Market Allocation under Competition Law

Introduction

“The main objective of the Competition Law is to promote economic efficiencies

using competition as one of the means of assisting the creation of market responsive

to consumer preferences.” – Supreme Court of India

Competition law in India has begun to take shape as major

enforcement actions involving a host of industries have worked

their way from initial complaint to a finding of an

infringement and appeal to the Supreme Court of India.

The Indian Competition Act, 2002 was enacted to “promote and

sustain competition…to protect the interests of consumers and

to ensure freedom of trade”. The Competition Act mirrors more

established competition law regimes in that it prohibits

agreements among parties, mergers or combinations and abuse of

dominance conduct that has an appreciable adverse effect on

competition. 

Competition Act 2002 has come into force to replace the

Monopolies and Restrictive Trade Practices (MRTP) Act, 1969.

After the economic reforms of 1990, it was felt that MRTP has

become obsolete pertaining to international economic

developments relating to competition law and there was a need

of law which curbs monopolies and promotes competition. In

1990s India saw substantial increases in the value and volume

of international trade in goods and services, in foreign

direct investments (FDI), and in cross border mergers and

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acquisitions (M&A). Over the period of time, trade barriers

fell and restrictions on FDI were reduced. The Competition

Act, 2002 has been enacted with the purpose of providing a

competition law regime that meets and suits the demands of the

changed economic scenario in India and abroad.

The Competition Act has repealed the Monopolies and

Restrictive Trade Practices Act, 1969 and has dissolved the

Monopolies and Restrictive Trade Practices Commission. The

cases pending before the MRTP Commission are transferred to

Competition Commission of India “CCI”, barring those which are

related to unfair trade practices and the same are proposed to

be transferred to the National Commission constituted under

the Consumer Protection Act, 1986.

The reasons for adoption of competition laws vary across

countries; these are usually on account of concerns about high

level of market concentration, formation of cartels, state

monopolies, privatization and deregulation, meeting with the

requirements of bilateral and plurilateral trade agreements

and in addition, to take care of cross border competition

dimensions and concerns.

CCI has the power to grant interim relief award compensation,

impose penalty and to grant any other appropriate relief, to

levy penalty for contravention of its orders, making of false

statements or omission to furnish material information, etc.

The Competition Act of India

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The Competition Act prohibits “agreement[s] 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.” Under the Competition Act, certain horizontal

agreements – price fixing, bid-rigging and market allocation –

are presumed to have an appreciable adverse effect on

competition. Other restraints, including vertical restraints,

mergers and alleged abuse of dominance are analyzed under a

balancing test to determine whether they have an appreciable

adverse effect on competition.

The Competition Act identifies three areas of possible

anticompetitive conduct:

1. Anti -competitive agreements. {Section 3}

2. Abuse of dominant position. {Section 4}

3. Combination [merger] regulation. {Section 5 & 6}

Anti - Competitive Agreements

The present Act is quite contemporary to the laws presently in

force in the United States of America as well as in the United

Kingdom. In other words, the provisions of the present Act and

Clayton Act, 1914 of the United States of America, The

Competition Act, 1988 and Enterprise Act, 2002 of the United

Kingdom have somewhat similar legislative intent and scheme of

enforcement.

However, the provisions of these Acts are not quite pari

materia to the Indian legislation. In United Kingdom, the

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Office of Fair Trading (OFT) is primarily regulatory and

adjudicatory functions are performed by the Competition

Commission and the Competition Appellate Tribunal. The U.S.

Department of Justice Antitrust Division in United States

deals with all jurisdictions in the field.

The competition laws and their enforcement in those two

countries are progressive, applied rigorously and more

effectively. The deterrence objective in these anti-trust

legislations is clear from the provisions relating to criminal

sanctions for individual violations, high upper limit for

imposition of fines on corporate entities as well as

extradition of individuals found guilty of formation of

cartels. This is so, despite the fact that there are much

larger violations of the provisions in India in comparison to

the other two countries, where at the very threshold, greater

numbers of cases invite the attention of the

regulatory/adjudicatory bodies.

