Section 3311)(d) refers to the agreements which
have the effect of forming either a buyers’ cartel or a sellers’ cartel. This
sub-section does not refer to or deal with agreements of sale and pur-
chase between sellers and purchasers.39

Hard Core Cartels

An overview on this point contained in the Recommendation of the
Council concerning Effective Action against Hard Core Cartels, 1998 is
as follows:
Hard core cartels are the most egregious violations of competition
law. They injure consumers in many countries by raising prices and re-
stricting supply, thus making goods and services completely unavailable
to some purchasers and unnecessarily expensive for others.
Effective action against hard core cartels is particularly important
from an international perspective because their distortion of world trade
creates market power, waste, and inefficiency in countries whose mar-
kets WOUld Otherwise be competitive and particularly dependent upon
COoperation because they gencrally opcrate in secret, and relevant evi-
dence may bC locatcd in many different countrics.

600: j ill 2002

 26 COM PET I TfON LAW

This C om›ci 1 Rcco‹z1mct datioil recommends ro member COu nt ¡

ensure th.at their coiiipctitioii 1.aivs effectively halt and deter hard
t0
sanctions and adequate enforccri tint
arid remedy hard core cartels.

Restriction or distortion of con*pctitio**

In 1991 the claiiiiant entered into an agreement witll rhe first
ant, a company owning a chain of several thousand public mouses and
.
the time partly owned by the second defendant, to take the leases of iw
“tied” public houses. The leases, in standard form, required the
to buy most of his beer at list prices from a specified supplier with
result that lie was unable to compete with “free” public hOuses ip
area, who were able to buy beer at lower, discounted prices. After
plaints from the lessees of other tied houses, in 1992 the defendants g3yq
notification of the agreement to the EC Commission under Ar ticle 4(l)
of Council Regulation (EEC) No. 17/62 and sought, inter alia, a “ gg _ Et a

tive clearance” order under Article 2 of the Regulation, that there were
no grounds under the rules of competition in Article 81(1) EC Of the EC
Treaty for action by the commission in respect of the agreement , or
exemption under Article 81(3). In 1994 the claimant applied with others
to the commission under Article 3 of the Regulation for an order that t6i
agreement infringed Article 81 EC. In 1997, following the introduction
of a new agreement for tenants with looser ties, which the commission
agreed met the requirements of Article 81(3), the defendants withdrew
their application for negative clearance or exemption of the original
agreement; and the commission stated that, since there was no longtr
a claim for Article 81(3) exemption, which could only be determined by
the commission, and a claim for breach of Article 81 also arose in High
Court proceedings, in which the claimant was seeking damages
defendants, the question of whether Article 81 had been infringed COU
be decided by the national court. When that issue came before the Hig
Court, the judge held that he was not bound by findings of
by the Co mmission in 1999, in response to a notification by anothJ
brewer, that at the relevant time it had been difficult to gain access
UK beer market. The judge held that, on the b.asis of the evidence
him, the market had riot been foreclosed and he dismissed the claif Tl3*'
claim. On thC claimarlt S Hj9pea Court of that the d•tr
OI SIflCCfC COO CffltlOfl, l, the
Whereby pursuant to Appeal
Article held
10 EC decis
narional courts conflicting with decisions of the Com mission wh ere the
be avoided, had precluded the judge from rejecting the findings of
Commission and, having hC1d that the agreement had made a signi

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 PROIE1BIT1ON OP C ERTA I H AC Ii Eli M ENTS 27

, »ntr ibution
to the foreclosurc, lundi 3n award of domages in favour
The dcfendants ù CîllCd. IC wAs held by the House où
yords th,t the duty to avoid CORÔÎ Ct ÎlJg decision of the commission and
t arts rcquircd that a dccisioi of tl c Commission os to whcther
prcvcntcd, rcstrictcd or distortcd competition in brcach
EC wils tO " followcd Il national court, that where,
tll
ÇOWCVCf legal afld f3Ctual conteXt of tllC CaSC cxamined by the com-
ni ÎSSÎOI1 iv.is nor coiiipl<t<1P d2fltiCdl, aS WllCfC the national court was
the legality of an exclusivity agreement between a particular
spcciÏicb retailers and the commission was mOnito ing a
agreement in respeCt of the Same products in the same market
another company and other retailers, there was no risk of the
adoption of conflicting decisions; that in such circumstances a decision
; tl›e com missio n was simply evidence properly admissible before the
English court which given the expertise of the Commission, might well
be regarded by that court as highly persuasive but was only part of the
Evidence whiCh it would take into account in reaching its own decision
a , d that, accordingly, the duty to avoid conflicting decisions had not
arisen in the present case and the decision making power on whether
Article 81(1) applied belonged to the English court which had properly
0
reached a conclusion on an assessment of all the evidence.’

