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COMPETITION LAW

General Perspective on Cartels

Name: Alvira.M
Class : BA.BL (Hons)
Year : IV
Section : A

TABLE OF CONTENTS:-

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b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
l)
m)
n)
o)
p)
q)
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v)

INTRODUCTION
HISTORICAL BACKGROUND
NEED FOR AND USEFULNESS OF COMPETITION
CARTELS UNDER MRTP ACT 1969
CASES UNDER MRTP ACT AND THEIR WEEKNESSES
COMPETITION ACT 2002 OVERVIEW
ANTI - COMPETITIVE AGREEMENTS
DEFINITION OF CARTELS
INDENTIFICATION OF CARTEL FORMATION
INGREDIENTS TO CONSTITUTE A CARTEL
CARTELS PRESUMED INJURIOUS
CHARACTERISTICS OF CARTELS
CONDITIONS CONDUCIVE TO THE FORMATION OF CARTELS
INTERNATIONAL AND INDIAN CASE LAWS
INQUIRY INTO CARTELS
POWERS OF THE COMMISSION
LENIENCY SCHEME
INTERIM ORDER
APPEALS
EFFECTIVE PENALTY
CONCLUSION
BIBLIOGRAPHY

INTRODUCTION:

The object of the competition policy is to create a business environment where the firm can compete with
each other and there should be always enough opportunities for the new firm to join the competition with the
existing firms. Such kind of policy always promotes efficiency, means it gives an opportunity to the firms to
increase their efficiency to do better business and earn better profit and also maximize the welfare of the
people of the society because in such type of market position the people have enough choices.
The main problem of a competition friendly market is some activities of the existing firms of the market.
Very often these firms started to collude to their competitor or forcing the competitors to go out of the
market or buying out the competitors. In any market, firms have an incentive to coordinate their production
and pricing activities to increase their collective and individual profits by restricting market output and
raising the market price. An explicit agreement among rival firms not to compete and to restrict output and
raise the price of their products is called a cartel1.
The elimination of rivalry by firms that formerly competed is accomplished not by integration of production
activities, as would happen in the case of a merger. Instead, the former rivals maintain separate firms but act
jointly in fixing prices or dividing the market, or even both Cartel is a formal or informal agreement among
number of firms in an industry to restrict competition.
These agreements may provide for setting minimum prices, setting limits on output or capacity, restrictions
on non-price competition, division of markets between firms either geographically or in terms of type of
product, or agreed measures to restrict entry to the industry to create a monopoly in a given industry.
Usually cartels involve an agreement between business men not to compete with one another and they can
occur in any industry and can involve goods or services at the manufacturing, distribution or retail level. In
this process, industries form combinations of this type to control sales and prices. These restraints are also
known as anti-competitive, anti-trust, monopolies, trade combinations, restrictive trade practices, restraint of
trade or competition law
The basic characteristic of cartel is that the combining enterprises concentrate on production according to
the limits of output fixed by the cartel keeping in view the market conditions and to restrain or regulate the
distribution of output for maintaining returns or the selling price of certain commodities by restrictive trade
or marketing practices.
Such trade combinations are used to be challenged in the courts on the ground that they are unlawful
conspiracies as these agreements between firms have the potential of restricting competition.

HISTORICAL BACKGROUND:

1 Bhatia, G.R. Combating Cartels in the markets: Issues & Challenges, Competition Commission of India
(CCI)

The practice of cartels or business combinations has so much historical importance. Combinations are