The Act as laid down in its preamble has been framed on the

philosophy of modern competition law to come in line with

current policies of GOI with growing national and

international trends with regard to competition both at

national and international level. It aims at fostering

competition and promoting Indian markets against anti-

competitive practices by enterprises. Competition laws in

India like in any other jurisdiction prohibits all agreements

which restrict freedom of trade and cause consumer harm by way

of limiting production and distribution of goods and services

and fixing prices higher than normal. For example, a cartel of

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producers, traders, together may fix prices higher than normal

leading to loss in consumer welfare. Principle objective of

supplier of goods and services who are in a position to

manipulate the market is to maintain their profits at pre-

determined levels. They seek to achieve through this various

means. Agreements for price-fixing, limiting supply of goods

or services, dividing the market, etc. are the usual modes of

interfering with the process of competition and ultimately

reducing or eliminating competition. Where competition is

adversely affected to an appreciable extent, such agreements

would be anti-competitive1.

The term anti-competitive agreements as such has not been

defined by the Act, however,

Section 3 prescribes certain practices which will be anti-

competitive and the Act has also provided a wide definition of

agreement under section 2 (b). Section 3(1) is a general

prohibition of an agreement relating to the production,

supply, distribution, storage, acquisition or control of goods

or provision of services by enterprises, which causes or is

likely to cause an AAEC within India. Section 3(2) simply

declares agreement under section 3(1) void.

Section 3 of the Competition Act talks about Anti-Competitive

Agreements. The Act has a wide and inclusive definition of the

term ‘agreement’ viz.:

• An arrangement/understanding or action in concert

• Can be oral or in writing

• Need not be enforceable by law

1 Ramappa T; Competition Law in India- Policy, issues and Devolvement’s; Oxford University Press,(2006); pg.50

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• Even a ‘wink and nod’ can be construed as an agreement.2

Anti-competitive agreements -: “Any agreement with respect to

production, supply, distribution, storage, acquisition or

control of goods/provision of services which is

anticompetitive is prohibited and void. Such agreements must

cause or be likely to cause appreciable adverse effect on

competition (AAEC) in a relevant market in India. The relevant

market may be a geographical or a products market. The Act

distinguishes between horizontal and vertical agreements.” 3

a. Horizontal agreements

Agreements between enterprises or persons engaged in

trade of identical or similar goods or services are

presumed to have AAEC if they:

• Directly or indirectly determine purchase or sale

prices

• Limit or control output, technical development,

services etc.

• Share or divide markets

• Indulge in rigging or collusive bidding

Cartels are also prohibited under the Act and have

an inclusive definition providing that any group of

entities agreeing to limit, control or attempt to

control production, distribution, sale or price

would be construed as cartels.

2 http://cci.gov.in/images/media/ResearchReports/ProtectingConsumerInterestsUnderCompttLaw.pdf3 The Competition Act, 2002, Section 3

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b. Vertical agreements

Agreements between enterprises or persons at

different stages/levels of production chain in

different markets are prohibited if such agreements

cause or are likely to cause AAEC. Vertical

agreements include:

• Tie-in arrangement (e.g. requiring a purchaser of

goods to purchase some other goods as condition of

such purchase)

• Exclusive supply arrangement (e.g. restricting a

purchaser in course of his trade from dealing in any

goods other than those of the seller)

• Exclusive distribution arrangement (e.g.

limiting/restricting supply of goods or allocate any

area or market for sale of goods)

• Refusal to deal (e.g. restricting by any method

any person/classes of persons to whom goods are

sold)

• Resale price maintenance (e.g. selling goods with

condition on resale at stipulated prices)

Horizontal v. Vertical agreements

Horizontal agreements are presumed to have AAEC whereas in

vertical agreements, the onus of proving AAEC lies on the CCI.

