Competition Law

Demand and Supply

Law of Demand
• Definition: The law of demand states that, all else being equal, as the price of a good decreases,
the quantity demanded increases, and as the price increases, the quantity demanded decreases.
• Explanation: Buyers are more willing to purchase more of a good or service when it is cheaper
and reduce their demand when it becomes more expensive.
Law of Supply
• Definition: The law of supply states that as the price of a good increases, the quantity supplied
also increases, and as the price decreases, the quantity supplied decreases.
• Explanation: Sellers are more willing to produce and sell more of a good when they can get a
higher price for it, and reduce supply when prices fall.
Market Equilibrium
• Definition: A market is in equilibrium when quantity demanded equals quantity supplied.
• Equilibrium Price: The price at which this balance occurs.
• Equilibrium Quantity: The quantity bought and sold at the equilibrium price.
Excess Demand and Excess Supply
• Excess demand (shortage) happens when more people want a product than what's available.
This causes prices to rise.
• Excess supply (surplus) happens when there’s more of a product than people want to buy. This
causes prices to fall.
Market Equilibrium with Free Entry and Exit
In a perfectly competitive market:
• When firms earn more than usual (supernormal profit), new firms join. This increases supply,
lowers prices, and brings profits back to normal.
• When firms earn less than usual, some leave. This reduces supply, raises prices, and the
remaining firms go back to earning normal profit.

Market
A market is a place where buyers and sellers interact to exchange goods and services. This interaction
can take place in a physical location (like a retail shop or a market bazaar) or a virtual setting (such
as online marketplaces). The concept of a market is central to economic activity and competition law,
as it provides the framework within which prices are determined and resources are allocated. In
competition law, defining the relevant market is essential to analyze anti-competitive effects. Market
definition helps determine whether a firm holds market power and whether its conduct affects
competition negatively.

Types of Markets
Perfect Competition: A market with many buyers and sellers offering identical products. There is free
entry and exit, and no individual can influence the market price. Firms are price takers.
Monopoly
A market with one seller and many buyers. The firm has complete control over price and output.
There are high entry barriers, and no close substitutes for the product.

Monopolistic Competition: A market with many sellers, each offering slightly differentiated products
(e.g., in branding or quality). Firms have some control over prices, and entry and exit are relatively
easy.
Oligopoly: A market with a few large firms that dominate the market. Products may be similar or
differentiated. Firms are mutually interdependent, and strategic decisions are based on competitors’
behavior.

Duopoly: A special case of oligopoly where there are only two major firms in the market. These firms
often monitor and respond to each other’s pricing and output decisions very closely.

Non-Competitive Markets: These markets include monopolies and oligopolies where firms can
influence prices. They may lead to reduced consumer welfare, and thus often require government
regulation or competition law enforcement to maintain fairness.

History of Competition in the US (Antitrust Legislation in the USA)

The United States is often referred to as the cradle of antitrust law, being the first nation to establish
a formal system to protect competition. The antitrust laws in the U.S. are considered a “Charter of
Freedom,” designed to uphold core republican values of free enterprise.

The legal framework of U.S. competition law is based on three major statutes:

1. The Sherman Act, 1890

The Sherman Act originated from public concern during a period when a small number of
corporations accumulated significant wealth and formed powerful trusts that suppressed competition.
It was enacted to curb the excesses of these business entities while maintaining a competitive
economy.

The Act made it illegal to restrain trade or to form monopolies. It gave the Department of Justice
(DOJ) the authority to approach federal courts to stop illegal behavior and to impose remedies.
Importantly, the Sherman Act also had extraterritorial application, as recognized in the case of
Hartford Fire Insurance Co. v. California (1993), where the court acknowledged its effect outside
U.S. borders.

Despite its introduction, monopolies and trusts continued to exist into the 1900s. Many large
conglomerates, such as Standard Oil and American Tobacco, were later exposed for illegal conduct,
putting the Sherman Act to rigorous test.

However, the Act had loopholes. Critics claimed it was ineffective because it did not address anti-
competitive mergers or corporate amalgamations. It only forbade collusion and monopolization.
Additionally, Congress did not clarify the meaning of key phrases such as “restraint of trade” and
“attempt to gain monopoly,” which created legal uncertainty.

2. The Clayton Act, 1914

The Clayton Act was enacted to stop monopolies from forming in the first place. Its primary goal was
to prevent anti-competitive practices at an early stage.

This legislation expanded the powers of the Attorney General and limited the discretion of courts to
determine cases based on whether restraints were “reasonable.” It addressed specific practices such
as price discrimination, tying arrangements, exclusive dealing, and mergers—areas not covered by
the Sherman Act.

The Clayton Act also provided important exemptions. It excluded labor unions and agricultural
organizations from its scope and allowed for private parties to enforce competition law.
 Aspect Sherman Act, 1890 Clayton Act, 1914
Nature of Law General federal law Amendment to the Sherman Act; more
specific in scope
Main Contracts, trusts, or conspiracies Specific anti-competitive practices like
Prohibition restraining trade in interstate or exclusive dealing, tie-in, and price
foreign commerce discrimination
Focus Limiting the power of cartels and Providing detailed mechanisms to
monopolies prevent specific anti-competitive
behaviors
Coverage of Did not expressly address mergers Specifically deals with mergers and
Mergers and acquisitions acquisitions
Remedies Provides for both civil and criminal Provides only civil remedies
remedies
Enforcement Enforced by the Department of Enforced by both the DOJ and the
Authority Justice (DOJ) Federal Trade Commission (FTC)

• Federal Trade Commission Act, 1914

• Banned unfair competition and deceptive practices.
• Created the Federal Trade Commission (FTC) to address anti-competitive behavior.

• Robinson–Patman Act, 1936

• Prevented price discrimination, making it illegal to charge different prices to different
customers for the same goods.
• Aimed to protect smaller buyers from unfair pricing by large corporations.

• Cellar–Kefauver Act, 1950

• Strengthened the Clayton Act by stopping companies from buying competitor assets if it would
reduce competition.
• Focused on both vertical and conglomerate mergers, not just those between direct competitors.

• Hart–Scott–Rodino Act, 1976

• Introduced a Premerger Notification Program.
• Required companies to notify the FTC and DOJ before large mergers, allowing preemptive
assessment of their impact on competition.

Standard Oil Co. of New Jersey v. United States (1911)

Facts: Standard Oil, founded by John D. Rockefeller in 1870 in Cleveland, Ohio, initially refined less
than 4% of the nation’s oil. Through exclusive transportation agreements with railroads, Rockefeller
secured discounted rates only for companies that cooperated with Standard Oil. By 1873, Standard
Oil controlled 80% of Cleveland’s refining capacity, which was approximately one-third of the total
U.S. refining capacity.
In 1882, Rockefeller consolidated forty companies into the Standard Oil Trust, where
shareholders exchanged their shares for trust certificates. Nine trustees, including Rockefeller’s allies,
managed the operations of the trust. This structure enabled Standard Oil to avoid state-level taxes and
corporate regulations. By the early 1900s, Standard Oil Co. of New Jersey had acquired almost all oil
refining companies in the U.S., effectively monopolizing the petroleum market. As a result, the U.S.
government sued the company under the Sherman Antitrust Act for creating an undue restraint of
trade.
Issue: The primary issue in the case was whether Standard Oil’s trust-based consolidation and market
dominance violated the Sherman Antitrust Act, even though prices remained stable and consumers
were not directly harmed.

Law:
The Sherman Antitrust Act of 1890, central to this case, addresses anti-competitive practices, and its
two main provisions are:
1. Section 1: Prohibits contracts or combinations that restrain trade or commerce among the states
or with foreign nations.
2. Section 2: Prohibits monopolizing or attempting to monopolize any part of trade or commerce.

Application in the Case:

• Section 1: The government argued that Standard Oil’s exclusive agreements with railroads and
its consolidation of multiple refineries into a trust were anti-competitive. These practices
restrained trade by eliminating competition, even though there was no immediate harm to
consumer prices. The Court concluded that the company’s actions restricted trade and reduced
the number of competitors in the market, thereby violating Section 1.
• Section 2: Standard Oil’s dominance in the oil industry resulted in the creation of a monopoly
that controlled production, distribution, and pricing. The Court found that this monopolistic
behavior suppressed competition, leading to a violation of Section 2. Despite stable prices,
Standard Oil’s actions were seen as monopolizing the market and harming competition.

The “Rule of Reason”:

The Rule of Reason emerged as a critical principle in the case, designed to assess whether a restraint
on trade was unreasonable and harmful to competition. The Court clarified that not all restraints on
trade are illegal. For instance, Standard Oil maintained low prices and stable product quality, which
were not inherently harmful to consumers. However, the Court emphasized that competition—not
just pricing—was crucial in determining the legality of a practice. The Court concluded that Standard
Oil’s structure and practices, such as blocking competitors from entering the market and consolidating
control over transportation and production, were unreasonable restraints that harmed competition.
The Rule of Reason established that anti-competitive conduct should be judged based on its overall
effect on market competition.

The Role of the Sherman Act in Promoting Market Competition:

The Court’s decision reinforced that monopolistic behavior harms competition, even when there is no
immediate harm to consumers in terms of higher prices. The focus of the Sherman Act was on
preserving long-term market health by ensuring that companies do not engage in practices that
eliminate competition and market alternatives. The Court recognized that the Sherman Act was not
only concerned with preventing price increases but also with protecting the competitive structure of
markets. Therefore, monopolistic behaviors that stifle innovation and market entry were deemed
harmful to the overall economy, even if consumer prices remained stable.