common and they fall into two main categories; those concerned with the regulation of terms of employment
- service cartels and those concerned with the regulation of trading terms and conditions -trade cartels.
In both cases the law relating to such combinations is closely associated with that of conspiracy. The history
in brief about the cartels is legislation in England to control monopolies and restrictive practices were in
force well before the Norman Conquest. The perceived threat to democracy and the free market from these
trusts led to the passing of Sherman and Clayton Acts of 1890 and 1914.
The American term anti-trust arose not because the US statutes had anything to do with ordinary trust law
but because the large American corporations used trusts to conceal the nature of their business arrangements.
The European Community has seen healthy competition as an essential element in the creation of a common
market free from restraints on trade. In accordance with this many countries enacted competition laws and
for example Competition Act 1998 was passed by England and Competition Act 2002 was passed by India.
Before the present Competition Act 2002 came into existence, The Monopolistic Trade Practice Act 1969
was enacted. The MRTP Act 1696 was enacted in pursuant of a report submitted by Monopolies Inquiry
Commission, which was setup by the Government of India to review the economic condition of India with
regard to the concentration of the economic power to some private entities and also to examine the effect of
the monopolistic and restrictive trade practice in India.
With the change in the prevailing scenario it was felt that some changes should be brought to the MRTP Act,
because the commission constituted under the Monopolistic Restrictive Trade Practices Act known as the
MRTPC was not empowered to impose penalties Act and at the same time it was not empowered with extraterritorial jurisdiction powers.
Action against an anti-competitive agreement could only be taken if it involved an Indian party and that too
only after the goods have been imported into India and lastly Non-cooperation on the part of the defendants
in the investigation. In addition to this many new concepts, like globalization, liberalization have emerged
for which India had to change its business policy within its jurisdiction and also outside.
Therefore the Competition Act 2002 came into force. This new act mainly came into force by the
recommendations of the Raghavan Committee report, a committee setup by the Government of India,
headed by S.V.S Raghavan which has formed the basis for the enactment of the Competition Act in India.
The problems of these cartel agreements were succinctly expressed by Adam Smith long back as "A
monopoly granted either to an individual or to a trading company has the same effect as a secret in
trade or manufactures. The monopolists, by keeping the market constantly under-stocked, by never
2 A. Kumar, The Evolution of Competition Law in India COMPETITION LAW TODAY CONCEPTS,
ISSUES AND THE LAW IN PRACTICE 479, 480 (New Delhi: Oxford University Press, 2008).

fully supplying the effectual demand, sell their commodities much above the natural price, and raise
their emoluments, whether they consist in wages or profit, greatly above their natural rate."
He also pointed out that "People of the same trade seldom meet together, even for merriment and
diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise
prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or
would be consistent with liberty and justice. But though the law cannot hinder people of the same
trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much
less to render them necessary.

NEED FOR AND USEFULNESS OF COMPETITION:-

It is increasingly recognized more than ever before that competition in markets promotes efficiency,
encourages innovation, improves quality, boosts choice, reduces costs, leads to lower prices of goods and
services. It also ensures availability of goods and services in abundance of acceptable quality at affordable
price. It is also a driving force for building up the competitiveness of the domestic industry: businesses that
do not face competition at home are less likely to be globally competitive. Competition ensures freedom of
trade and prevents abuse of economic power and thereby promotes economic democracy. Thus, competition
in markets is benign for consumers, business houses and economy as a whole.
The absence of fair and free competition, however, eludes the stakeholders the benefits of competition. It is
this imperative which has persuaded countries to either enact their competition law or to modernize their
existing competition law and to revamp Competition Authorities, the number of countries having a
competition law has risen from 35 in 1995 to around 100 as on date.

CARTELS UNDER MRTP ACT 1969:-

The MRTP Act, has its genesis in the Directives Principle of State Policy, embodied in the Constitution of
India. It was enacted to prevent concentration of economic power to the common detriment, provide for
control of monopolies, prohibit monopolistic and restrictive trade practices and prohibit unfair trade
practices. The MRTP Act empowered the Central Government to set up an authority, called the MRTPC,
which has investigative, advisory and adjudicative functions, to oversee the implementation of the MRTP
Act. The MRTPC could investigate into any restrictive trade practice, on a complaint from any trade or
consumer associations or upon a reference made by the Central or State Government, or upon the
application made by the Director General of Investigation and Registration DG (IR) which is the
investigative wing of the MRTPC, or on suo moto basis.
Complaints regarding restrictive trade practices from affected parties is required to be referred to the DG
(IR) for conducting preliminary investigation of the MRTP Act. One example of a RTP is a cartel. As held in

Union of India & Others .v. Hindustan Development Corporation 3 Cartel is an association of producers
who by agreement among themselves attempt to control production, sale and prices of the product to
obtain a monopoly in any particular industry or commodity.
Under the MRTP Act, cartel is categorized as an RTP, which has been defined as a trade practice which
has or may have the effect of preventing, distorting or restricting competition, Section 2(o) of the
MRTP Act.
Various categories of agreements enumerated under section 33(1) of the MRTP Act, including agreement,
which restrict persons from whom certain goods can be purchased have been recognized as per se restrictive.
Cartels, fall under clause (d) of the section, which states that any agreement to purchase or sell goods or
to tender for the sale or purchase of goods only at prices or on terms or conditions agreed upon
between the sellers or purchasers, shall be deemed for the purpose of this Act, to be an agreement
relating to restrictive trade practices and shall be subjected to registration as under Section 35 of the
MRTP Act.

