Author: Aditi Singh, III year of B.A.,LL.B(Hons.) From Symbiosis law school Noida.
Introduction
When many businesses in the same industry strive to limit market competition through official or informal agreements, a cartel is established. Such agreements can be reached by establishing agreed-upon procedures to create an industrial monopoly, establishing product production or capacity restrictions or constraints on the type of product, geographically separating markets, or preventing new entrants in the market by establishing agreed-upon procedures to create an industrial monopoly. Cartels of this type can occur in any industry, whether it is related to products or services, and at any level- procurement, distribution, or retail. These anti-competitive cartels are formed in order to gain control over the sales and pricing of the industry.
The term ‘cartel’ is defined under section 2, subsection (c) of the Competition Act, 2002 as “Cartel includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services.”
The government’s previous approach to the cartel problem was insufficient. It mandated the registration of restrictive trade practises with the Monopolies Commission in India. The goal of such registration was to make it easier to hunt down the commercial firm that engaged in the restrictive trade practice in the event that a complaint was lodged against it because all of the information was stored with the Commission.
A relevant case to mention here is Director-General vs. Voltas Limited, in which the Commission made the following findings under Section 38 of the MRTP Act, 1969: -
“We have gone through voluminous records and pleadings pertaining to these inquiries, evidence produced by the parties, oral arguments, written submissions and cases referred to by the parties and are of the view that no case of gateways under section 38(1), as pleaded has been made out by the Voltas in these proceedings. Likewise, the manufacturer, Simtools Ltd. in RTP Enquiry No.483 of 1987 has also failed to make out any case for gateways. Therefore, we hold that the respondents have indulged into the restrictive trade practices, as alleged in the notice of inquiry, and those practices are prejudicial to the public interest in each of the 15 inquiries.”
Harmful cartels that reduced competition in many jurisdictions have long been regarded as harmful to the economy. Hardcore cartels with anti-competitive consequences are always seen as detrimental. Many nations, including India, place a premium on discovering and punishing destructive cartels in order to keep them from wreaking havoc on the economy.
Judicial Trends of Cartel
In most cases, the CCI initiates a cartel inquiry on its own initiative after receiving information from a complaint or a leniency application. Furthermore, CCI may initiate an inquiry upon receiving a referral from a government or regulatory entity. The CCI, on the other hand, instructs the DG to launch an inquiry if it believes there is a prima facie case warranting investigation. Furthermore, the Competition Act of 2002 empowers the DG and CCI to conduct unannounced search and seizure activities ("dawn raids"). The Act also gives the CCI the same powers as civil courts when it comes to filing an action, such as calling and requesting the appearance of any official or person, questioning him under oath, and ordering the discovery and production of documents.
In ITC Ltd v MRTP Commission, it was concluded that three key qualities must be uncovered in order to demonstrate the presence of a cartel: agreement through coordinated conduct indicating conspiracy, price fixing, and intent to create a monopoly or restrict/eliminate competition. Establishing the presence of a cartel using this method is complex, hence there is a need to simplify the procedure so that colluding corporations do not get away with clandestine cartel actions.
In “Builders Association of India vs. Cement Manufacturers Association & Ors”, the Association (the "Informant") submitted information under Section 19(1)(a) of the Act against the Cement Manufacturers Association ("CMA") and 11 cement manufacturers for alleged violations of Sections 3 and 4 of the Act. On June 20, 2012, the CCI “found the parties in violation of Sections 3(3)(a) and 3(3)(b), read along with Section 3(1), and issued a monetary penalty as well as orders to cease and desist from engaging in any anti-competitive behaviour. It also forbade CMA from collecting and disseminating information to its members on wholesale and retail prices, as well as facts on cement businesses' production and dispatches.”
The CCI in Neeraj Malhotra v. Deutsche Post Bank Pvt Ltd held that an agreement alone cannot be the foundation for antitrust prosecution and that such an arrangement must have economic implications. In Re: Alleged Cartelisation in Flashlights Market in India, “the court ruled that even though the rivals exchanged information, there was no breach of Section 3 of the statute. In this case, the commission stated that because their agreement does not contain any price-fixing, the assumption of substantial adverse impact on competition (AAEC) did not apply.”
In Rajasthan Cylinders vs Union of India, it was observed that “despite the bidders' similar price-fixing and a trade association meeting, there was no collusive bidding. The simultaneous pricing fixing is a feature of the market, not a result of cooperation. Further, in another case the court ruled that any arrangement that has an unfavourable effect on competition but is not protected by section 3 of the Competition Act of 2002 is unenforceable.” In such serious instances, however, the onus is on the Commission to show the culpable side of the cartel.
Concluding Remarks
The goal of the Competition Act is not only to prevent anti-competitive conduct, but also to foster and preserve competition in markets, to defend consumers' interests, and to secure free trade. The Competition Act really reflects changing economic situations. The Competition Commission should serve as a watchdog for the implementation and enforcement of competition policies. It should encourage the implementation of necessary policy reforms and should operate as a pro-active advocate for competition. Agreements that increase production and distribution and encourage technical and economic advancement while providing consumers with a fair share of the advantages should be treated leniently. In the case of horizontal agreements, the relevant market should be explicitly specified.
Cartels, as well as price, quantity bid, and territory sharing agreements, should be regarded illegal. Only when a dominant party engages in predatory pricing will it be regarded an abuse. Agreements that improve production and distribution, foster technological and economic growth, and provide consumers a fair share of the benefits should be considered favourably. In the case of horizontal agreements, the relevant market should be explicitly specified. A study of the CCI's rulings in cartel cases over the previous five years reveals significant progress toward more sophisticated economic evidence analysis.