Impact of the Decision: The ruling in Standard Oil was a landmark decision in antitrust law, shaping
the future of competition law in the United States. The Rule of Reason became a guiding principle
for interpreting antitrust violations under the Sherman Act. The Court acknowledged that not every
restraint on trade is illegal, but unreasonable ones—those that harm competition and suppress market
alternatives—are prohibited.

The case set a precedent for future antitrust enforcement, demonstrating that monopolistic practices
could be challenged even when there was no immediate consumer harm in terms of price increases or
product quality. This decision laid the foundation for the regulation of monopolistic behavior and the
promotion of fair competition in the U.S. market.

Conclusion:
The Court found that Standard Oil violated the Sherman Antitrust Act and ordered the company to be
broken up into 34 independent companies. By applying the Rule of Reason, the Court established that
only unreasonable restraints on trade are illegal. Standard Oil’s conduct, with its sweeping control
over the petroleum market and suppression of competition, was deemed an unreasonable restraint,
thus violating the Sherman Act.

United States v. American Tobacco Co. (1911)

Facts:
In the late 1800s, James B. Duke grew his cigarette business through innovative marketing techniques
such as advertising, demand creation, discounts, and redeemable coupons. By 1889, his company
controlled 30% of the cigarette market. In January 1890, five major tobacco firms merged to form the
American Tobacco Company (ATC), with Duke serving as president.
ATC achieved economies of scale and scope, reducing production and selling costs per unit. The
company diversified into other tobacco products like chewing tobacco, snuff, and cigars. These
products served distinct markets and were not in direct competition with cigarettes. By 1902, ATC
controlled:
• 60% of the smoking and chewing tobacco market.
• 80% of the snuff market.
• 14% of the cigar market.
In October 1904, ATC merged with Consolidated Tobacco Co. and Continental Tobacco Co.,
completing the consolidation of the tobacco industry. The U.S. government, concerned about the
market power ATC had amassed, filed a lawsuit under the Sherman Antitrust Act, alleging that ATC’s
actions violated antitrust law by creating an undue restraint of trade and consolidating too much power
within the tobacco market.

Issue:
The primary issue in the case was whether the mergers and consolidation carried out by American
Tobacco Company (ATC), which resulted in its dominant control of the tobacco industry, amounted
to an illegal restraint of trade under the Sherman Antitrust Act. This was especially important since
there was no direct evidence of higher prices or consumer harm, as prices remained stable.

Law:
The relevant law in the case was the Sherman Antitrust Act of 1890, which addresses anti-competitive
practices:
• Section 1: Prohibits contracts or combinations that restrain trade.
• Section 2: Prohibits monopolizing or attempting to monopolize any part of commerce.

Application:
• Section 1: The government argued that ATC’s actions, such as the mergers and its dominant
market position, had created a restraint on trade. These actions eliminated competitors and
allowed ATC to control a large portion of the tobacco market, even though consumer prices
remained stable.
• Section 2: ATC’s dominance in the tobacco industry was viewed as monopolistic behavior,
which suppressed competition by making it difficult for new firms to enter the market. The
Court found that ATC's ability to control production, distribution, and pricing violated the
Sherman Act by monopolizing the market.
The Court found that market structure itself was an issue. Even though ATC maintained low prices,
the size and market control achieved through consolidation were seen as harmful to competition. This
was despite the fact that there was no immediate evidence of price increases or poor product quality.
The Court emphasized that the structure of the market could, in itself, harm competition by preventing
new entrants and controlling the supply of tobacco products.

History Of Competition law in the UK

Early Common Law – Doctrine of Restraint of Trade
• Under early English common law, any agreement restraining a person from carrying out a
trade, business, or profession was considered void, whether the restriction was general or
specific.
• This was based on the principle of public policy: such restraints were thought to hinder
individual liberty, suppress competition, and promote monopoly.
• The doctrine reflected a strong concern for economic freedom and the right to work.

Philosophical Justification
• John Stuart Mill supported the doctrine, arguing that such restraints threatened liberty and
economic competition.
• Contracts restricting trade were seen as anti-competitive, potentially creating monopolies and
denying individuals the means to earn a living.

Landmark Early Case: Dyer’s Case (1414)

• Facts: Dyer agreed not to engage in the trade of dyeing in a certain town for 2 months.
• Held: The court declared the restraint illegal and void. All restraints of trade were invalid at
that time.
• Principle: Any agreement that tended to strengthen a monopoly or restrict trade was against
public policy and thus unenforceable.

Shift to the Modern View – Reasonableness Test

• Over time, courts moved from a strict prohibition to a more balanced approach.
• The modern position recognises that partial restraints may be valid, if:
o They protect a legitimate interest (e.g., trade secrets, goodwill),
o They are reasonable in scope, geography, and time, and
o They are not against public interest.

Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. (1894)

Facts: Thorsten Nordenfelt, a renowned Swedish gun manufacturer, sold his entire global business to
the Maxim Company for £2,87,500. As part of the sale, he agreed to two restrictive covenants:
1. That he would not manufacture guns or compete with Maxim for 25 years, except on its behalf.
2. That he would not engage in any business that might compete with the company anywhere in
the world.

Later, Nordenfelt joined a rival firm, and Maxim sued to enforce the restraints.

Issues:
1. Were both restrictive clauses unlawful restraints of trade?
2. Was the worldwide ban on engaging in any competing business too broad to be enforceable?
Judgment: The House of Lords upheld the first clause as reasonable and enforceable, since it was
limited to the trade sold and protected the buyer's legitimate business interests.
However, the second clause was held to be unreasonable and void, as it was overly broad and extended
beyond what was necessary to protect the buyer.
Principles Laid Down:
• All restraints of trade are prima facie void, as they restrict personal liberty and harm public
policy.
• However, a restraint is valid if it is:
o Reasonable between the parties,
o In the public interest, and
o Necessary to protect the buyer’s proprietary interest.
This case formalised the “reasonableness test” in UK law and introduced a balanced approach to
restraint of trade clauses.

Analysis:
The decision in Nordenfelt marked a turning point in common law. It moved away from an absolute
ban on restraints of trade, and instead applied a rule of reason—allowing partial restraints when
justified and proportionate.

Lord McNaughton explained that although trade restraints are generally void, special circumstances
could justify them. This paved the way for courts to uphold non-compete clauses that protect
legitimate business interests without harming public interest or competition.

A modern application of this reasoning is seen in franchise agreements. In Prontaprint PLC v. Landon
Litho Ltd (1987), the court treated the franchisor-franchisee relationship like that of a vendor and
purchaser, rather than employer-employee. As a result, the franchisor was allowed to impose
reasonable restrictions to protect their business, brand, and customer base.

Conclusion:
Nordenfelt remains a leading case in UK law on restraint of trade. It established that reasonable
restrictions are enforceable if they strike a balance between freedom of trade, freedom of contract,
and protection of commercial interests. Courts now accept that such clauses are a necessary part of
modern commercial life—as long as they do not promote monopolies or unreasonably restrict
economic freedom.

History and Evolution of Indian Competition Law

Ancient Foundations and Constitutional Mandate

India has a long-standing tradition of promoting fair markets and economic justice, with early
references to economic regulation in Kautilya’s Arthashastra, which outlined measures for preventing
unethical trade practices.

Post-independence, the Indian Constitution laid the foundation for competition principles, particularly
through Articles 38 and 39, which mandate the State to:
• Ensure the distribution of ownership and control of material resources to best serve the
common good.
• Prevent the concentration of wealth to the detriment of society.

Nehruvian Mixed Economy and the Precursor to Competition Law

After gaining independence in 1947, India adopted a centrally planned economic structure known as
Nehruvian socialism, a mixed economy model. Under this model, the private sector was heavily
regulated, and the public sector was promoted in core industries like coal, oil, steel, and power.
Industrial (Development and Regulation) Act, 1951 (IDRA):
• Empowered the government to regulate licensing, capacity, and expansion of private
enterprises.
• Established a License Raj, creating entry barriers and restricting competition.
• High tariffs and excessive regulation discouraged free market competition, often leading to the
formation of monopolies.

The MRTP Era – First Statutory Competition Law (1969–2002)

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

The MRTP Act was passed following the 1965 Monopolies Inquiry Commission Report, which
revealed that 85% of industrial sectors had high concentrations of economic power.
Objectives of the MRTP Act:
• Prevent the concentration of economic power.
• Prohibit:
o Monopolistic Trade Practices (MTP).
o Restrictive Trade Practices (RTP).
o Unfair Trade Practices (UTP).
Key Features:
• MRTP Commission was established to investigate business conduct.
• Large firms (assets over ₹20 crore or ₹1 crore with over 25% market share) required prior
government approval for mergers, takeovers, or expansions.
• Firms with assets over ₹100 crore were barred from entering unapproved sectors.
Amendments and Developments:
• 1977 (Sachar Committee): Added UTPs like false advertising.
• 1984: Broadened the scope of MTPs.
• 1991 Amendment: Removed licensing requirements post-liberalization.
Problems and Shortcomings of the MRTP Regime:
• Overregulation stifled business efficiency and innovation.
• The MRTP Commission lacked power to impose penalties, relying on cease-and-desist orders.
• Vague definitions (especially of UTPs) led to legal uncertainty.
• The Commission did not effectively address cartel behavior—only 7 cartel cases were
addressed between 1991 and 2007.

The Shift from MRTP to Modern Competition Law

The Raghavan Committee and the Need for Reform

Following the 1991 New Economic Policy and commitments to WTO treaties (GATT and TRIPS),
the government recognized that the MRTP Act had become outdated and inefficient.