CASES UNDER MRTP ACT AND THEIR WEEKNESSES:-

A) DG (IR) vs. Modi Alkali and Chemicals Ltd 4 an anonymous complaint was received alleging that some
of the leading undertakings in Northern India have formed a cartel for hiking the prices of their products.
The prices of chlorine gas and hydrochloric acid had an increase of 277% and 200% within six and four
months respectively in the year 1992. The same were contended to be a result of an agreement amongst the
parties to create artificial scarcity, in order to raise prices of their products. Since the prices of raw materials
namely sodium chloride and electricity had more or less remained the same, there was stated to be a
fictitious crisis created to take advantage of the market and increase the prices of their products.
Thus keeping in mind the definition of cartels and the necessary elements, the Commission was of the view
that, except the use of expression cartel, there was no material evidence to suggest parity of prices or
meeting of minds. The Commission was of the view, that the notice of enquiry and the subsequent
investigation lacked relevant and necessary information in regard to the parties forming a cartel leading to
distortion and restriction of competition in the market. Having the essential factors not being proved, the
Commission agreed with the respondents that prima facie there was no case of a cartel.
Weekness - Cartels were not defined in the MRTP Act 1969 but the understanding of cartels was only
possible to be drawn from the section 2(o) i.e., restrictive trade practice.

3 1994 CTJ 270 (SC) (MRTP)


4 2002, CTJ 459 (MRTP)

B) Alkali & Chemical Corporation of India Ltd. And Bayer India Ltd 5 the companies were engaged in the
manufacture and sale of rubber chemicals and amongst them possessed a dominant share of the total market
for these products. There were charges of them making identical increases in prices on five to six occasions
on or around the same date.
However, there was no direct evidence available behind the increase in prices. The MRTPC observed while
making its judgment, that in the absence of any direct evidence of cartel and the circumstantial
evidence not going beyond price parallelism, without there being even a shred of evidence in the proof
of any plus factor to bolster the circumstances of price parallelism, we find it unsafe to conclude that
the respondents indulged in any cartel for raising the prices.
Weekness The MRTPC did not have the tools or the powers to efficiently investigate in order to recover
direct evidence to prove the existence of the cartel activity.
C) American Natural Soda Ash Corporation (ANSAC) vs. Alkali Manufacturers Association of India
(AMAI) and others

ANSAC, a joint venture of six USA soda ash producers attempted to ship a

consignment of soda ash to India. AMAI, whose members included the major Indian soda ash producers,
complained to the MRTPC to take action against ANSAC for cartelised exports to India.
The Supreme Court did not go into the allegation of cartelisation, but instead held that the wording of the
MRTP Act did not give the MRTPC any extra- territorial jurisdiction. The MRTPC therefore could not take
action against foreign cartels or the pricing of exports to India, nor could it restrict imports. Action could be
taken only if an anti-competitive agreement involving an Indian party could be proved, and that too only
after the goods had been imported into India. The Supreme Court overturned the order of the MRTPC.
Weekness The MRTP Act did not empower the MRTPC with the Extra-Territorial Jurisdiction powers. It
could only handle cases that emerged in the Indian market but not the cases that emerged outside India,
however having the effect in the Indian Market.
D) Sirmur Truck Operators case6 and Truck Operators Union vs. Mr. N.C. Gupta & Mr. Sardar 7 case, the
nature of allegation was same, i.e. the respondents had acted in concert while fixing the freight rates for
rendering transport services and that they did not allow non-member truck operators to load and unload
goods, unless they joined the union.
The MRTPC in the both the cases concluded, on the basis of the evidence, that preventing and restricting
competitors from doing business was undoubtedly a restrictive trade practice falling under Section 2 (o) of
5 Kumar, S.S Cartels and Price Fixation: Worst type of anti-competitive practices
6 (1995) 3 CTJ 332 (MRTPC)
7 (1995) 3 CTJ 70 (MRTP)