Joint venture agreements are an exception to horizontal

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agreements, provided such agreements increases efficiency in

production, supply, distribution, storage acquisition or

control of goods or provisions of services. Export agreements

and agreements to protect intellectual property are allowed to

have protective clauses.4

The Competition Act, 2002 and the Competition Commission of

India In India, the authority on Competition Law, the Competition

Act, 2002, as amended by the Competition (Amendment) Act,

2007, follows the philosophy of modern competition laws. The

Act prohibits anti-competitive agreements, abuse of dominant

position by enterprises and regulates combinations

(acquisition, acquiring of control and M&A), which causes or

likely to cause an appreciable adverse effect on competition

within India.5 The objectives of the Act are sought to be

achieved through the Competition Commission of India (CCI)

which has been established by the Central Government with

effect from 14th October 2003. It is the duty of the

Commission to eliminate practices having adverse effect on

competition, promote and sustain competition, protect the

interests of consumers and ensure freedom of trade in the

markets of India. The Commission is also required to give

opinion on competition issues on a reference received from a

statutory authority established under any law and to undertake

4 http://www.nishithdesai.com/Media_Article/2012/Competition%20Law%20In%20India%20Vs%20USA%20And%20EU.pdf5 http://cci.gov.in/index.php?option=com_content&task=view&exp=0&id=12 visited on January 22nd 2014

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competition advocacy, create public awareness and impart

training on competition issues. To effectuate its findings,

the CCI passes “orders” deciding on whether the activity(s)

has an appreciable adverse effect on competition in India or

not; after following the procedures given under Sections 19,

26 and 27 of the Competition Act, 2002. Such orders are

appealable to Competition Appeal Tribunal, and further to the

Supreme Court of India.

Restraint of Trade and Market Allocation in Foreign Aspects

Sherman Anti-Trust Act

The Sherman Anti-Trust Act of 1890, the first and most

significant of the U.S. ANTITRUST LAWS, was signed into law by

President Benjamin Harrison and is named after its primary

supporter, Ohio Senator John Sherman.

The prevailing economic theory supporting antitrust laws in

the United States is that the public is best served by free

competition in trade and industry. When businesses fairly

compete for the consumer's dollar, the quality of products and

services increases while the prices decrease. However, many

businesses would rather dictate the price, quantity, and

quality of the goods that they produce, without having to

compete for consumers. Some businesses have tried to eliminate

competition through illegal means, such as fixing prices and

assigning exclusive territories to different competitors

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within an industry. Antitrust laws seek to eliminate such

illegal behavior and promote free and fair marketplace

competition.

The Sherman Act made agreements "in restraint of trade"

illegal. It also made it a crime to "monopolize, or attempt to

monopolize any part of the trade or commerce." The purpose of

the act was to maintain competition in business.

Section 1 of the Sherman Act provides that "[e]very 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 hereby declared to be illegal."6 The

broad language of this section has been slowly defined and

narrowed through judicial decisions.

The courts have interpreted the act to forbid only

unreasonable restraints of trade. The Supreme Court

promulgated this flexible rule, called the Rule of Reason, in

Standard Oil Co. of New Jersey v. United States7. Under the

Rule of Reason, the courts will look to a number of factors in

deciding whether the particular restraint of trade

unreasonably restricts competition. Specifically, the court

considers the makeup of the relevant industry, the defendants'

positions within that industry, the ability of the defendants'

competitors to respond to the challenged practice, and the

defendants' purpose in adopting the restraint. This analysis

forces courts to consider the pro-competitive effects of the

restraint as well as its anticompetitive effects.

6 The Sherman Antitrust Act, 1890, Section 17 221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619 (1911)

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The Supreme Court has also declared certain categories of

restraints to be illegal per se: that is, they are

conclusively presumed to be unreasonable and therefore

illegal. For those types of restraints, the court does not

have to go any further in its analysis than to recognize the

type of restraint, and the plaintiff does not have to show

anything other than that the restraint occurred.

Restraints of trade can be classified as horizontal or

vertical. A horizontal agreement is one involving direct

competitors at the same level in a particular industry, and a

vertical agreement involves participants who are not direct

competitors because they are at different levels. Thus, a

horizontal agreement can be among manufacturers or retailers

or wholesalers, but it does not involve participants from

across the different groups. A vertical agreement involves

participants from one or more of the groups—for example, a

manufacturer, a wholesaler, and a retailer. These distinctions

become difficult to make in certain fact situations, but they

can be significant in determining whether to apply a per se

rule of illegality or the Rule of Reason.

