J. Sagar Associates advocates

1
Horizontal Agreements

• J. Sagar Associatesadvocates solicitors
• Delhi Gurgaon Mumbai Bangalore Hyderabad

2
Agreement under Competition Act, 2002

• S. 2(b) of CA02 defines agreement wide
  definition
• Includes arrangement, understanding or action in
  concert
• Such agreement may be oral or in writing
• Whether it is intended to be enforceable or not
• S.3(1) of CA02 includes agreement
• for production, supply distribution, storage,
  acquisition or control or goods/services
• between enterprises or their associations

3
Anti Competitive Agreements

• Any agreement between either of the
  above-mentioned entities which cause or is likely
  to cause an appreciable adverse effect on the
  competition (AAEC)
• Is prohibited under S.3(1) of CA02
• Is void as per S.3(2) of CA02

4
Horizontal Agreements

• Agreements or practice carried on by
  enterprises or persons etc. (including cartels)
  engaged in trade of identical or similar products
  are presumed to have AAEC if they-
• Directly or indirectly fix purchase or sale
  prices
• Limit or control output, technical development,
  etc
• Share markets
• Indulge in bid-rigging or collusive bidding
• Exception Efficiency enhancing joint ventures

5
Cartel

• Inclusive definition Under S. 2(c) of CA02
• Between association of producers, sellers,
  distributors, traders, etc
• Agree to limit, control or attempt to control
  production, distribution, sale or price
• A cartel is an explicit agreement among competing
  firms not to compete agreement for price fixing,
  market sharing or limiting output.

6
Penalty

• Proviso to S.27(b) of CA02 provides for penalty
  in case of cartels.
• Imposed on each producer, seller, distributor,
  trader or service provider included in that
  cartel.
• Amount up to 3 times or 10 of its turnover for
  each year of continuance of such agreement ,
  whichever is higher
• No specific provision for imposing penalty on
  trade association involved

7
Leniency

• S.46 of CA 02 permits lesser penalty under
  certain conditions
• Regulation 4 of CCI (Lesser Penalty) Regulations,
  2009
• The first three applicants get lesser penalty up
  to 100, 50 and 30 respectively provided
  application is received before DGs investigation
  report is received by CCI
• Marker system certainty is a casualty with the
  word may in the regulations
• Information must add value and the applicant must
  continue to cooperate with CCI during
  investigation/inquiry

8
Deutsche Bank Case

• Allegations of
• cartelization amongst banks in imposing
  pre-payment penalty
• collective dominance
• CCIs findings
• no agreement amongst the various service
  providers i.e. the banks/HFCs,
• no simultaneity in practice of imposing
  pre-payment penalty
• no bank/HFC in the market which can be deemed to
  be dominant by any of the parameters used for
  determining dominance.
• Banks/HFCs operating as competitors in a vibrant
  competitive market.

9
Trade Associations Cartels

• Trade Associations not defined under CA02
• Trade associations viewed as platform for
  cartels cartelization has often emerged
  following meetings amongst the members of trade
  associations.
• Cases before CCI with trade associations alleged
  to have facilitated cartels - FIA, Film
  Producers/Distributors, Sugar Mills Cartel - no
  finding of cartelization.
• Two questions how will CCI deal with buyers
  cartels and trade associations

10
Federation of Indian Airlines Ors.

• Suo motu cognizance by MRTP Commission of an
  article published in the Economic Times on
  17.01.2008
• Allegation all the airlines under the banner of
  FIA have decided to charge minimum fare of Rs.
  500/- to improve their bottom lines
• CCIs findings No proof of agreement
• Nothing on record to show FIA had taken any
  decision regarding charging of minimum fares by
  domestic airlines
• MoMs - FIA dealt with issues of general nature
  affecting airlines like operational efficiencies,
  flight schedules, capital deployment and slot
  allocation

11
FICCI Multiplex Association of India vs. United
Producers/Distributors Forum (UPDF) Ors.

• Conflict between Multiplex Owners and
  producers/distributors of movies over revenue
  sharing
• Allegation UPDF vide their notice dated
  27.03.2009 directed producers/distributors for
  not releasing any movie through multiplexes
• CCIs findings
• Movie producers/distributors guilty of
  cartelization
• Penalty of Rs.1 lakh imposed on each of the 27
  producers/distributors
• Cease Desist with undertaking to refrain from
  such activities

12
Sugar Mills Cartel Case

• Suo motu cognizance by CCI of an article
  Cartelization by Industry up to push up sugar
  prices in India published in the Economic Times
  on 26.07.2010
• Evidences of meetings between trade associations
  to increase ex-factory price of the sugar Indian
  Sugar Mills Association (ISMA) and National
  Federation of Cooperative Sugar Factories Limited
  (NFCSF) between 13.07.2010 to 24.07.2010
• DGs findings indicating spurt in sugar prices
  between 23.07.2010 to 28.07.2010
• CCIs findings
• All the members did not attend e.g.Sugar
  federations associations of UP
• No evidence of sustained increase in price for
  more than couple of days
• highly regulated industry and no evidence that
  the members who attended the meeting implemented
  the decision to increase the floor price.

13
Price Parallelism

• Price parallelism
• In oligopolistic markets, unilateral pricing
  decisions based on competitors pricing strategy
  results in similar or parallel pricing.
• CCIs ruling in Deutsche Banks Case
• CCIs ruling in Domestic Airlines Cartel Case
  (Discussed later)

14
Domestic Airlines Cartel Cases

• 2 Cases initiated within a period of 1 year
• Rise in ticket prices during Deepawali 2010 ( 1
  MRTP case pending since 2009)
• Rise in ticket prices during the Indian Airlines
  pilots strike in May 2011
• CCI s Conclusions
• Increase in fares due to the peak traffic season.
• Pattern showed that higher bucket seats were sold
  in peak season.
• In the Air-India Strike case, drop in supply of
  seats due to the strike.
• recognized the dynamic pricing system followed by
  low cost carriers (LCC).
• Price parallelism due to transparency.
• No evidence to show collusion.
• Price parallelism plus factors taken into account
  but sufficient evidence to prove tacit collusion
  not found.

15
Dawn Raid

• Under S. 41.(3) of CA02, DG authorized to
  conduct raids in terms of Ss.240(2) and 240A of
  the Companies Act, 1956
• Prior permission from the Chief Metropolitan
  Magistrate, Delhi.
• Till date no dawn raid has been conducted

16

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