Key concepts to know under The Competition Act, 2002 Anti-Competitive Agreements

To understand the purpose, underlying principles, and functioning of the Competition Act, 2002, certain key concepts dealt with by the Act need to be known.
The same has been explained hereunder.

Anti-Competitive Agreements Anti-competitive agreements are those between the parties to a business transaction that have the potential to undermine
competition in a specific market or that favour one person or group unreasonably above the interests of others. The Competition Act of 2002 forbids such anti-
competitive agreements. According to the definition of “agreement” under Section 2(b) of the Act, the agreement need not take the form of a formal
document that the parties have signed. It may or may not be written. It is obvious that the definition given is broad, inclusive, and not exhaustive.
Section 3[1] of the Competition Act states about anti-competitive agreement, there are two kinds of
agreement under the Act-
1. Vertical 2. Horizontal

Agreement is defined under Section 2(b) of the Competition Act[2]. Agreement is relating to production, supply,
distribution, storage, acquisition or control of goods or services which causes or is likely to cause an appreciable
adverse effect on competition in India shall be void. Agreement widely defined – even a nod or a wink can suffice. It
need not be written, covers oral understandings as well. Direct proof of agreement not required, may be conditional
from facts, circumstantial evidence is enough.

In the case of Indian Foundation of Transport Research and Training v. Shri Bal Malkait Singh and Ors[3]- AIMTC
had directed its members to uniformly increase the truck freight (by -15%) due to increase in price of diesel, thereby
harming consumers and causing an AAEC in the market. CCI Order: Held that the similarity of the press reports by the
AIMTC’s President and its spokesperson respectively indicated that there was a meeting of minds amongst the
members of the AIMTC to fix/increase the freight rates consequent upon the hike in diesel prices. The CCI additionally
held that the agreement had an appreciable adverse effect on competition.

Horizontal Agreement
Section 3(3) of the Act states that- Any agreement entered into between enterprises or associations of enterprises or
persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by,
any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of
goods or provision of services, which—

(a) Directly or indirectly determines purchase or sale prices;

(b) Limits or controls production, supply, markets, technical development, investment or provision of services;
(c) Shares the market or source of production or provision of services by way of allocation of geographical area of
market, or type of goods or services, or number of customers in the market or any other similar way;
(d) Directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse
effect on competition.[4]
There is direct or indirect determination of prices, it is between competitiors presumed and anti-competitive. Sharing
of• Prices,• Input costs,• Price/cost components,• Profit margins,• Cost structure and price calculation,

Difference between MRTP Act and Competition Act:-

1. Meaning- MRTP Act is the first competition law made in India, which covers rules and regulations relating to unfair
trade practices. Whereas, Competition Act, is implemented to promote and keep up competition in the economy and
ensure freedom of business.
2. Nature- MRTP Act is reformatory in nature. Whereas, competition Act is punitive in nature.
3. Penalty- No penalty for offence under MRTP Act. Whereas, in Competition Act, penalty is present.4. Objective-
MRTPAct controlled monopoly in the market. Whereas objective of Competition Act is to promote competition.
Abuse of dominant position A person or business is said to be in a dominating position when it is in a strong position that allows it to function
independently of the competitive dynamics present in the relevant market or has a favorable impact on its rivals, customers, or the relevant
market.

Control of such abuse is provided for under Section 4 of the Act. It states that no enterprise or organisation abuses its dominant position. The
following behaviours are defined as “abuse of dominant position”: 1- Imposition of unfair or discriminatory terms or pricing (including
predatory prices) in connection with the purchase or sale of goods or services may be done directly or indirectly.

A “predatory price” is when a product is sold below what it costs to produce it or to provide the service in an effort to drive out or lessen
competition. For the purpose of calculating the cost of predatory pricing, the Competition Commission of India (Determination of Cost of
Production) Regulations, 2009 have been introduced. Average variable cost will typically be used as a stand-in for marginal cost, as per
Regulation 3(1).

2. To the detriment of customers, limiting or restricting the production of products or services or placing restrictions on technical or
scientific progress related to such goods or services. 3- Engaging in actions that in any way prevent access to the market. 4-Using one
relevant market’s dominant position to defend or penetrate another relevant market.

Section 4 of the Act is that, unlike in the case of anti-competitive agreements and combinations, the offence of “abuse of dominant position” is
not dependent on a determination of an appreciable adverse effect on competition. When dealing with matters falling under Section 4, the
sole place where anti-competitive agreements (AAEC) is to be taken into account is in the list of considerations that the Commission is
obligated to take into account when considering whether an entity enjoys a dominant position under Section 19(4) of the Act. According to
Section 19(4)(1), when determining whether an enterprise enjoys a dominant position, the Commission may take into account “any relative
advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an
appreciable adverse effect on competition.

Combinations and their regulation

The third area of competition law’s concentration is the regulation of combinations. The three types of combinations regulated by the
Competition Act, 2002 are as follows: 1- A person or business buying the stock, voting rights, or assets of another entity. 2-Individuals gaining
control over an enterprise. 2-Combinations or mergers between or among businesses.

Combinations are defined in Section 5 of the Act by a set of cutoff points below which they are not subject to the Competition Act’s scrutiny.
The fundamental reasoning for imposing such restrictions is that joining forces between tiny businesses or entities may not significantly harm
competition in Indian marketplaces. However, an exception has been made in the case of any covenant in a loan agreement or an investment
agreement in favour of governmental financial institutions, foreign institutional investors, banks, or venture capital funds.