the MRTP Act. Accordingly, the Commission issued an order of cease and desist against the respondents
and directed them to stop the trade practice.
E) DG (IR) vs. Sumitomo Corporation, Tokyo, Japan and others8 the MRTPC was called upon to decide on
the charges of restrictive trade practices of manipulating prices of products within the meaning of Section
2(o) (ii)9 of the MRTP Act. On information being received by the commission regarding collusive tendering
in the steel industry and quoting of identical prices, the commission appointed a consultant who reported
that the Japanese companies along with their Indian agents have colluded and are quoting identical prices in
respect of input material required by the steel plant.
In lieu of the gateway available to the defendants, the Notice of Enquiry is discharged. The allegation of
cartelisation is only being discharged on the grounds of the availability of the gateway to the Respondents.
Weekness The presence of such gateways acted as a deterrent in successfully charging the companies of a
restrictive Trade Practice Act. It weakened the MRTP Act and gave the companies the gateways to escape
Punishments.
To sum up the above, the Defences used by the various Accused are as follows10:i)

Price parallelism as a defence against cartelised price fixation. Factors required to separate price

ii)
iii)
iv)
v)

parallelism from cartelised price fixation


Increase in input cost as defence for price increase
Presence of gateways
Order for supply was so small that it had virtually negligible effect on competition in the market
Justification of ones own activity of cartelisation on the basis that the accused is itself a

vi)

dominant player in the market


Acceptance of anonymous complaint to initiate an Enquiry

COMPETITION ACT 2002- OVERVIEW:-

In India, the MRTP Act was enacted in 1969. The focus of the MRTP Act was more on the control of
monopolies and the prohibition of monopolistic and restrictive trade practices. In the current era of
globalisation, the MRTP Act had become obsolete and there was a need to shift the focus from curbing
monopolies to promoting competition.

The Central Government, therefore, constituted a high level

8 2004 CTJ 26 (MRTP)

9 Section 2(o)(ii) Restrictive Trade Practice which tends to bring about manipulation of prices, or
conditions of delivery or to affect the flow of supplies in the market relating to goods or services in such manner
as to impose on the consumers unjustified cost or restrictions.
10 Pradeep S Mehta & A K Koul, Study of Cartel Case Laws in Select Jurisdictions Learnings for the
Competition of India 15th October 2007, Page : 48 available at
http://www.cutsccier.org/CARTEL/pdf/Study_of_Cartel_Case_Laws_in_Select_JurisdictionsLearnings_for_the_CCI.pdf

committee known as the Raghavan Committee and after considering its report and suggestions from various
stakeholders, enacted a new law called the Competition Act, 2002. The Central Government also constituted
the Competition Commission of India. According to the Competition Act a cartel is formed if three
prerequisites are fulfilled
a) An agreement which includes arrangement or understanding
b) Agreement is amongst producers, sellers, distributors, traders or service providers, i.e. parties
are engaged in identical or similar trade of goods or provision of service, and
c) The agreement aims to limit, control or attempt to control the production, distribution, and
sale or price of, or, trade in goods or provision of services
In line with international trend and to cope with changing realities, India reviewed the Monopolies and

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Restrictive Trade Practices Act, 1969 and has enacted the Competition Act, 2002. The Central Government
has also established the Competition Commission of India . The duties of the Commission are: a) to eliminate practices having adverse effect on competition;
b) to promote and sustain competition; and
c) to protect the interests of consumers and ensure freedom of trade carried on by other participants,
in markets in India.
Some of the provisions of the Act including those relating to competition advocacy have already been made
effective. One of the core enforcement areas of the Act on its being made effective is Prohibition of AntiCompetitive Agreements having appreciable adverse effect on competition (AAEC) in markets, in India.
The AAEC is a key factor before an agreement is dubbed as anticompetitive agreement and declared
void. Agreement includes any arrangement or understanding or action in concert,i)
ii)

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.

Thus, agreement need not be in writing, not necessarily to be legally enforceable and an arrangement or
understanding is as good as a formal written agreement. The Act prohibits anticompetitive agreements,
abuse of dominant position by enterprises, and regulates combinations (mergers, amalgamations and
acquisitions) with a view to ensure that there is no adverse effect on competition in India.
The Act prohibits any agreement which causes, or is likely to cause, appreciable adverse effect on
competition in markets in India. Any such agreement is void. An agreement may be horizontal i.e. between
enterprises, persons, associations, etc. engaged in identical or similar trade of goods or provision of services,

11 G.R. BHATIA1 , COMBATING CARTEL IN MARKETS ISSUES & CHALLENGES available at


http://www.competition-commission-india.nic.in/speeches_articles_presentations/GR.BhatiaArticle.pdf

or it may be vertical i.e. amongst enterprises or persons at different stages or levels of the production chain
in different markets.

