Prohibition Of Anti-Competitive Agreements

Agreements which cause or are likely to cause appreciable

adverse effect on competition are anti-competitive agreements.

•Horizontal agreements
For example, agreement between two rivals is a horizontal
agreement. In cases of agreements between rivals for fixing prices
or for limiting production or for sharing markets, there is a
presumption in the Act that such agreements cause appreciable
adverse effects on competition.

•Vertical agreements
For example, an agreement between the manufacturer and a
distributor is a vertical agreement.
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• The presumptive rule does not apply to vertical agreements.
The question whether the vertical agreement is causing
appreciable adverse effect on competition is to be determined
by rule of reason, which essentially means that the positive as
well as the negative impact of such agreement on competition
will have to be taken into account before coming to any
conclusion.

• The law recognizes intellectual property rights and in order to

facilitate their protection, it permits reasonable restrictions
imposed by their owners. Since exports do not impact markets
in India, agreement between exporters, in spite of being
horizontal, are exempted.

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Prohibition Of Anti-Competitive Agreement -
Section 3(1)
Any enterprise or association of enterprises or person or
association of persons shall not enter into any agreement in
respect of :

• Production,
• Supply,
• Distribution,
• Storage,
• Acquisition, or
• Control of goods or provision of services.
which causes or is likely to cause an appreciable adverse effect
on competition within India. Any agreement in violation of the
above rule is void
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Anti-Competitive Agreement which has
appreciable adverse effect on the competition –
Section – 3(3)
Following agreements are presumed to have
appreciable adverse effect on competition.
• 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 associations of enterprises or
associations of persons, including cartels, engaged in
identical or similar trade of goods or provision of
services.
Reference from
Exceptions – Section 3(3)
An agreement shall not be considered as
anti-competitive if such agreement is entered into by
way of joint ventures which increases efficiency in
production, supply, distribution, storage, acquisition or
control of goods or provision of services.

Example: An arrangement between two or more banks

for sharing their A.T.M networks .

Reference from
Other Anti-Competitive Agreements –
Section 3(4)
These are vertical restraints and are judged on case
basis.
1. Tie-in agreement;
2. Exclusive supply agreement;
3. Exclusive distribution agreement;
4. Refusal to deal;
5. Resale price maintenance.

These vertical restraints and are judged on case basis.

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1. Tie-in agreement ,Eg. To compulsorily buy gas burner
from agency supplying gas cylinder as a condition for
purchase of gas connection.
2. Exclusive supply agreement ,Eg. To restrict spykar
brand dealers from stocking any other brand goods other than
spykar
3. Exclusive distribution agreement ,Eg. To give maruti car
dealer exclusive right to sell in particular area say Malad .To
restrict Monginis to sell cakes in other areas except
Churchgate.
4. Refusal to deal, Eg.An agreement with particular company
Z ltd to sell all goods to particular person only say V limited.
5. Resale price maintenance, Eg. K supplies goods to A on
condotion that he(A0 shall not sell that particular goods say
textbook below particular price say 100rs.
Reference from
Exceptions
The following agreements are not considered as void.

1. The Copyright Act, 1957.

2. The Patents Act, 1970
3. The Trade and Merchandise Marks Act, 1958 or the
Trade Marks Act, 1999.
4. The Geographical Institutions of Goods Act, 1999.
5. The Designs Act, 2000.
6. The Semiconductor Integrated Circuits Layouts-
Design Act, 2000.
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