Raghavan Committee (1999):

• A High-Level Committee on Competition Policy and Law was formed.
• Key recommendations included:
o Repealing the MRTP Act and enacting a new Competition Act focused on promoting
competition rather than just controlling monopolies.
o Privatization of state monopolies and applying the same law to both public and private
sectors.
o Phased removal of product reservations for small-scale industries.
• The MRTP Act was inadequate for fostering competition in the market and reducing anti-
competitive practices.
Competition Act, 2002 – The New Regime
The Competition Act, 2002 was enacted in line with international standards and received Presidential
assent in January 2003. It came into effect on 13 January 2003, replacing the MRTP Act.
Objectives of the Competition Act:
• Promote free and fair competition.
• Prevent anti-competitive agreements, abuse of dominance, and anti-competitive combinations
(mergers/acquisitions).
• Reduce unnecessary government interference in business.
Key Features:
• Establishment of the Competition Commission of India (CCI).
• CCI’s responsibilities include:
o Prohibiting agreements that have or are likely to have an appreciable adverse effect on
competition (AAEC).
o Preventing abuse of dominant position.
o Regulating mergers, acquisitions, and combinations likely to harm competition.
Basic Definitions:
• Market: The environment where buyers and sellers interact—physical or digital.
• Open Market: A market free from tariffs, quotas, and licensing barriers.
• Regulated Market: A market with government oversight to ensure fair practices and protect
consumers.

Amendments and Refinements

2007 and 2009 Amendments to the Competition Act:
• Strengthened CCI’s powers.
• Introduced penalties, leniency programs for cartel whistleblowers, and investigations by the
Director General.
• Improved procedural efficiency to enhance the effectiveness of the Act.
• on context and economic evidence.

Per Se Rule (Harvard School)

The Harvard School of Antitrust Thought was dominant from the 1940s to the 1970s. It shaped the
Per Se Rule by emphasizing market structure over outcomes, believing that certain conduct is
inherently anti-competitive, especially when undertaken by firms with significant market power.
Philosophy and Features:
• Concentrated markets (monopolies, oligopolies) were assumed to lead to abuse.
• Focused on preserving small firm rivalry and decentralized market structures.
• Rejected the idea that efficiency or innovation could justify dominance.
• Favoured bright-line, predictable rules for enforcement
Key Features:
• No Examination Needed: Courts do not examine the intention behind the agreement,
justifications, or actual outcomes.
• Automatically Illegal Conduct: Practices like:
o Price fixing
o Bid rigging
o Market allocation
are presumed to be harmful and thus illegal without further analysis.
• Focus on Simplicity and Deterrence: It's designed to save time, reduce legal uncertainty, and
send a strong message that some behaviors will never be tolerated.
Advantages (Pros):
1. Clear Rules: Businesses know in advance what is illegal.
 2. Speedy Enforcement: No need for detailed investigations or economic analysis.
3. Strong Deterrence: Discourages firms from even considering collusive practices.
Disadvantages (Cons):
1. Too Rigid: May penalize conduct that isn't actually harmful or might even be helpful to
competition.
2. Ignores Context: Doesn’t consider whether the conduct helped reduce prices or improve
quality.
3. Can Hurt Innovation: Firms may avoid aggressive but legal strategies that could benefit
consumers, fearing legal action.
Example:
If two competing cement companies agree on fixing the same price per bag, the CCI or court will not
look into whether it led to lower consumer prices or not—it’s automatically illegal under the Per Se
Rule.

Rule of Reason
The Rule of Reason is a flexible and case-by-case analysis approach. It is used especially for practices
that may have both positive and negative effects on competition.
(Chicago School View):
• Markets Self-Correct: If left alone, competition will often fix problems.
• Focus on Outcomes: Antitrust law should look at actual harm or benefit to the consumer.
• Economic Analysis Matters: Courts must consider economic evidence rather than just
punishing based on assumptions.
How It Works – What Courts Assess:
1. Purpose of the agreement – Why was it made?
2. Market power – Do the parties involved dominate the market?
3. Actual or likely effects – Does the practice reduce competition or harm consumers?
4. Justifications – Are there any pro-competitive benefits, like:
o Increased efficiency?
o Better product availability?
o Lower prices?

Landmark Shift: In Continental T.V., Inc. v. GTE Sylvania Inc. (1977), the U.S. Supreme Court
moved away from automatically banning certain vertical agreements and said they should be judged
under the Rule of Reason.
Advantages (Pros):
1. Flexible & Nuanced: Takes real-world context into account.
2. Encourages Innovation: Firms can try new business models if they have valid justifications.
3. Avoids Overreach: Doesn’t punish behavior that may actually help consumers.
Disadvantages (Cons):
1. Complex & Expensive: Requires detailed market studies and expert testimony.
2. Unpredictable: Different courts may interpret the same facts differently.
3. Weaker Deterrence: Firms might take risks hoping to later justify the behavior in court.

NOTE (for writing application questions): Today, the Rule of Reason is the default approach for
most vertical restraints, tying arrangements, and other non-cartel conduct. Per se rule remains for
hard-core horizontal agreements like price fixing and bid rigging.
Courts increasingly blend both approaches, depending on context and economic evidence.
 Quick-Look Test
The Quick-Look Test is a simplified legal standard in antitrust law used to assess potentially harmful
conduct without the need for lengthy economic analysis. It is used when the anticompetitive nature
of a practice is apparent, but not blatantly illegal under the Per Se Rule.
When is it used?
• When a practice appears to harm competition but is not clearly illegal under the Per Se Rule.
• Common in cases involving advertising restrictions, information-sharing limits, or
professional association rules.
How it works:
1. The court conducts a brief review of the conduct.
2. If the conduct appears inherently suspect, the burden shifts to the defendant.
3. The defendant must provide procompetitive justifications (e.g., consumer protection).
4. If the defendant’s justifications are unconvincing, the conduct is ruled illegal.
Why it’s useful:
• Faster than a full Rule of Reason analysis.
• Avoids the need for:
o Full market definition.
o Proof of market power.
o Detailed economic studies.

Definitions
Relevant Market – Section 2(r)
Section 2(r) of the Competition Act, 2002 defines Relevant Market as:
“the market which may be determined by the Competition Commission of India (CCI) with reference
to the relevant product market or the relevant geographic market or with reference to both.”
Purpose:
• The concept of a relevant market helps identify the exact area where competition takes place.
• It includes:
o Relevant Product Market (RPM): What products/services are substitutable.
o Relevant Geographic Market (RGM): Where (location-wise) they compete.
Why It Matters:
• It helps determine whether a practice has Appreciable Adverse Effect on Competition (AAEC).
• It identifies substitutability and market boundaries before assessing dominance or anti-
competitive practices.

Relevant Product Market (RPM) – Section 2(t)

"A market comprising all those products or services which are regarded as interchangeable or
substitutable by the consumer, by reason of characteristics, price, and intended use."
Key Criteria to Determine RPM:
1. Interchangeability / Substitutability:
o Products are considered part of the same RPM if they are interchangeable in use.
o This is assessed from the consumer’s perspective, focusing on whether a consumer
views the products as substitutes.
2. Characteristics, Price & Intended Use:
o Products that have similar technical features, price points, and functional purposes are
likely to be interchangeable and therefore belong to the same RPM.
3. Demand Substitution & Cross Elasticity:
o If an increase in price for one product leads to a significant shift in demand for another
product, they are likely part of the same RPM.
o This is measured through Cross Elasticity of Demand and the SSNIP Test.
SSNIP Test (Small but Significant Non-transitory Increase in Price)
The SSNIP Test is a tool used to define the Relevant Product Market (RPM), often referred to as the
hypothetical monopolist test. It tests whether a 5-10% increase in price for a product would make the
price hike unprofitable due to demand shifting to substitutes.
Steps of the SSNIP Test:
1. Start with the narrowest possible product category.
2. Apply a hypothetical 5% price increase to this product.
3. If there is insufficient substitution to make the price increase unprofitable, include the next
closest product.
4. Repeat this process until no further substitution occurs.
5. The final set of products, after this process, constitutes the Relevant Product Market (RPM).

1. Hoffmann La Roche v. Commission (1979) [EU]

Facts: Hoffmann manufactured Vitamin C and Vitamin E, both used as antioxidants in food and
pharmaceutical industries.
Issue: Do Vitamin C and Vitamin E belong to the same Relevant Product Market?
Analysis:
• Technically: Both vitamins were interchangeable as fermentation agents.
• Functionally/Nutritionally: Vitamin C promotes tissue growth, while Vitamin E strengthens
immunity.
• From a consumer’s perspective, they were not substitutable for the same purpose.
Held: The Court found that Vitamin C and Vitamin E were not sufficiently interchangeable to fall
within the same RPM. They were deemed to belong to separate RPMs.

2. Hoffmann La Roche & Novartis v. Italian Competition Authority (2018)

Facts: Avastin, an anti-cancer drug, was being prescribed off-label for eye ailments. Lucentis, a more
expensive drug, was licensed specifically for eye treatment. Both drugs were developed by Hoffmann,
with Lucentis marketed by Novartis.
Issue: Do Avastin and Lucentis fall within the same Relevant Product Market?
Analysis:
• Despite their different primary authorizations, both drugs were used to treat eye ailments.
• Doctors prescribed Avastin for cost reasons, making the two drugs interchangeable from the
consumer's perspective.
Held: The Court concluded that Avastin and Lucentis fall within the same RPM. End-use, price
sensitivity, and prescription patterns were key to this conclusion.