Collusive tendering, bid-rigging

The allegation was that the parties listed in the case engaged in fix-
ing of prices through collusive tendering or bid-rigging in the provi-
sion of electrical and building words for properties in Singapore. The
Commissio n pointed out that an agreement would still be caught under
Secrion 34 prohibition even if it was not the intention of an undertaking
so agreeing to implement or adhere to the terms of the agreement because
an impression may be created in the minds of others that the undertaking
was a participant. A concerted practice may be found to exist of the par-
ties, even if they did not enter into an agreement, knowingly substituted
the risks of competition with cooperation between themselves."
The Competition Commission of Singapore regards collusive ten-
dering or bid-rigging arrangements as restrictive of competition to an
appreciable extent by their very nature. Tendering procedures are de-
signed to provide competition in areas where it might otherwise be ab-
sent. An essential feature of the system is that tenderers prepare and
submit bids independently. Any tenders submitted as a result of collusion

40. Cf8Ùd9 v Inntrepreneur Prit›/in Co (CPC), (2007) 1 AC 333: (2006) 3 WLR 148:
(2006) 4 All ER 465: 2006 UKHL 38 (HL).
41. COlluSive Tendering (Bid-rigging) in Eleclrical and Building forts, (2010) SG
 co u rzTtT O N L

very nature be rega

This is ill ustrated in the case
re o[ Fair Trading! cited
of the nature
where the CAT s°'d this 0 th,
tciidcring l›roccss:
tcntlcring process condUCtCd by a

,vill i-ccci •, •› « r• P*" • •° its tcHdcr, a nu mier of independe•ñ ,

,yt¡c\jl.trC'd I›i‹J5 for!! ul.*!c‘ ‘/ contractors wholly indepef ldeR J
cx ch otlicr. A t*i1dcr"lS PrOC*SS is designcd to produce
tion in a vcry striict ii red
2. Thc coiiipetit ivc teti process ma y be interfered
dering
tcndcrs submÎ tted s c not the rcsult of individual
culation but of knowledge of the tenders by other Oj•
concertation between partlcipants. Such behaviour by
ings leads to Conditions of competition which dO nOt corresp pq
to the normal conditions of the market.
When the tendering process is selective rather than open t gj)
potential bidders, the loss in independence through knOwle Qge q(
the intentions of other selected bidders can have an even greater
distorring effect on the tendering process.
4. Accordingly, since the selecrive tendering process by its nature
has a restricted number of bidders, any interference with the se-
lected bidders’ independence can result in significant distortions
of competition.
As set out by the Office of Fair Trading in a case in 2006, in which
it had concluded that a number of roofing contractors had colluded in
relation to the making of tender bids for flat roof and car park surfacing
contracts in England and Scotland, there are four types of agreemen ts
that can result in a pre-selected supplier winning the contract.
1. Cover bidding or cover pricing occurs when a contractor that
is not intending to win the contract, submits a price for it after
communication with the designated winner. The price is decided
upon in conjunction with another contractor that wishes to win
the contract. Cover pricing gives the impression of competitive
bidding but, in reality, contractors agree to submit token bids th8t
are higher than the bid of the contractor that is seeking the cover.
2. Bid-suppression, which takes place when contractors agree
amongst themselvcs either to abstain from bidding or to WifhdrBW
bids.
42. CCS GuiJelines nn S. J4, kira. 3.2.
43. 2005 CAR"F 4 (SinJ;aJiore).
44. Corfdi / l’est C.uiitrnl O Jierat‹›rs iii Siii(upore, re, 2008 SG CCS 1.

i“t
I2