For example, horizontal market allocations are per se illegal,

but vertical market allocations are subject to the rule-of-

reason test.

Market allocations are situations where competitors agree to

not compete with each other in specific markets, by dividing

up geographic areas, types of products, or types of customers.

Market allocations are another form of price fixing. All

horizontal market allocations are illegal per se. If there are

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only two computer manufacturers in the country and they enter

into a market allocation agreement whereby manufacturer A will

only sell to retailers east of the Mississippi and

manufacturer B will only sell to retailers west of the

Mississippi, they have created monopolies for themselves, a

violation of the Sherman Act. Likewise, it is an illegal

agreement that manufacturer A will only sell to retailers C

and D and manufacturer B will only sell to retailers E and F.

The case of Palmer v. BRG of Georgia, Inc.8 addressed the issue

of market division.

Facts: Harcourt Brace Jovanovich Legal and Professional

Publications (HBJ) is the nation’s largest provider of bar

review materials and lecture services. In 1976, HBJ began

offering a Georgia bar review course in direct competition

with BRG of Georgia, Inc. (BRG), the only other main provider

of bar review services in the state. In 1980 HBJ and BRG

entered into an agreement whereby BRG was granted an exclusive

license to market HBJ bar review materials in Georgia in

exchange for paying HBJ $100 per student enrolled by BRG in

the course. HBJ agreed not to compete with BRG in Georgia, and

BRG agreed not to compete with HBJ outside of Georgia.

Immediately after the 1980 agreement, the price of BRG’s

course was increased from $150 to $400. Jay Palmer and other

law school graduates who took the BRG bar review course in

preparation for the 1985 Georgia bar exam sued BRG and HBJ,8 498 U.S. 46 (1990)

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alleging a violation of Section 1 of the Sherman Act. The

district court held in favor of the defendants. The court of

appeals affirmed. The Supreme Court agreed to hear the

plaintiffs’ appeal.

Issue: Did the BRG-HBJ agreement constitute a division of

markets and a per se violation of Section 1 of the Sherman

Act?

Opinion Per Curiam: The revenue-sharing formula in the 1980

agreement between BRG and HBJ, coupled with the price increase

that took place immediately after the parties agreed to cease

competing with each other in 1980, indicates that this

agreement was formed for the purpose and with the effect of

raising the price of the bar review course. It was, therefore,

plainly incorrect for the district court to enter summary

judgment in respondents’ favor. Moreover, it is equally clear

that the district court and the court of appeals erred when

they assumed that an allocation of markets or submarkets by

competitors is not unlawful unless the market in which the two

previously competed is divided between them.

Here, HBJ and BRG had previously competed in the Georgia

market; under their allocation agreement, BRG received that

market, while HBJ received the remainder of the United States.

Each agreed not to compete in the other’s territories. Such

agreements are anticompetitive regardless of whether the

parties split a market within which both do business or

whether they merely reserve one market for one and another for

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the other. Thus, the 1980 agreement between HBJ and BRG was

unlawful on its face.

Held: The agreement between HBJ and BRG was unlawful on its

face. The agreement's revenue-sharing formula, coupled with

the immediate price increase, indicate that the agreement was

"formed for the purposes and with the effect of raising" the

bar review course's prices in violation of the Sherman Act.

See United States v. Socony-Vacuum Oil Co.9. Agreements between

competitors to allocate territories to minimize competition

are illegal, United States v. Topco Associates, Inc.10 ,

regardless of whether the parties split a market within which

they both do business or merely reserve one market for one and

another for the other.

EU Competition law

The old Rome Treaty of 1957 is now known as Treaty on European

Union(previously known as European Community) by the Treaty of

Lisbon, which was signed on 13 December

2007 in Lisbon and which entered into force on 1 December

2009. EU competition law is contained in Chapter 1 dealing

with Rules of Competition of Title VII of the EU Treaty, which

consist of Articles 101 to 109(previously Article 81 to 89).