3. United States v. Du Pont (Cellophane Case, 1956) [US]

Facts: DuPont held 75% of the cellophane market in the U.S. The government alleged that DuPont
was monopolizing under the Sherman Antitrust Act.
Issue: Is cellophane a distinct market, or does it belong to a broader market of flexible packaging
materials?
Analysis:
• Consumers could substitute cellophane with other packaging materials, such as waxed paper
or polyethylene.
• Cross-price elasticity was high, meaning that a price increase in cellophane led to a significant
switch to other packaging materials.
Held: The Court found that cellophane was not a distinct market. DuPont’s market share in the broader
flexible packaging market was not considered monopolistic. The Court emphasized that price and
functionality were more important than technical product categories.
Relevant Geographic Market (Section 2(s)
The Relevant Geographic Market (RGM) refers to the physical area or territory in which the
competitive conditions are similar for buying and selling goods or services — and are noticeably
different from the neighbouring areas.
For example, consumers in Chennai may face different pricing, product availability, and
delivery timelines compared to those in Delhi due to transport or distribution costs. So, Chennai and
Delhi may form different geographic markets.

Identifying RGM helps the Competition Commission of India (CCI) understand:

• Where the actual competition is happening
• Who the competitors are
• Whether a business is dominant in a particular area
• Whether a merger or agreement will hurt competition in that area

Key Factors to Determine RGM (as per Section 19(6))

The CCI looks at several practical criteria to decide the boundaries of the relevant geographic market:
Factor What it means
Regulatory barriers Whether different areas have different laws or licenses that affect
competition
Consumer preferences Whether people in one area prefer local brands or sellers
Transport costs Whether moving goods from another place is costly or difficult
Cultural/language Whether marketing and product use are affected by local customs or
barriers language
Distribution networks Whether logistics and supply chains reach certain areas efficiently
Taxes and tariffs Whether state or local taxes make goods costlier in one area than
another
Marketing access Whether a company can advertise and reach customers in that area

DLF v. CCI (2011)

Facts: DLF was accused of abusing its dominance in the Gurgaon housing market.
Issue: Is Gurgaon a separate market or part of Delhi/NCR?
Held: Gurgaon had different market conditions (laws, pricing, preferences) from Delhi or Noida.
Conclusion: Gurgaon was treated as a distinct relevant geographic market.

Agreement. (sec 2(b))

“Agreement” includes any arrangement or understanding or action in concert,
— whether or not it is formal or in writing,
— and whether or not it is intended to be enforceable by legal proceedings.
Key Elements:
• Covers formal and informal arrangements.
• May be oral, written, or even implied through conduct.
• Legal enforceability is not required.
• Includes tacit coordination or concerted practices.
Explanation
• It refers to any mutual understanding between firms—especially competitors—to achieve
common objectives that may restrict competition.
• Such agreements may relate to:
o Fixing prices
o Limiting production or supply
o Allocating markets
o Bid rigging or collusion
 • These are often referred to as cartel-like behaviours.
Illustration:
If two cement manufacturers agree (even without signing any contract) to sell at the same price, it
qualifies as an agreement under Section 2(b), even if not enforceable in a court.

Enterprise - Section 2(h)

“Enterprise” means any person or a department of the Government, engaged in activities relating to:
• Production
• Storage
• Supply
• Distribution
• Acquisition or control of goods or services
• Investment activities
• Buying/selling/dealing with securities
Either directly or through its units, divisions, or subsidiaries, regardless of location.
Key Characteristics:
• Can be private individuals, government departments, companies, etc.
• Must be engaged in economic activities—profit motive not required.
• Includes entities in financial markets (e.g., share trading, debentures).
• Trade unions and employee associations may also be considered enterprises if engaged in
relevant economic activity.
Illustration:
A government-owned oil company distributing petroleum products, or an NGO involved in
large-scale pharmaceutical distribution, can both be “enterprises” under this section.

Person - Section 2(l) .

“Person” includes:
• An individual
• A Hindu Undivided Family (HUF)
• A company
• A firm
• An association of persons or body of individuals (whether incorporated or not)
• Any corporation (including foreign entities)
• Government or its agencies, local authorities, etc.
Scope:
• Very broad—covers both natural and juridical persons.
• Includes individuals, business entities, NGOs, governments, and statutory bodies.
• This wide inclusion ensures that all entities involved in economic activities can be brought
under scrutiny for anti-competitive practices.
•
Partnership
[As understood under Indian law; relevant to Competition Act via ‘person’ and ‘enterprise’
definitions]
General Understanding:
• A partnership is a business relationship governed by the Indian Partnership Act, 1932.
• Formed when two or more persons agree to share profits of a business carried on by all or any
of them acting for all.
In Competition Law Context:
• A partnership firm qualifies as both a “person” [Sec. 2(l)] and an “enterprise” [Sec. 2(h)] if it
is involved in economic activities such as:
o Production, supply, or distribution of goods or services.
Important Clarification:
• Salary or remuneration received by a partner from the firm is not treated as "salary" under
Section 15 of the Income Tax Act, and likewise, in competition law, such internal
arrangements are not generally treated as competitive conduct unless:
o The firm enters into cartel-like behavior with other firms.

What Are Anti-Competitive Agreements?

Anti-Competitive Agreements
• Anti-Competitive Agreements under the Competition Act, 2002 are in the nature of Restrictive Trade
Practices under the extant MRTP Act, 1969.
• Ambit: Includes agreements which may have the potential of restricting, distorting, suppressing,
reducing, or lessening competition.
• Section 3 deals with economic regulation of market power. It prohibits agreements in respect of goods
and services which cause or are likely to cause an Appreciable Adverse Effect (AAE) on competition
in India.
• Such agreements are void.

Anti-Competitive Agreements – Prohibitions

• Section 3(1) prohibits an enterprise or person or their associations from entering into an agreement (in
respect of production, supply, distribution, storage, acquisition or control of goods or services), which
causes or is likely to cause an AAE on competition in India.
• Such agreements are void.
• What is prohibited is the agreement or arrangement to control and dominate trade and commerce in a
commodity, coupled with the power and intent to exclude competitors to a substantial extent.
• It is not the form or particular means used, but the results to be achieved that are the focus of the law.

Two Types of Anti-Competitive Agreements

• Those which are per se void and those which are void if found on investigation by applying the Rule
of Reason as affecting competition in the manner provided under Section 3(1).
• These are Horizontal and Vertical Agreements.

Horizontal Agreements
• Between two or more enterprises that are at the same stage of the production or supply chain and in
the same market.
• Examples: Agreements between producers or between retailers dealing in similar kinds of products.
Covered under Section 3(3).
• Includes agreements that:
• Fix purchase or sale prices
• Limit or control production
• Share markets by territory, type, or size of customers
• Involve collusive tendering

Vertical Agreements
• Between enterprises at different levels or stages of the production/supply chain, in different markets.
• Examples: Between producer and distributor
• Types include:
• Tie-in agreements
• Exclusive supply/distribution agreements
• Refusal to deal
• Resale price maintenance

Tests Applied to Anti-Competitive Agreements

[Link] Agreements (between competitors at the same level like two retailers or two manufacturers) are
judged by the Per Se Rule.
 • This means they are automatically considered illegal.
• The law assumes such agreements (e.g., price fixing, bid rigging) always harm competition, so no
detailed investigation is needed.

[Link] Agreements (between businesses at different levels like manufacturer and distributor) are judged
by the Rule of Reason.
• These are not automatically illegal.
• Courts examine their actual impact on competition by looking at both potential benefits and harms.

This test is guided by Section 19(3) of the Competition Act.

The Raghavan Committee recommended this approach:

Treat horizontal agreements strictly (ban them outright).

Treat vertical agreements more flexibly, based on their effects.

What Is “Appreciable Adverse Effect on Competition (AAEC)”?

The Act does not define AAEC directly, but Section 19(3) outlines factors to assess whether an
agreement causes such an effect.
A. Anti-Competitive Factors (Sec. 19(3)(a)–(c)):
1. Creation of entry barriers for new businesses.
2. Driving out existing competitors from the market.
3. Blocking or foreclosing competition.
B. Pro-Competitive Factors (Sec. 19(3)(d)–(f)):
1. Consumer benefits like lower prices or better quality.
2. Enhanced production or supply chain efficiency.
3. Promotion of innovation, technical or economic growth.

Interpretation of “Appreciable”:
According to Law Lexicon, “appreciable” means something perceptible or noticeable, not necessarily
significant.

Even a small but real effect on competition could qualify as AAEC.

Ajay Devgn Films v. Yash Raj Films (2012)

Facts: Yash Raj Films (YRF) was accused of entering into exclusive agreements with single-screen
theatres during Diwali, thereby limiting the screening of competing films such as those by actor Ajay
Devgn.
Allegation: That such agreements created an unfair barrier in the market and caused AAEC.
CCI’s Analysis and Findings:
1. No compulsion or coercion was proven. The single-screen theatres voluntarily entered into
those agreements.
2. Theatres were free to show other films if they chose to.
3. Multiplexes were not restricted – and they accounted for 65% of box office revenue.
4. Only 35% of revenue came from the single-screen segment – insufficient to prove AAEC.
5. Distributors had the freedom to reschedule film releases depending on screen availability.
Held:
There was no Appreciable Adverse Effect on Competition. Hence, no violation of Section 3 of the
Act was established.
 Bid Rigging
Bid rigging occurs when potential or actual bidders collude and intentionally manipulate the outcome
of a tender process. This is done by pre-deciding the winning bid, fixing bid prices, suppressing
competition, or distributing markets or customers among themselves.
Bid rigging is treated as inherently anti-competitive and presumed to have an Appreciable Adverse
Effect on Competition (AAEC). It is prohibited under Section 3(3)(d) of the Competition Act, 2002.

Why is Bid Rigging Anti-Competitive?

