Section 3 of the Competition Act, 2002, prohibits all agreements in respect of production, supply, distribution, storage, acquisition or control of goods or services which causes or is likely to cause an appreciable adverse effect on competition within India. All such anti-competitive agreements shall be void.
The term ‘Agreement’ has a broader definition under the competition laws as compared to contract laws in India. As per the Competition Act, the term ‘Agreement’ includes any arrangement or understanding or action in concert:
- whether or not, such arrangement, understanding or action is formal or in writing; or
- whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings.
The definition of an Agreement as provided under the Act is wide and inclusive. It may be noted that even a silent participation in an association meeting wherein any anti-competitive conduct was discussed may amount to an agreement between the members to indulge in an anti-competitive activity. Undertakings need to be very careful while dealing with their competitors as it is not necessary that a formal executed anti-competitive contract is necessary in order to be found violating the competition laws.
The Competition Act, 2002 distinguishes between horizontal agreements and vertical agreements and provides various instances where it is presumed that they shall cause or are likely to cause an appreciable adverse effect on competition.
Agreements between undertakings engaged in identical or similar trade of goods or provision of services are presumed to cause or likely to cause an appreciable adverse effect on competition in India, if it:
- directly or indirectly determines purchase or sale prices;
- limits or controls production, supply, markets, technical development, investment or provision of services;
- shares or divides the market;
- directly or indirectly results in bid rigging or collusive bidding.
Agreements between undertakings at different stages of the production/distribution chain are presumed to cause or likely to cause an appreciable adverse effect on competition in India, if it results in:
- Tie-in arrangement;
- exclusive supply agreement;
- exclusive distribution agreement;
- refusal to deal;
- resale price maintenance.