Article 3(3) of the EU Treaty provides that The Union shall

establish an internal market. It shall work for the

9 310 U.S. 150, 22310 405 U.S. 596

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sustainable development of Europe based on balanced economic

growth and price stability, a highly competitive social market

economy, aiming at full employment and social progress, and a

high level of protection and improvement of the quality of the

environment. It shall promote scientific and technological

advance.

Section 3 of the Act is based largely on Article 101 of EU,

which is the law regulating anti-competitive Agreements in EU

though the decisions under those Articles are not binding on

India, but they are useful guides in understanding the intent

of the legislation. Article 101 and

102 (previously Article 82 dealing with abuse of dominance)

are also referred as called Modernization Regulation‖. The EU

has granted a number of block exemptions to agreements in

various sectors so that it is unnecessary for individuals to

apply for individuals to apply for exemption. They relate to

agency agreements, exclusive distribution agreements,

agreements relating to research and development,

specialization agreements, vertical agreements and concerted

practices etc.

UK Competition law

The principal domestic law relating to competition in the UK

is the Competition Act, 1998. The

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Enterprises Act, 2002, is complementary to their competition

Act. Section 2 of the UK Competition Act deals with anti-

competitive agreements, decision, and concerted practices.

Section 2(1), agreements between undertakings, decisions by

associations of undertaking or concerted practices which -

(a) May affect trade within the UK, and

(b) Have their object or effect of prevention, restriction or

distortion of competition within the UK.

They are same as set out in Article 101 ( EU), as according to

section 60 of the Competition Act, 1998, the domestic law in

the UK relating to the Competition should be consistent with

the corresponding questions arising in the competition law

within the Community. Any issue relating to effect on

competition with a Community Dimension is provided to be dealt

with in accordance with the European Community law, viz.

Articles 101 and 102 of the EU Treaty.

Rules Applied in the Interpretation of Anti-Competitive

Agreements

Concept of Per se illegality

"The per se rule involves a limited analysis of whether

certain conduct occurred and, if so, whether the type of

conduct in question falls within the category of conduct that

has been condemned under the antitrust laws as per se illegal.

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"If the conduct is subject to the per se rule, it is presumed

to be illegal without elaborate inquiry as to the precise harm

it may have caused or the business excuse for its use."

A per se violation is issued when the type of restraint has

previously been scrutinized by the courts and has consistently

been determined to violate Section One of the Sherman Act. A

series of disallowed agreements will change the scrutiny of

that type of agreement from the rule of reason to the per se

standard. When this occurs, such agreements are presumed to

violate Section One of the Sherman Act. Until the per se

standard applies, however, the rule of reason is applied.

Accordingly, the per se rule is appropriate only after courts

have had considerable experience with the type of restraint at

issue and can predict with confidence that the practice would

be invalidated in almost all instances under the rule of

reason. For example, the per se violation standard is used in

cases that involve predatory pricing, as well as horizontal

customer division agreements such as price fixing, group

boycotts, and tying arrangements. In other words, the contract

is deemed illegal per se without requiring a showing of the

actual or likely impact on a market. The purpose of using the

per se standard is twofold. First, it promotes judicial

efficiency by allowing the court to use a strict standard and

avoid lengthy litigation on facts that have an extremely high

probability of violating the Sherman Act. While this factor is

considered, administrative efficiency in itself is

insufficient to justify a per se violation. Secondly, the per

se standard provides consistency within the law. As a result,

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practitioners are able to advise their clients as to

permissible conduct, or conduct that has a substantial

likelihood to violate the Sherman Act11.

Concept of Rule of reason

The Rule of Reason is a doctrine developed by the United

States Supreme Court in its interpretation of the Sherman

Antitrust Act. The rule, stated and applied in the case of

Standard Oil Co. of New Jersey v. United States12, is that only

combinations and contracts unreasonably restraining trade are

subject to actions under the anti-trust laws. Possession of

monopoly power is not in itself illegal.