When bidders collude, the competitive essence of bidding is lost, leading to the following adverse
effects:
• The true market price is never discovered. The rigged bids distort price discovery, preventing
the buyer from accessing fair market value.
• The buyer pays more than necessary. Both public and private buyers may overpay, resulting
in economic inefficiency.
• Genuine competitors are pushed out. Honest firms lose confidence in the process, reducing
long-term competition.
• Public funds are misused. Especially in government projects, bid rigging leads to wasteful
expenditure and undermines public trust.

Types of Bid Rigging

1. Bid Suppression
Bid suppression occurs when one or more competitors, who are otherwise expected to participate in
a tender, agree not to bid or withdraw their bid. This is done with the intention of ensuring that a pre-
determined enterprise wins the contract without facing competition.
• Mechanism: The designated bidder becomes the sole or lowest bidder simply because the
others have stepped aside.
• Example: In a public infrastructure tender, two out of four regular bidders refrain from
participating, having agreed in advance to let a third win in exchange for future favours.
• Legal Effect: This directly eliminates competition and violates Section 3(3)(d), which
presumes AAEC in such cases.

2. Complementary Bidding (Cover or Courtesy Bidding)

In complementary bidding, also known as cover bidding, the participating competitors agree to submit
bids that are either deliberately overpriced or include unacceptable terms (e.g., extended delivery
period, restrictive conditions). These bids are not intended to win, but to make the designated bidder’s
offer appear favourable and legitimate.
• Mechanism: The appearance of competition is created to mislead the tendering authority, but
only one bid is genuine.
• Example: Three suppliers of medical devices submit bids. Two of them submit quotes at rates
20–30% higher than market average or insert terms that disqualify them. The third, pre-decided
supplier wins easily.
• Legal Effect: This creates artificial competition and is considered a classic form of bid rigging
under Indian and international law.

3. Bid Rotation
Bid rotation involves colluding firms taking turns to win contracts by agreeing in advance on a
rotational pattern. All bidders submit offers, but each one intentionally allows others to win based on
the agreed sequence.
• Mechanism: The rotation could be based on time (monthly/quarterly), geography, or project
type. This arrangement can persist for years.
 • Example: A group of five contractors agrees that each will win one tender every five months.
The rest submit uncompetitive bids during the other’s “turn.”
• Legal Effect: Though each firm appears to be participating regularly, the process is
predetermined and eliminates fair competition. This violates the essence of competitive
bidding and is punishable under Section 3(3)(d).

4. Subcontracting as a Compensation Mechanism

In this form, firms that agree not to compete or to lose intentionally are rewarded with subcontracts
or other forms of compensation by the winning bidder.
• Mechanism: The collusion is masked by a legitimate subcontracting arrangement, but the real
intent is compensation for not bidding competitively.
• Example: In a road-laying contract, a bidder wins and immediately outsources 40% of the work
to another firm that had agreed to submit a losing bid.
• Legal Effect: If the subcontracting is linked to a prior agreement to suppress or manipulate the
bid, it falls within the ambit of bid rigging. It serves to divide the profits of the inflated bid
among cartel members.

5. Market Allocation in Bidding

Here, the bidding market is divided among competitors, either by geography, customer type, or
product category, and competitors agree not to bid outside their assigned zones.
• Mechanism: Each firm has a designated area or contract type where others agree not to
compete. This removes the element of open bidding.
• Example: In railway signalling projects, three companies agree to bid only in pre-assigned
zones — North, East, and South — and avoid submitting bids in each other’s zones.
• Legal Effect: This form of collusion combines elements of market sharing and bid rigging, and
is a clear violation under both Section 3(3)(c) and (d) of the Act.

6. Agreement to Abstain from Auction Bidding

In auction-based systems (e.g., sale of natural resources, real estate), bidders may collude to abstain
from competing, ensuring that one of them acquires the asset at a low price.
• Mechanism: By agreeing not to participate or by placing weak bids, cartel members allow one
of them to obtain a favourable outcome, after which the profits may be shared or compensated.
• Example: In a coal mine auction, Company A wins because B and C deliberately stay away or
submit low bids. Later, Company A enters into a profit-sharing deal with them.
• Legal Effect: Such arrangements defeat the transparency and competitive pricing objectives of
auction mechanisms, and thus constitute collusive bidding under Section 3(3)(d).

7. Compensatory Arrangements Between Bidders

To maintain cartel stability, firms that agree to lose or abstain from bidding are often compensated
through indirect mechanisms, such as future contracts, monetary payments, or inflated invoices.
• Mechanism: The compensation may not be evident from the bid documents but can be traced
through financial transactions, back-end agreements, or related-party contracts.
• Example: A company wins a government contract and then awards unrelated consulting
contracts to firms that had submitted losing bids, using them as a method of payoff.
• Legal Effect: These mechanisms are critical in maintaining cartel cohesion and are evidence
of a concerted practice to rig bids. CCI considers such indirect benefits as strong indicators of
collusion.

Inquiry and Orders by CCI in Bid Rigging Cases

Under the Competition Act, 2002, the Competition Commission of India (CCI) has been granted
specific powers to deal with anti-competitive practices such as bid rigging.
 • Section 19: Grants the CCI the power to conduct an inquiry into any alleged contravention of
the Act, including allegations related to bid rigging under Section 3(3)(d).
• Section 27: Authorizes the CCI to pass appropriate orders after completing such inquiry, which
may include:
o Cease and desist directions
o Imposition of penalties
o Modification of agreements
o Division of dominant enterprises, where necessary

LPG Cartel Case (bid rigging case)

Facts
• In 2011, the Competition Commission of India (CCI) took suo motu cognizance of suspected
collusive bidding by LPG cylinder manufacturers in tenders floated by BPCL (2009, 2010)
and extended to IOCL and HPCL.
• The tenders were for the supply of 14.2 kg LPG cylinders, which are supplied only by public
sector oil companies under government control.
• The Director General (DG) investigated and found:
o Identical or near-identical price bids submitted across states.
o 50 bidders, many of whom were group companies under the same management.
o Meetings among bidders (e.g., at Hotel Sahara, Mumbai) and use of a common trade
association (Indian LPG Cylinder Manufacturers Association).
o Use of common agents and information sharing prior to bidding.
• CCI held that the conduct amounted to bid rigging, violating Section 3(3)(d) of the
Competition Act, 2002, and imposed penalties.
• The COMPAT upheld the CCI’s order.
• The case reached the Supreme Court, which reversed the decision in 2018.
Issues
1. Whether the LPG cylinder manufacturers engaged in collusive bidding and bid rigging in
violation of Section 3(3)(d) of the Competition Act, 2002.
2. Whether the market characteristics and price parallelism alone were sufficient to establish the
existence of a cartel.
3. Whether the conduct caused an Appreciable Adverse Effect on Competition (AAEC).
Law
• Section 3(3)(d), Competition Act, 2002:
Any agreement between enterprises engaged in identical or similar trade of goods or services
that results in bid rigging or collusive bidding shall be presumed to have an appreciable
adverse effect on competition (AAEC).
• Plus Factors Doctrine (CCI Definition):
Economic actions or outcomes inconsistent with unilateral behavior but consistent with
coordinated action.
• SC Precedents on Oligopoly & Price Parallelism:
In an oligopolistic market, parallel pricing alone is not illegal, unless supported by direct or
strong circumstantial evidence of collusion.
Application
• CCI & DG's findings:
o Similar bids, same agents, and pre-bid meetings suggested coordination.
o Market characteristics (few players, similar products, no substitutes, repetitive bidding)
facilitated collusion.
o Defined these indicators as plus factors proving bid rigging.
• Defense by parties:
 o Similar pricing due to external factors like steel, paint, transport costs, and government-
controlled prices.
o The market is oligopolistic with only 3 buyers (IOCL, BPCL, HPCL).
o Identical bids were coincidental or due to logical pricing benchmarks.
o Many denied attending meetings or being part of any association.
• Supreme Court's analysis:
o Acknowledged price parallelism is a natural feature of oligopoly, not illegal per se.
o Noted that only 3 buyers existed and that pricing was government-regulated, leaving
suppliers with no competitive market alternatives.
o Held that CCI failed to prove a collusive agreement or any appreciable adverse effect
on competition.
o Therefore, plus factors were not sufficient to establish bid rigging.
Conclusion
• The Supreme Court set aside the orders of CCI and COMPAT.
• It held that price parallelism and market characteristics alone are not enough to prove
cartelisation without clear evidence of an agreement.
• The case clarified the legal threshold for proving bid rigging in regulated and oligopolistic
markets under Section 3(3)(d) of the Competition Act.

Cartel
A cartel is an agreement or association among producers, sellers, distributors, traders, or service
providers who collude to limit, control, or attempt to control:
• The production, distribution, sale, or price of goods or services.
• The allocation of markets for goods or services.

How is a Cartel Done?

• Collusion: Cartels are typically formed when competitors collaborate or make secret
agreements to reduce or eliminate competition in the market.
• Methods of Cartel Behavior:
1. Price-fixing: Agreeing on the price of goods or services to eliminate price competition.
2. Output restriction: Limiting the production of goods or services to control supply and
inflate prices.
3. Bid rigging: Manipulating tender processes to predetermine the winner of a bid.
4. Market division: Dividing geographical areas or customer groups to avoid competition
in certain segments.
Cartels are often secretive or tacit, making them difficult to detect and prosecute.

What Can the CCI Do?

