Current Cartels in India with reference to the Competition Act, 2002

Introduction

The Indian Competition Act 2002 (Competition Act) is the legislation regulating anti-competitive conduct in India, and the Competition Commission of India is the statutory authority overseeing the enforcement of the competition law. The CCI is aided in its duties by its investigative arm, the Office of the Director-General[1] (DG); its duties involve the achievement of the objectives of the Competition Act, namely the prevention of practices causing an appreciable adverse effect on competition (AAEC)[2], the promotion of competition in the market, and the protection of the freedom of trade and the interests of the consumer.

The Competition Act's stance on Cartels

Section 2, sub-section (c) of the Competition Act defines the term cartel as "an association of producers, sellers, distributors, traders or service providers who by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or, price of or trade in goods or provision of services."

Section 3 of the Competition Act categorically proscribes the creation of certain anti-competitive agreements, such as agreements between or among competitors (horizontal agreements, like those of cartels), and agreements between actors at different levels of the production chain (vertical agreements). Agreements that are not in line with provisions of Section 3, i.e. agreements that provide for bid-rigging, price-fixing, etc. are presumptively deemed void.

To certify the existence and functioning of a cartel, the CCI must establish that the competitors had entered into an agreement with the explicit goal of fixing prices, limiting supply, sharing markets, or rigging bids.

Once a cartel is found to exist, by default, it is hypothesized to cause an appreciable adverse effect on competition (AAEC), unless the agreement is anchored to an efficiency-enhancing joint venture. While this presumption is rebuttable, alleged cartelists have very rarely succeeded in opposing the same. The CCI is also invested with the power to search and seize documents, and to collect evidence via raids to establish the existence of a cartel agreement.

According to Section 19 of the Competition Act, The CCI is authorized to initiate inquiries into anti-competitive agreements or unilateral conduct of its own volition, upon receipt of any relevant information, or based on a reference from any statutory authority. To determine if an agreement violates Section 3, the CCI is required to consider an exhaustive list of factors, including foreclosure of competition, barriers to entry, and benefits to consumers.

Current Cartels in India

In India cartels have been alleged in various sectors namely cement, steel, tires, trucking, family planning device[3] (copper T) etc. India is also believed to be victim of oversees cartel in soda ash, bulk vitamins, petrol etc. All these tend to raise the price or reduce the choice of consumers. The business houses are affected most by cartels as the cost of procuring inputs is enhanced or choice is restricted making them uncompetitive, unviable or be satisfied with less profits. It is in this backdrop that cartels are considered as most serious competition infringements and supreme evil of anti-trust and the most egregious violations of competition law. It is increasingly recognized more than ever before that competition in markets promotes efficiency, encourages innovation, improves quality, boosts choice, and reduces costs, leads to lower prices of goods and services. It also ensures availability of goods and services in abundance of acceptable quality at affordable price. It is also a driving force for building up the competitiveness of the domestic industry; businesses that do not face competition at home are less likely to be globally competitive. Competition ensures freedom of trade and prevents abuse of economic power and there by promotes economic democracy.

Thus competition in markets is benign for consumers, business houses and economy as a whole. So many countries either enacted competition laws of their own or modernized the existing competition law and revamped the competition authorities. There are sectoral regulators created by law and their powers may be in conflict with competition commission and these bound to hurt consumers[4]. Therefore a formal mechanism for coordination between the Competition Commission and the sectoral regulators is of key importance and should be made mandatory through suitable provision in the Competition Act and sectoral laws. In India the Competition commission is more of regulatory in nature than adjudicatory, but the adjudicatory functions have to be manned by persons trained in law[5].

The Supreme Court suggested that there may be two bodies; one with expertise i.e., advisory and regulatory and the other adjudicatory[6]. There may be an Appellate body and the Supreme Court‘s jurisdiction always remain high; but the jurisdiction of High Courts under Article 226[7] to review the Appellate body‘s decision still a question to be decided. However, Competition Appellate Authority has been created for making appeals over the decisions of Competition Commission but still writ jurisdiction lies with High Courts and Supreme Court.

Investigative Authority of Competition Commission of India

The Competition Commission may initiate an investigation suo moto, on reference by any statutory authority or receipt of information from any person, consumer or consumer association or trade association based on a prima facie satisfaction that the Competition Act has been violated. On such satisfaction, the Competition Commission directs the director general to investigate the matter and submit a report within a specified period. On consideration of such a report, and any objections thereto from the parties concerned, the Competition Commission may either close the case or impose such penalties as deemed fit. The director general cannot initiate an investigation on its own or appeal against the directions or orders of the commission. Any party which approaches the Competition Commission holds the status of ‘information provider’. Such informants have no right to withdraw the information without leave of the Competition Commission. Further, they must cooperate and participate in the inquiry as required. A copy of the investigation report is forwarded to the informant(s) and charged parties, to enable them to raise objections or offer suggestions

Conclusion

The Competition Commission of India is a proactive regulator and has notably been undertaking advocacy initiatives in order to add to the discourse between market competition regulators and potential leniency applicants. Accordingly, there has been an exponential increase in the number of leniency cases in India which is reflective of a thorough awareness of the leniency regime in the country. Concurrently, there is a conspicuous trend in the number of bid-rigging issues, especially in the domain of public procurement. Given the havoc that anti-competitive activities can wreak on the sustainable economic development of the country, the Competition Act needs to be thrust into the limelight now more than ever.

(Keywords)

Competition Act, MRTP, CCI, Section 2, cartels

(Profile of the Author)

Kanav Bharti Gupta is third year student in ICFAI Law School, The ICFAI University Dehradun and has a keen interest in Criminal law, Labour law and Intellectual Property Rights.

(FAQs)

1. Which Act was replaced by the Competition Act, 2002?

Answer: The Monopolies and Restrictive Trade Practices Act, 1969 [MRTP Act] was repealed and replaced by the Competition Act, 2002, with effect from 01st September, 2009.

[1] Sec 26 of Competition Act, 2002

[2] Sec 2 of Competition Act, 2002

[3] https://www.cci.gov.in/sites/default/files/workshop_pdf/14udai.pdf

[4] https://www.mondaq.com/india/cartels-monopolies/936392/competition-commission-in-india-and-regulations-governing-cartels-

[5] https://www.cci.gov.in/sites/default/files/workshop_pdf/14udai.pdf

[6] ITC Ltd. v MRTP Commission (1996) 46 Comp Cas 619

[7] The Constitution of India, 1950