The Rule of Reason can be therefore considered a complement to

per se illegality. Under the latter, the action, without

consideration for circumstances, is illegal. Under the rule of

reason, the circumstances in which the action was committed

must be considered.

The rule of reason is thus decided on a case by case basis. In

determining whether the restraint is reasonable, the United

States Supreme Court13 has enumerated several factors that

should be incorporated within the balancing test. The factors

include:

(1) Specific information about the business;

(2) The history, nature, and effect of the restraint; 11 http://web.law.und.edu/LawReview/issues/web_assets/pdf/84/84-1/84NDLR59.pdf12 221 U.S. 1 (1911)13 Supra 12

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(3) The applicable market power of both the manufacturer and

the distributor; and

(4) The reason for the restraints.

The rule of reason is a flexible test that permits the court

to analyze the subjective practices of the business in

conjunction with the effects of the questionable business

agreement. If the business agreement has an anticompetitive

effect, the agreement will be invalidated under the Sherman

Act. While the rule of reason is the general standard, some

agreements are of the type that, if there is a strong

probability that the agreement will have an anticompetitive

effect, the agreement is per se illegal.14

In Mahindra and Mahindra Ltd v. UOI15, Hon’ble Supreme Court of

India observed ―it will thus be seen thus be seen that the

“rule of reason” normally requires an ascertainment of the

facts or features peculiar to the particular business; its

condition before and after the restraint was imposed; the

nature of the restraint and its effect, actual or probable;

the history of the restraint and the evil believed to exist,

the reason for adopting the particular restraint and the

purpose or end sought to be attained and its only on a

consideration of these factors that it can be decided whether

a particular act, contract or agreement, imposing the

restraint is unduly restrictive of competition so as to

constitute restraint of trade.”14 http://web.law.und.edu/LawReview/issues/web_assets/pdf/84/84-1/84NDLR59.pdf15 (1979)2 SCC 529

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Indian Aspects of Market allocation

Territorial and customer vertical market allocations are not

per se illegal but are judged by the Rule of Reason. In 1985,

the Justice Department announced that it would not challenge

any restraints by a company that has less than 10 percent of

the relevant market or whose vertical price index, a measure

of the relevant market share, indicates that collusion and

exclusion are not possible for that company in that market.

Section 3(3) (c) of ICA provides that any agreement which

shares the market….by way of allocating of geographical area

of the market, or type of goods or services or number of

customers in the market or any other similar way. Non-compete

agreements in a sale of business do just that. They limit the

production and supply of goods and services in a certain

geographical market and foreclose the geographical market for

the seller to do business.16

Market allocation is also known as Market Division Scheme.

Market allocation or market division schemes are agreements in

which competitors divide markets among themselves. In such

schemes, competing firms allocate specific customers or types

of customers, products, or territories among themselves. For

example, one competitor will be allowed to sell to, or bid on

16 http://cci.gov.in/images/media/ResearchReports/TathagataChoudhuryInternshipReport.pdf

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contracts let by, certain customers or types of customers. In

return, he or she will not sell to, or bid on contracts let

by, customers allocated to the other competitors. In other

schemes, competitors agree to sell only to customers in

certain geographic areas and refuse to sell to, or quote

intentionally high prices to, customers in geographic areas

allocated to conspirator companies.

This would obviously benefit the sellers involved in the

agreement because it restrains competition. However, the

consumers would be the ones paying for the benefits in the

form of higher prices.

In the market allocation scheme the territories are often

divided based upon geographical location. In dividing up the

territory, the competitors agree to refrain from competing

with one another within their respective territories. The

rationale behind prohibiting such market divisions is that the

actions permit competitors to increase the price to consumers

within their jurisdiction by minimizing the competition. This

type of collusion between competitors almost always results in

an anticompetitive effect.

Case Law Analysis

Cases before 1991 Amendment

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The following cases are related to market allocation mainly

involving trucking cartels.

In a number of the following cases allegations of price

fixation were also proved in addition to market allocation.

1. In Re: Truck Operators Union17–

It was held that the constitution of the Union enabled the

existing members to keep out new entrants from the market of

transportation of fruits and vegetables on arbitrary grounds.