• The Competition Commission of India (CCI) is responsible for investigating and acting against
cartels.
• The CCI has the authority to:
1. Initiate investigations suo motu (on its own) or upon complaints or government
reference.
2. Investigate the conduct of the enterprises involved in a cartel.
3. Order the cessation of the cartel (cease and desist from the anti-competitive behavior).
4. Impose penalties on parties involved in a cartel, which can be up to 10% of their average
turnover over the relevant period, or even 3 times the profits earned from the cartel,
whichever is higher.
5. Provide leniency to cartel members who disclose information and cooperate with the
investigation, reducing their penalties.
What Section Governs Cartels?
• Section 2(c) of the Competition Act, 2002 defines a cartel.
• Section 3(3) of the Competition Act, 2002 makes cartels per se illegal and presumes that they
have an Appreciable Adverse Effect on Competition (AAEC).

Investigation and Penalties:

• Investigation: The Director General (DG) conducts the investigations, gathering evidence to
prove the existence of a cartel.
o The CCI can initiate investigations based on complaints, suo motu actions, or
government referrals.
o The DG can carry out search and seizure operations to collect evidence.
• Penalties:
o Cartels are considered per se illegal under Section 3(3).
o The CCI can impose heavy penalties:
§ Up to 10% of the average turnover for the relevant period of the company
involved.
§ In cases of cartels, penalties can be 3 times the profit or 10% of the turnover,
whichever is higher.

Nature of Evidence and Economic-Based Evidence:

• Direct Evidence: Evidence can include:
1. Documents: Communications like emails, faxes, and meeting notes that show collusion.
2. Witness Testimonies: Testimonies from individuals involved in the cartel, particularly
whistleblowers who may benefit from leniency programs.
• Economic-Based Evidence: The CCI may also use economic analysis to understand the effects
of cartel behavior on competition, focusing on:
1. Price Impact: Analyzing whether prices have been artificially inflated due to the cartel.
2. Market Behavior: Studying how the cartel affected market dynamics, such as supply,
competition, and consumer choice.
3. Cross-Elasticity: The use of economic tests like the SSNIP test to assess the effect of
the cartel on market substitution and consumer behavior.
4.

Aviation Cartel
Facts
• The case was initiated based on a letter from the Lok Sabha Secretariat dated 31st January
2014 requesting examination of cartelization in the airline sector.
• Sector Involved: Domestic airlines in India, including Jet Airways, Indigo, SpiceJet, GoAir,
and Air India.
• Time Period: The data analyzed covered from April 2012 to March 2014, including pre-
investigation (2010-2012) and post-investigation periods (2014-2016).
• Routes Analyzed:
o Delhi-Bombay-Delhi
o Delhi-Bangalore-Delhi
o Delhi-Hyderabad-Delhi
o Delhi-Pune-Delhi
• Key Data: The airlines were analyzed on their cost structure, market share, and pricing
practices for these routes.
Issues
1. Market Share Stability:
o Examination of market share stability for the airlines on the aforementioned routes
between April 2012 to March 2014.
2. Cost Structure & Pricing:
o Examination of how airlines determine ticket prices, whether they are fixed or dynamic.
o Investigation of dynamic pricing mechanisms and the technology used (e.g., Navitaire,
airRM).
3. Effect of Pricing Practices:
o Analysis of price parallelism among airlines.
o Did the pricing strategies indicate cartel behavior?
Law
• Section 3(1) of the Competition Act, 2002: Prohibits anti-competitive agreements, including
cartelization in the market.
• Section 3(3) of the Competition Act, 2002: Specifically addresses horizontal agreements that
may have an appreciable adverse effect on competition (AAEC).
• Competition Commission's Framework:
o Price parallelism in oligopolistic markets may not necessarily be considered a violation,
unless supported by clear evidence of coordinated action.
Application
1. Market Share Analysis:
o Monthly market share fluctuations revealed no clear pattern of stability suggesting
cartel behavior. Airlines showed significant variations in market share.
o Annual Market Share: There was significant growth variation among airlines, with
some airlines gaining market share while others lost, indicating that airlines were not
coordinating market growth.
2. Pricing Structure Analysis:
o Dynamic Pricing:
§ Airlines use sophisticated software like Navitaire and airRM to set dynamic
prices based on demand, seasonality, occupancy, competitor prices, and other
factors.
§ Price changes were based on factors like booking time and competition prices,
with airlines adjusting fares as per the market.
o Market Conditions:
§ Oligopolistic market conditions led to price parallelism, but there was no direct
evidence of coordinated action.
3. New Entrants and Exit:
o Airlines like IndiGo, SpiceJet, GoAir, and Vistara entered the market during the
investigation period, indicating a competitive market rather than a collusive one.
o Airlines like Kingfisher, Paramount Airlines, and MDLR exited, showing the market's
natural competition dynamics.
Conclusion
• The Director General (DG) concluded that while price parallelism exists in the Indian airline
industry, it cannot be attributed to cartelization or collusion.
• The investigation showed no evidence of coordinated behavior among the airlines despite price
similarities.
• The CCI found that dynamic pricing systems and market fluctuations could explain price
changes and market share variations, and thus the parallel pricing was not the result of
cartelization.
• The case was ultimately dismissed, with the DG and CCI finding that no appreciable adverse
effect on competition (AAEC) occurred due to the pricing strategies employed.
 The Beer Cartel Case
Facts:
• Leniency Applicants: The case involved Crown Beers India Pvt. Ltd. and SABMiller India
Ltd., both owned by Anheuser Busch InBev SA/NV (AB InBev).
• Suo Motu Investigation: The Competition Commission of India (CCI) initiated an
investigation in 2017 after receiving leniency applications from the companies, which
disclosed their coordinated pricing activities with United Breweries Limited (UBL) and
Carlsberg India. The coordination was done under the All India Brewers’ Association (AIBA)
to align beer prices across India.
• Cartel Activities: The companies colluded to fix beer prices through the Ex-Brewery Price
(EBP) and Maximum Retail Price (MRP) across multiple states. They also engaged in market
allocation and output restriction.
Issues:
1. Did the companies violate the Competition Act, 2002 by engaging in price fixing, market
allocation, and output restrictions?
2. Did the leniency applications result in reduced penalties for the companies involved, as
allowed under the law?
Law:
• Section 3(1) of the Competition Act, 2002 prohibits anti-competitive agreements such as price
fixing, market allocation, and output restriction.
• Section 3(3) specifies that such agreements are per se illegal (i.e., automatically prohibited).
• Section 46 allows companies that come forward and admit their involvement in a cartel to
receive reduced penalties if they fully cooperate with the investigation (the leniency program).
Application:
• Evidence of Cartelization: The investigation revealed direct evidence (emails, WhatsApp
messages, cost cards, and coordinated bids) showing that the companies were actively
coordinating beer prices. They used the AIBA as a common platform to discuss pricing and
avoid price wars.
• Market Distribution Models: The companies coordinated pricing across different market
models in India, including the Corporation Model, Auction Market Model, and Open/Free
Market Model.
• Penalties: AB InBev (through its leniency application) was granted a 100% reduction in
penalties, while UBL and Carlsberg were fined substantial amounts:
o UBL: INR 751.83 Crore
o Carlsberg: INR 120.56 Crore
o AIBA: INR 0.6 Crore
Conclusion:
• The CCI found that the companies engaged in cartel behavior and violated the Competition
Act. AB InBev was granted leniency for its full cooperation, while UBL and Carlsberg faced
hefty fines.
• The NCLAT upheld the CCI's decisions and emphasized that once a leniency application is
made, the company cannot withdraw its admission of guilt. The leniency program successfully
reduced penalties for those who cooperated and provided vital evidence
•
Price Parallelism
Price parallelism refers to the situation where competitors in a market adjust their prices in a similar
manner, but without any formal agreement or communication. This phenomenon can arise from
conscious parallelism, which occurs when one competitor leads by increasing its prices, and others
follow suit. The unspoken mutual understanding is that none of the companies will undercut the
others, ensuring all of them benefit from higher prices.
However, price parallelism is difficult to prove and can be confused with spontaneous coordination,
where companies independently respond to similar market forces or conditions without any illicit
collusion. This makes it challenging to distinguish whether the price changes are the result of
collusion or simply an outcome of the rational interdependencies within an oligopolistic market.

Conditions that make price parallelism more likely include:

• Homogeneous products: When products are similar or identical, businesses face difficulty in
charging different prices, leading to price uniformity.
• Similar input sources: Competitors who rely on the same suppliers may face similar cost
fluctuations, resulting in synchronized price changes.
• Highly visible prices: In markets where prices are visible to competitors (e.g., online
marketplaces), it becomes easier for businesses to match price movements.

Despite these conditions, similar prices or price changes happening at the same time are not enough
to establish price-fixing. For an action to qualify as price-fixing, there must be concrete proof that the
price increases resulted from a coordinated effort, which can be substantiated through circumstantial
evidence such as plus factors.

Plus Factors
Plus factors are economic indicators or actions that go beyond simple parallel conduct and suggest
that collusion may be at play. These factors provide additional evidence of coordinated behavior,
helping to support claims that firms did not independently set their prices but instead acted together
to manipulate market conditions.
Key plus factors identified by Richard A. Posner include:
1. Past Participation in Collusion: If a company has a history of engaging in price-fixing or other
antitrust violations, this raises the likelihood that future price coordination could be deliberate.
2. Opportunities for Communication: Evidence showing that firms had regular opportunities to
communicate (e.g., through trade associations, meetings, or exchanges of information)
strengthens the case for collusion.
3. Extraordinary Profits: If the firms involved show unusually high profits during a period of
price parallelism, it may suggest that the price changes were coordinated and not merely a
market response.
4. Industry Characteristics: Certain market conditions, such as product homogeneity, high
transaction frequency, readily observed price changes, high entry barriers, and high market
concentration, can make coordination easier. These factors make it more likely that firms will
be able to coordinate prices without being detected.
In essence, plus factors are used to confirm suspicions of coordinated behavior, making them vital in
proving that price parallelism is not just a coincidence or response to market conditions, but a result
of collusion.

