What agreements are considered anti-competitive under Section 3 of the Competition Act?

Question

My company has entered into distribution agreements with resale price conditions. Could this be treated as an anti-competitive agreement under the Competition Act? What I am unsure about is the procedure — where the application goes, what it costs, and how long section 3 competition act matters usually take. A plain explanation of the steps, in order, would help more than a general answer.

MyVakeel Legal Desk · Accepted Answer

The law that applies to section 3 competition act here is Competition Act 2002, Section 3, Competition Act 2002, Section 27 and Competition Act 2002, Section 46. The detail below matters, because Competition Act 2002, Section 3 draws the line differently depending on what your documents show.

Section 3 prohibits agreements that cause or are likely to cause an appreciable adverse effect on competition in India, including both horizontal agreements between competitors such as cartels and vertical agreements such as exclusive supply or resale price maintenance arrangements.

Certain horizontal agreements, such as price fixing, bid rigging and market or output sharing among competitors, are presumed to have an appreciable adverse effect and are treated as void once established, without needing further proof of actual market harm.

Vertical agreements including tie-in arrangements, exclusive dealing, exclusive distribution and resale price maintenance are examined under the rule of reason, weighing pro-competitive justifications against anti-competitive effects.

Section 27 empowers the Competition Commission of India to pass orders including cease and desist directions, division of the enterprise's dominant structure where relevant, and penalties of up to ten percent of average turnover for contravention of Section 3.

Section 46 provides a leniency programme under which a party to a cartel can receive reduced penalties by disclosing full and true information about the cartel to the Commission before or during investigation.

What this means for you: 1) Review existing distribution and supply agreements for resale price or exclusivity clauses; 2) Assess whether the agreement's terms can be justified on efficiency or pro-competitive grounds; 3) Consider a leniency application under Section 46 if cartel conduct is suspected internally; 4) Consult competition law counsel before entering new vertical agreements with restrictive clauses.

Where the facts are disputed, what usually decides a section 3 competition act matter is the paper trail — dated complaints, acknowledgments and written replies under Competition Act 2002, Section 3. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in corporate law.