It was alleged before the MRTPC that if any transporter had

attempted to enter the market and offered to transport fruits

and vegetables, he was restrained to do so by force. While

ordering modification of the impugned clause of the

constitution of the Union, a “cease and desist” order was

passed against the Union.

2. In Re: Bharatpur Truck Operator’s Union18 –

It was alleged that non-members were restricted from lifting

the goods from within the city of Bharatpur and its

surrounding areas, in addition to concert in fixing,

maintaining and increasing freight rates. A cease and desist

order was passed.

3. In Re: Rohtak Public Goods Motor Union19 –

A complaint was received from the President of Rohtak Mandi

Foodgrain Dealer’s Association against Rohtak Public Goods

17 RTP Enquiry No. 32 of 197718 RTP Enquiry No. 10 of 198219 RTP Enquiry No. 25 of 1983

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Motor Union alleging that they had not allowed non-union truck

operators to carry goods. The allegation was proved and a

cease and desist order was passed by the MRTPC.

4. In Re: Bhilwara District Trust Transport Union20–

Two enquiries were instituted against the Bhilwara District

Trust Transport Union & others. Allegations of being involved

in RTPs of market allocation and increase of freight rates

were made and MRTPC issued an interim temporary injunction

restraining the respondents from carrying on the restrictive

trade practice.

5. In Re: India Truck Union, Mahwa, Rajasthan21 –

The allegations included preventing non-members from loading

goods, forcing customer to hire trucks from members only, etc.

The allegations were proved and the MRTPC passed cease and

desist order against the respondent union.

6. In Re: Goods Trucks Operators Union, Faridabad and

others22 –

It was alleged that the members of the union were prevented

from negotiating on freight rates freely and were involved in

market allocation. A cease and desist order was issued by the

MRTPC.

7. In Re: motor Lorry Owners and Operator’s Union23– 20 RTP No. 29 of 1986 and 109 of 198621 RTP Enquiry No. 30 of 198322 RTP Enquiry No. 1313 of 1987 23 RTP No. 402 of 1988, 97, 98 and 99 of 1989

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It was alleged that the four lorry associations had indulged

in dislocating the public distribution system by not allowing

the transport contractors of the Civil Supplies Corporation to

hire other Lorries at the existing market rates. Due to lack

of evidence the MRTPC did not issue any restraining order.

8. In Re: Truck Operator’s Union, Haryana24 –

The allegation was that the Union compelled non-member Truck

Owner to become member of the Union failing which the Union

would prevent manufacturers from using their trucks in Karnal

district. The MRTPC issued a cease and desist order against

the respondents.

Cases handled by MRTPC after 1991 amendment

The following cases are related to market allocation. The

transport sector involving truck associations in India had

been mostly involved in market allocation. The same

organizations were also involved in price-fixation as well.

The cases relating to price fixation and market allocation

after 1991 are mainly related to this sector and in the major

number of cases the allegations was proved and the MRTPC had

passed cease and desist orders.

9. Mewar Chamber of Commerce & Industry & Others v. Bhilwara

dist. Truck Transport Union & Others25–

24 RTP Enquiry no. 98 of 199025 (1995) 3 CTJ 7 (MRTPC)

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Allegations that the respondent (truck-operators’ union)

collected by force fines or levies from non- member traders

under the guise of donations and fixed freight rates in

concert to be charged by the member truckers from the users or

consumers. Enquiry was instituted. An ad-interim temporary

injunction was issued restraining the respondents from

carrying on the RTP till the disposal of the enquiry. After

completion of the enquiry, it was held that the respondent and

its office-bearers were involved in the alleged RTP and the

practice was held prejudicial to public interest. A cease and

desist order was passed directing the respondents not to

indulge in these practices in future and stop collecting fines

or levies or fixing the freight rates which distorted or

restricted competition between the members of the Union and

others.