Evaluation of Plus Factors

The evaluation of plus factors remains challenging, particularly because courts have not established
a clear framework for weighing the significance of different plus factors. This has led to an ad hoc
approach in assessing the strength of evidence in cartel cases.
Key issues in evaluating plus factors:
• No Hierarchy: Courts struggle to determine which plus factors carry more weight in proving
collusion.
• Uncertainty in Economic Implications: It is not always clear which plus factors have a negative
impact on competition and which ones might be neutral or benign in terms of market dynamics.
• Communication is Crucial: The most critical element in proving collusion is demonstrating
how the defendants communicated their intentions.
 Leniency
The Leniency Programme is a crucial tool used by competition authorities to detect, investigate, and
dismantle cartels. It acts as a form of whistleblower protection, encouraging cartel members to come
forward with vital information in exchange for reduced penalties. The programme is designed to
promote transparency and encourage cartel members to break ranks by turning informant against their
fellow participants.

Provisions of the Leniency Programme

1. Whistleblower Protection:
o The Leniency Programme provides protection for those who disclose cartel activities
voluntarily. If a cartel is discovered by the Competition Commission (CCI) on its own,
the participants in the cartel would typically face severe penalties. However, individuals
who come forward and make full, true, and vital disclosures about cartel behavior are
eligible for reduced penalties.
2. Penalty Reduction:
o The penalty reduction is dependent on when the applicant comes forward and the
quality of information provided. A first applicant may receive up to 100% immunity
from penalties, while a second applicant may receive 50% reduction, and a third
applicant may get 30% reduction in penalties.
o The reduction in penalty also depends on the circumstances, such as:
§ The stage at which the disclosure is made: Early disclosures attract greater
benefits.
§ Evidence already in possession of the Commission: The more valuable the new
information, the greater the reduction.
§ The quality of the information provided: Detailed and crucial evidence
strengthens the leniency claim.

Conditions for Leniency

1. Full and True Disclosure:
o The disclosure must be full, true, and vital. In other words, the information provided
should be complete and necessary to support the Commission’s investigation into the
cartel’s activities.
2. Confidentiality:
o The identity of the applicant and the information disclosed will be treated as
confidential, unless:
§ Required by law to be disclosed.
§ The applicant agrees to the disclosure in writing.
§ The applicant themselves makes the disclosure public.
o Confidentiality ensures the program’s integrity and protects the whistleblower from
retaliation.

Leniency Provisions under the Competition Act, 2002

Section 46 of the Competition Act provides leniency provisions, which state:
“The Commission may, if it is satisfied that any producer, seller, distributor, trader, or service provider
included in any cartel, which is alleged to have violated Section 3, has made a full and true disclosure
regarding the alleged violations and such disclosure is vital, impose upon such individual a lesser
penalty than what would typically be leviable under this Act or the rules or regulations.”
However, the following conditions apply:
1. No lesser penalty before investigation report: A lesser penalty cannot be imposed if the report
of investigation under Section 26 has been received before the disclosure.
 2. Full, true, and vital disclosures required: The individual making the disclosure must ensure
that the disclosure is full, true, and vital.
3. Ongoing cooperation requirement: The individual must continue to cooperate with the
Commission until the completion of the proceedings. If cooperation ceases, the individual
loses the benefit of the lesser penalty.
4. Non-compliance or false evidence: If the individual fails to comply with the conditions for
leniency or provides false evidence, the penalty that would have been levied initially may be
imposed again. Additionally, the individual may face charges for the offences that they initially
received the lesser penalty for.

Leniency Plus: Incentivizing Disclosure of Additional Cartels

Leniency Plus is a provision under Section 46 of the Competition Act that rewards companies already
benefiting from leniency for one cartel by allowing them to disclose another undisclosed cartel in
exchange for further reductions in their penalty.

Benefits of Leniency Plus:

1. Additional Penalty Reduction:
o Companies can receive up to 30% reduction in their original penalty if they disclose
another cartel.
o If the disclosure leads to the discovery of a new cartel, they may receive 100% immunity
for the newly disclosed cartel.
2. Conditions for Leniency Plus:
o The company must cease participation in the newly disclosed cartel once it is reported
(unless directed otherwise by the CCI).
o The company must provide full, true, and vital information to help the Commission
form an opinion that a new cartel exists.
o The new cartel must be distinct from the previously disclosed cartel.
o Cooperation with the CCI is required throughout the investigation and proceedings.

When Leniency Protection May Not Apply

Leniency protection will not be granted if:
• The DG Report has already been submitted before the disclosure.
• The applicant fails to cooperate fully or stops cooperating during the investigation.
• The disclosure is not vital, incomplete, or if the applicant provides false information.

Brushless DC Fans (Case No. 03 of 2014)

• Background: This was the first leniency decision by the Competition Commission of India
(CCI). A suo motu investigation was initiated by the CCI based on information from the
Central Bureau of Investigation (CBI). The report suggested a cartel between manufacturers
and suppliers of brushless DC fans related to tenders from Indian Railways and Bharat Earth
Movers Limited.
• Leniency Application: One party applied for leniency during the investigation.
• CCI’s Decision:
o The CCI acknowledged the valuable disclosures from the applicant that helped identify
the cartel.
o Penalty Reduction: The applicant was granted a 75% penalty reduction, but complete
immunity was not granted since the CCI had already gathered sufficient evidence to
form a prima facie opinion on the existence of the cartel.
o CCI’s Approach: The CCI took a conservative stance on what constitutes “value added”
in leniency applications.
Zinc Carbon Dry-Cell Batteries (Case No. 02 of 2016 and Case Nos. 02 and 03 of 2017)
• Background: The investigation was triggered by a leniency application from Panasonic Energy
India Co Ltd (Panasonic). The investigation concerned cartelization between Panasonic,
Eveready Industries India Ltd. (Eveready), and Indo National Ltd. (Nippo) regarding the dry-
cell battery market. The Association of Indian Dry Cell Manufacturers (AIDCM), which
included the three companies, was also investigated.
• Search & Seizure: The Director General (DG) conducted search and seizure operations on the
premises of the companies and examined communications and documents.
• Leniency Decisions:
o Panasonic: As the first leniency applicant, Panasonic was granted 100% immunity from
penalties, helping the CCI form a prima facie opinion about the cartel.
o Eveready and Nippo: These companies applied for leniency at later stages and were
granted 30% and 20% reductions in their penalties, respectively, for their cooperation
in the investigation.

Ramakant Kini v. Hiranandani Hospital and Others

Facts:
The Informant, Ramakant Kini, filed information before the CCI against Dr. L.H. Hiranandani
Hospital and Cryobank India Ltd. alleging a tie-in arrangement between the hospital (providing
maternity services) and Cryobank (providing umbilical cord stem cell banking services). Mrs. Jain
had availed maternity services at the hospital and was allegedly compelled to use Cryobank’s services
due to an exclusive agreement, denying her freedom of choice.
Issues:
1. Whether the exclusive supply agreement between Hiranandani Hospital and Cryobank
amounted to a vertical anti-competitive agreement under Section 3(4) of the Competition Act.
2. Whether the conduct amounted to refusal to deal.
3. Whether there was an abuse of dominant position under Section 4.
4. What is the correct delineation of the relevant market?
Law:
• Section 3(1): General prohibition on anti-competitive agreements.
• Section 3(4): Vertical agreements – Rule of Reason, read with Section 19(3) (factors to
determine Appreciable Adverse Effect on Competition – AAEC).
• Section 4: Abuse of dominant position.
Analysis:
• Section 3(1) Overview: Section 3(1) of the Competition Act, 2002, broadly prohibits anti-
competitive agreements between parties that may affect competition in India. Unlike Sections
3(3) and 3(4), which focus on horizontal and vertical agreements, Section 3(1) does not
specifically limit the type of agreement. It applies to a wider range of anti-competitive conduct
and serves as a catch-all provision.
o CCI's Interpretation: The CCI clarified that Section 3(1) is applicable when the conduct
in question does not strictly fit the definitions of vertical or horizontal agreements. In
this case, the exclusive supply agreement between Hiranandani Hospital and Cryobank
was found not to neatly fall under the narrow definitions of horizontal (Section 3(3)) or
vertical (Section 3(4)) agreements. Despite this, Section 3(1) provided a broader
framework to assess the overall adverse effects on competition. Therefore, even if an
agreement doesn't fit into specific categories, it can still be penalized under Section 3(1)
for restricting competition.
o Broader Scope of Section 3(1): The CCI emphasized that Section 3(1) applies to any
agreement or conduct that has an appreciable adverse effect on competition in India,
even if it is not a typical horizontal or vertical agreement. This provision ensures that
 anti-competitive practices are covered comprehensively, preventing gaps where
agreements that harm competition might otherwise go unaddressed.
• Relevant Market: The DG initially defined the relevant market narrowly, focusing only on
high-end multi-speciality hospitals in selected wards of Mumbai. However, the CCI broadened
the market to include all types of maternity services and hospitals/clinics in the region,
concluding that the relevant market should not be so narrowly defined.
• Dominance: While the DG concluded that Hiranandani Hospital held a dominant position, the
CCI disagreed. The hospital’s 1% market share in the broader market did not support the claim
of dominance.
• Refusal to Deal & Tie-in Arrangement: The CCI found that the hospital’s decision not to allow
other stem cell service providers within its premises did not amount to refusal to deal. The
agreement between the hospital and Cryobank was not considered exclusive or anti-
competitive, particularly since new entrants had successfully entered the stem cell banking
market.
Conclusion:
The CCI concluded that the conduct did not cause an Appreciable Adverse Effect on Competition
(AAEC) and thus did not violate Section 3(4). However, under the broader framework of Section
3(1), a penalty of ₹3.81 crore was imposed. The CCI applied Section 3(1) as a catch-all provision to
address practices that might harm competition even if they don’t strictly fall under specific vertical
or horizontal arrangements. On appeal, COMPAT ruled that both the CCI and DG had wrongly
defined the relevant market, and no contravention was made out. (Note: COMPAT is now replaced
by NCLAT).

