Presentation on

Study of Cartels
in India

Sections Involved
Cartel is defined in Section 2, sub section (c) of the Act.
Section 3, sub section (3) of the Act states:
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;

Sections Involved
(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:
Further:
Proviso to section 3, sub section (3) of the Act states:
Provided that nothing contained in this sub-section shall 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 provision of services.

Pre-Enactment of Competition Act, 2002 (MRTP Act)

The Monopolistic and Restrictive Trade Practices Act 1969 (MRTP
Act), has its genesis in the Directives Principle of State Policy,
embodied in the Constitution of India. It was enacted:
To provide for control of monopolies,
To the prohibition of monopolistic and restrictive trade practices ex.
cartels, and
To the prohibition of unfair trade practices.
Restrictive trade practices, are the generally those practices that have
an effect on prevention, distortion and restriction of competition.
For example, a practice, which tends to obstruct the flow of capital or
resources into the line of production, manipulation of prices and flow
of supply in the market, which may have an effect of unjustified cost
or restriction in choice for the consumers, is regarded as a Restrictive
Trade Practice.

MRTP Act Contd..

One example of a RTP is a cartel. As held in Union of India
& Others .v. Hindustan Development Corporation, Cartel
is an association of producers who by agreement among
themselves attempt to control production, sale and prices
of the product to obtain a monopoly in any particular
industry or commodity. Under the MRTP Act, cartel is
categorized as an RTP, which has been defined as, a trade
practice which has or may have the effect of preventing,
distorting or restricting competition, Section 2(o) of the
MRTP Act.

Competition Act, 2002

The Competition Act, 2002 in Section 2(c) of the Act defines cartel
and its essential requisites are as follows:
An agreement which includes arrangement or understanding;
Agreement is amongst producers, sellers, distributors, traders or
service providers, i.e. parties are engaged in identical or similar
trade of goods or provision of service, and
Agreement aims to limit, control or attempt to control the
production, distribution, and sale or price of, or, trade in goods or
provision of services.
In addition to that, cartels are also covered under anti-competitive
agreements, which are prohibited agreements under Section 3, of
the Act.

Case Laws on Cartel

Alkali Manufacturers Association of India v. American
Natural Soda Ash Corporation (Soda ash cartel)
This cartel was related to soda ash.
Before formation of this cartel, there were 6 producers of
soda ash, these six producers joined together to form an
export cartel known as the American Natural Soda Ash
Corporation (ANSAC for brief).
The ANSAC came into existence reportedly through a
membership agreement of December, 1983, between the
said six producers of soda ash in that country, in order
not to compete with each other and in order that all
export sales by them or by any of their subsidiaries will be
made through the ANSAC.

Alkali Case contd..

For this reason the local producers of different nations started to
face difficulties to survive in the competition. In Indian also the
same problem occurred. The AMAI filed the present complaint
before the commission.
Held:
That there exists Prima facie the ANSAC is a cartel indulging in the
alleged trade practice of cartelization in so far as the soda ash exports
are concerned and as to fixation of a predatory price for the soda ash.
The Government of India charged a very high rate of anti-dumping
duty upon this cartel.

Case Laws on Cartel

FICCI Multiplex Association of India v. United
Producers/Distributors Forum and Others
The United Producers/Distributors Forum (UPDF) along with a
couple of other guilds collectively
agreed to not release any films to multiplexes
till they agreed to a revenue sharing ratio of 50% of the ticket
sale proceeds
irrespective of the nature of the film or the week of release.
Held:
The Competition Commission of India held that the joint stand
on fixing the revenue ratio was unarguably an example of joint
price-fixing and thereafter concluded that had acted like a
cartel under Section 2 (c) of the Competition Act, 2002.

Case Laws on Cartel

Builders association of India v. Cement manufacturers association and
others
The information was filed by the Builders Association of India.
The CCI issued the order after investigations by the Director General
(CCI).
In a first-of-its-kind order, the CCI has imposed a penalty of over Rs 6,000
crore on 11 leading cement producers after finding them guilty of forming
cartels to control prices, production and supply of cement in the market.
Held:
According to the CCI order, it found cement manufacturers violating the
provisions of the Competition Act. While imposing the penalty, the
commission considered the parallel and coordinated behavior of cement
companies on price, dispatch and supplies in the market. The commission
observed that the act of these cement companies in limiting and controlling
supplies in the market and determining prices through an anticompetitive
agreement was detrimental to the entire economy.

Proviso to section 3, sub section (3) of the Act

The proviso to Section 3(3) of the Competition Act, 2002 provides an
exemption to agreements entered into by way of joint ventures, in the
event that such joint ventures increase efficiency in production, supply,
distribution, storage, acquisition or control of goods or provision of
services.
In Yogesh Ganeshlaji Somani v. Zee Turner Ltd., for example, the
Commission came to the conclusion that based on the nature of the market
structure and the circumstances under which the joint venture was formed,
efficiency reasons justify it in the facts of the case.
U.S. anti-trust law does not provide for a blanket efficiency justification
for joint ventures, and they are dealt with as ordinary agreements that may
or may not be anti-competitive.
For instance, in United States v. Topco, the U.S. Supreme court found the
joint venture to be per se illegal because it involved an agreement between
competitors at the same level of the market structure to allocate territories
in order to minimize competition.

Authors View
The proviso of the Competition Act, 2002 clearly embarks a
difference between agreements that are entered through a Joint
Venture for increase efficiency in production, supply, distribution,
storage, acquisition or control of goods or provision of services (in
sort for the upliftment of the members of JV). That the said
agreements holds good in the eyes of law. Whereas according to
Section 1 of the Sherman Act states:
Every 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 declared to be illegal.
So through the plain reading of the enactment it can be inferred that
the US law entails in its purview any agreement entertained by the
parties that hampers the market and is in restraint of trade.

Broadcasters vis--vis Competition law

TRAI is the governing body in Broadcasting services.
One of its main objectives is to provide a fair and transparent
environment that promotes a level playing field and facilitates fair
competition in the market.
As per TRAI regulations the broadcasters have not been barred to
enter into agreements to distribute their channels.
The prohibition that is laid to the broadcasters is that:
they cannot mix their channels to form bouquets and
to follow must provide services to MSOs.
The broadcasters can form agreements or enter into JVs for increase
efficiency in production, supply, distribution, storage, acquisition or
control of goods or provision of services as par Proviso 3(3) of
Competition Act, 2002.

Suggestions And Conclusion

There exists various small scale business where cartel goes
undetected. So governing authorities i.e. more units must be
constituted to the root level.
Cartels in form of anti-competitive agreements, are a threat to
consumer welfare and the economy of a state. It can be easily
inferred from that above that the CCI has been much better
empowered to tackle cartel cases than its predecessor the MRTP
as inclusion of definition of cartel and wide powers of director
General states its dominance and effectivity.