10. Taraori Mandi Goods Transport Co. case26 -

There was allegation that the respondents did not allow the

other truck operators and persons, not being members of the

respondent association, to load or unload goods within the

area they operated in. Even the owners of the trucks were

subjected to similar restrictions. A complaint along with

injunction application was filed with the MRTPC. After enquiry

the DG concluded that respondents prevented the complainants

from loading goods in their trucks. Respondents contested the

enquiry. It was held that excluding the rivals from the

competition is a RTP which is ex-facie prejudicial to the

public interest. A cease and desist order was issued26 (1994) 2 CTJ 129 (MRTPC)

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prohibiting the respondents from engaging in the impugned

practice in future.

11. Bhiwadi Manufacturers Association v. Truck Operators

Association27 –

Bhiwadi Manufacturers Association is an association of

manufacturers who are engaged in diverse trading and

commercial activities. The Association complained to the MRTPC

that the local Truck Operators Association had resorted to

various RTPs of preventing the non-members from carrying on

the trading activity of loading and unloading of goods, fixing

freight rates, demanding ‘dharmada’ and making the rules

binding on the persons hiring trucks. The complainant

Association wanted the MRTPC to pass an injunction on truck

operators’ association and restrain it from indulging in the

alleged RTP. All the respondents did not file ant reply to the

injunction application. So far as the enquiry proceedings are

concerned, the Commission proceeded ex-parte. It observed that

the rules of the Respondent Association clearly established

that the respondents had indulged in the RTP as defined under

section 2 (o) and section 33 (1) (j) read with section 33 (2)

of the Act. The respondents were directed to cease and desist

from indulging in those practices.

Conclusions and Suggestions

27 1 CTJ 126 (MRTPC)

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The new economic policy of 1991 on one hand has made our life

comfortable as the goods and services required for our use are

available in abundance and on the other hand it has also

opened a new challenge for preventing anti-competitive

agreements by manufacturers and service providers. Under the

Act there has been made adequate provisions for preventing

anti-competitive agreements and has also created an

institution i.e. commission to ensure effective implementation

of law However Act and CCI are to be adequately empowered to

take of such situations. Provisions relating to prohibition of

anti-competitive agreements under the Act are, to some extent

adequate to maintain fair competition in the market and

thereby protect interest of consumers. However they are needed

to be strictly observed and implemented.

Competition rules and policies in India are in the early

stages. Amendments and rule changes will work out some of the

issues that come to light as the CCI gains experience as

India's competition watchdog.

However, as is evident from the case law discussed, the

Competition Act is making a strong impact on the way business

and transactions are conducted in India. The fines imposed by

the CCI are some of the highest in the world. In an age when

competition law regulators across the world are increasing

their cooperation with respect to enforcement, India has

already engaged in competition law-related cooperation

agreements with the United States and Russian competition

regulators, and there are indications that the government is

contemplating additional arrangements with other countries.

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This is especially relevant for international companies with a

presence in India and those considering entering the Indian

marketplace.

Going through anti-competitive agreements and specifically

market allocation under new competition law regime in India I

have some suggestions, as to provision of anti-competitive

agreement, which in my view needs to be addressed and

therefore, should be given place under the statute.

Some suggestions are as follows:-

Rule of Presumption under section 3(3) should be

converted into Per Se. In a developing country like

ours Per Se approach will serve the object in more

effective way resulting in fewer cases of violations

due to strict prohibition of law.

Heavy fines should be imposed for violation under

the Act to attract leniency.

For the actions and conduct mentioned under section

3(3)(a) to (d) no further analysis of AAEC should be

required, if act and conduct which are prohibited

have indeed.

Cartels should be expressly criminalized under the

Act

It is needless to say that Indian Competition Act has played a

very effective role to overcome from the problems under the

MRTPC and give the Competition Law a new light to travel with

the helping hand of CCI. However, the new Act is definitely a

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step in the right direction by harmonizing the competition

policy with international trade and policy.

The commission‘s proactive role in India in uncovering cartels

and other anti-competitive agreements would go a long way in

encouraging fair market practice and deepen competition. The

orders of commission reflect the robustness of the system as

well as confidence to stem out the anti- competitive practice

from markets in India. Need of the hour is to further

strengthen and provide more teeth to commission, as brought

out above.

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