Hub and Spoke Cartels

A Hub and Spoke Cartel is a form of collusive arrangement that involves horizontal competitors (the
spokes) who coordinate their activities indirectly through a vertical intermediary (the hub). This type
of cartel is highly damaging to market competition, as it enables competitors to work together without
directly communicating, often using a third-party intermediary to facilitate the coordination.
A Hub and Spoke Cartel is a type of collusive agreement where competing companies (spokes)
coordinate their actions indirectly through a central entity (hub).
Key Elements:
1. Hub:
o The hub is a central player, like a supplier or retailer, that helps competitors (spokes)
communicate and coordinate indirectly.
o The hub does not compete directly but acts as a mediator to enable coordination.
2. Spokes:
o Spokes are the companies competing at the same level (e.g., manufacturers or retailers).
o Instead of talking directly, the spokes coordinate through the hub to set prices, allocate
markets, or share other strategic information.
3. Information Exchange:
o The spokes share sensitive information (like prices) with the hub, which then passes
this on to other spokes.
o This indirect communication helps the spokes coordinate without direct contact, leading
to collusion on prices or market allocation.
4. Coordination:
o Coordination among the spokes happens through the hub. They indirectly influence
each other’s decisions (like prices) based on what they learn from the hub.
Examples:
• LPG Cylinder Cartels:
o Manufacturers share pricing and market allocation info through an association (the
hub), leading to price-fixing and market manipulation.
 • Ride-Hailing Platforms (Ola/Uber):
o Platforms like Ola or Uber can act as hubs, indirectly helping drivers set prices through
their pricing algorithms, even without direct communication.

Sameer Agrawal v. ANI Technologies Pvt. Ltd. (2018): The Ola/Uber Case
The Sameer Agrawal v. ANI Technologies Pvt. Ltd. (Ola/Uber Case) is a landmark case involving
the Competition Commission of India (CCI)'s investigation into the practices of Ola and Uber. This
case sheds light on the hub and spoke structure applied in app-based ride-hailing platforms, and how
digital platforms can potentially facilitate anticompetitive behavior without direct collusion among
participants.
Background of the Case:
• Informant: Sameer Agrawal, who alleged that Ola and Uber were facilitating a hub-and-spoke
cartel involving the drivers.
• Opposite Parties: ANI Technologies Pvt. Ltd. (Ola) and Uber India Systems Pvt. Ltd.
• Issue Raised: Agrawal alleged that the drivers working for these platforms were indirectly
colluding on pricing. He argued that the platforms themselves (Ola and Uber) acted as hubs,
with the drivers as the spokes. This structure allegedly led to price-fixing in violation of
competition laws.
Legal Questions:
• Hub-and-Spoke Cartel: Was the relationship between Ola/Uber (the hubs) and the drivers (the
spokes) an example of a hub-and-spoke cartel?
• Price-Fixing: Did the pricing algorithms used by the platforms facilitate collusion between
drivers and restrict competition?
Findings and Supreme Court Judgment:
1. Role of Drivers:
o The key issue was whether drivers were acting as part of a hub-and-spoke cartel by
following pricing guidelines set by the platform.
o Drivers' Independence: Both Ola and Uber argued that their drivers were independent
contractors, and there was no direct communication or collusion between them.
2. Algorithmic Pricing:
o The platforms use pricing algorithms that determine fare rates, but there was no
evidence presented to show that the drivers were directly involved in setting these
prices.
o The Court noted that algorithmic pricing could still result in indirect price-fixing, but
the absence of direct collusion among drivers made it difficult to prove a hub-and-spoke
conspiracy.
3. Locus Standi (Standing to File a Complaint):
o Locus standi (the right to bring a case) was also a key issue. The Supreme Court ruled
that the informant did not have locus standi, as he had not been personally affected by
the actions of Ola/Uber.
4. No Hub-and-Spoke Cartel:
o The Supreme Court concluded that there was no hub-and-spoke cartel in this case, as
the drivers were not operating under a common understanding or agreement through the
app platform.
o The platforms (Ola and Uber) did not directly control or influence the actions of the
drivers in a way that constituted cartel behavior.
5. Resale Price Maintenance:
o The informant had also raised concerns about resale price maintenance. The Supreme
Court held that the platforms’ pricing algorithms were based on large data sets and were
not indicative of any unlawful coordination between drivers.
Legal Conclusion:
• The Supreme Court ultimately upheld the CCI’s ruling, finding that there was insufficient
evidence to prove the existence of a hub-and-spoke cartel involving Ola and Uber.
• The algorithmic pricing models used by the platforms were found to be legal, and the Court
concluded that while price parallelism can sometimes suggest collusion, it does not always
qualify as a violation of the law unless there is direct evidence of coordinated activity.

Key Provisions of the 2023 Amendment

1. Non-Competing Entities as Cartel Participants:
o Under the 2023 Amendment, the Competition Commission of India (CCI) can
scrutinize the role of a non-competing entity (referred to as a "hub") in cartel activities.
o Hub Liability: A hub can be held liable for cartelization, even if it did not directly
participate in the cartel's operations, as long as:
§ There is an agreement between competing entities (the spokes) that engages in
any of the prohibited conduct under Section 3(3) of the Competition Act (e.g.,
price-fixing, market allocation, production control, bid-rigging).
§ The hub intends to participate in or further the cartel’s objectives.
2. Dilution of Evidence Standard:
o The 2023 Amendment dilutes the standard of evidence required to hold the hub liable
for cartel activities.
o The "intent" to participate is now sufficient to attribute liability to the hub, even if the
hub has not directly engaged in cartel activities. However, the "rim" (active agreement
between competitors) still needs to be proven.
3. Implications for Vertically Related Companies:
o The amendment equates the financial liability of a hub (vertically related company)
with that of the cartel participants (competitors), even if the hub is not directly engaged
in trade at the same level as the cartel participants.
o Vertical liability means that hubs can now be held financially responsible for knowing
about or participating in a cartel, even if they are not directly involved in the same level
of trade as the cartel participants.

Effects doctrine

To Whom Do the Provisions of Anti-Competitive Agreements Apply?

• The provisions of anti-competitive agreements apply to any enterprise or person engaging in
commercial activities.
• All commercial activities of the Union, states, and their statutory bodies are included within
the scope of the Act.
• Exceptions: Sovereign functions related to Atomic energy, Space research, Defence, and
Currency are excluded from the Act.

Anti-Competitive Agreements and Competition Within India

• Trade is a broader concept that includes all cross-border economic activity.
• Anti-competitive agreements are considered illegal only if they result in unreasonable
restrictions on competition.
• Adverse effects on competition in India should result from the anti-competitive agreement.
• When assessing whether an agreement has an appreciable adverse effect on competition, both
harmful and beneficial effects should be considered.
• The visible effect of the agreement must be observed.
Effects Doctrine: Application to Foreign and Domestic Firms
• If the competition in India is affected, the location where the agreement or understanding was
made is irrelevant.
• This is known as the “Effects Doctrine”, meaning:
o Domestic competition laws apply not only to foreign firms but also to domestic firms
operating outside India, as long as their actions or transactions produce an "effect"
within India’s territory.

Effects Doctrine: Extraterritorial Application of the Competition Act

Under Section 32 of the Competition Act, 2002, the Competition Commission of India (CCI) is
empowered to take cognizance of acts taking place outside India if they have an adverse effect on
competition within India.
• Section 32 states that, despite the event or violation occurring outside India, the CCI shall have
the authority to inquire into any agreement(s), abuse of dominant position, or combinations
(mergers and acquisitions) if these actions have, or are likely to have, an appreciable adverse
effect on competition in India.

Tests for the Application of the Effects Doctrine

• Timberlane Lumber Co. v. Bank of America National Trust: A 3-part test to determine the
application of the Effects Doctrine:
1. Effect: The effect must be actual or intended (direct or substantial) on the relevant
commerce.
2. Restraint: It must show that the effect is large enough to cause cognizable injury to the
domestic market.
3. Comity: Whether the interests of the state justify asserting extraterritorial authority,
taking into account the principle of comity.

Effects Doctrine in India: Case Law

Haridas Exports v. All India Float Glass Manufacturers Association (2002)
• Facts:
o Alkali Manufacturers Association of India filed a complaint against the American
Natural Soda Ash Corporation (ANSAC), which included six soda ash producers.
o Similarly, the All India Float Glass Manufacturers’ Association (AIFGMA) filed a
complaint against three Indonesian companies.
• Issues:
o Can the MRTP Commission pass orders against foreign parties that do not conduct
business in India, where agreements were made outside India with no Indian party
involved?
o Does the Effects Doctrine apply in India?
• Decision:
o The MRTP Commission found that foreign firms were engaged in predatory pricing,
which restricted competition in India.
o The Supreme Court opined that the MRTP Act has no extraterritorial application.
o The Act requires agreements to involve an Indian party for its provisions to apply.
o The Supreme Court ruled that the MRTP Commission's jurisdiction could not extend to
foreign cartels unless a member of the cartel does business in India.
• Conclusion:
o The Court also ruled that predatory pricing by foreign firms did not restrict competition
in India. Lower prices for Indian consumers were not prejudicial to public interest.
o The MRTP Commission’s order was set aside.