ANTI COMPETITIVE AGREEMENTS:-

The anti-competitive agreements as per the Act, are of two kinds; namely
i) those agreements which are presumed to have appreciable adverse effect on competition (AAEC) in which
case the burden of proof shifts on the enterprise or person against which the charge is levelled. These
primarily include:
(a) directly or indirectly fixing the prices;
(b) limiting or controlling production, supply, markets, technical

development, investment or

provision of services;
(c) sharing or allocation of geographical area of market, customers or in any other similar way; and
(d) directly or indirectly resulting in bid-rigging or collusive bidding.
ii) those agreements which are to be judged by Rule of Reason i.e., the burden of proof in respect of which
lies on the investigator/prosecutor. These include tie-in arrangements, exclusive supply agreement, exclusive
distribution agreement, refusal to deal and resale price maintenance.

DEFINITION OF CARTELS :-

Cartel is defined in section 2 clause (c) of the Act:


Cartel includes an association of producers, sellers, distributors, traders or service providers who,

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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;
Cartels are agreements between enterprises (including a person, a government department and association of
persons / enterprises) not to compete on price, product (including goods and services) or customers. The Act
gives a detailed definition of an enterprise in section 2 (h).
The objective of a cartel is to raise price above competitive levels, resulting in injury to consumers and to
the economy. For the consumers, cartelisation results in higher prices, poor quality and less or no choice for
goods or/and services.
A cartel is said to exist when two or more enterprises enter into an explicit or implicit agreement to fix
prices, to limit production and supply, to allocate market share or sales quotas, or to engage in collusive

12 PROVISIONS RELATING TO CARTELS , COMPETITION ACT 2002, available at


http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/cartel%20book.pdf

bidding or bid-rigging in one or more markets. An important dimension in the definition of a cartel is that it
requires an agreement between competing enterprises not to compete or to restrict competition.
An international cartel is said to exist, when not all of the enterprises in a cartel are based in the same
country or when the cartel affects markets of more than one country.
An import cartel comprises enterprises (including an association of enterprises) that get together for the
purpose of imports into the country.
An export cartel is made up of enterprises based in one country with an agreement to cartelize markets in
other countries. In the Act, cartels meant exclusively for exports from India have been excluded from the
provisions relating to anti-competitive agreements.

IDENTIFICATION OF CARTEL FORMATION:-

Certain practices need to be identified to establish the existence of a cartel under the Competition Act.

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Section 3(3) of the Competition Act identifies four types of horizontal agreements (ie, cartel agreements),
which are presumed to cause an AAEC in India:
a) price-fixing agreements (ie, agreements between competitors which directly or indirectly have the
effect of fixing or determining purchase or sale prices);
b) agreements between competitors that seek to limit or control production, supply or markets;
c) market-sharing agreements between competitors irrespective of the form that they may take (includes
market sharing by way of allocation of products, geographies or source of production); and
d) bid-rigging agreements (ie, agreements between competitors that have the effect of eliminating or
reducing competition for bids or adversely affecting or manipulating the process of bidding).

INGREDIENTS TO CONSTITUTE A CARTEL:-

The three ingredients to constitute Cartel are:(a) an agreement which includes arrangement or understanding
(b) agreement is amongst producers, sellers, distributors, traders or service providers i.e. parties are
engaged in identical or similar trade of goods or provision of service, and
(c) agreement aims to limit, control or attempt to control the production, distribution, sale or price of,
or, trade in goods or provision of services
An obvious question arises as to why a Cartel is presumed to have AAEC. In a layman language,
competition law seeks to promote, maintain and sustain competition in market being beneficial to various
13 FARHAD SOBARJEE, INDIA LAW AND PRACTICE available at
http://www.chambersandpartners.com/guide/practice-guides/location/247/6686/1979-200

stakeholders in society. In case of Cartel, competitors agree not be compete on price, product, customers
etc. since in the case of a Cartel, direct competitors agree to forego competition and opt for collusion, the
consumers and business houses lose the benefits of competition.
Thus, cartels are inherently harmful. Further, competitors know that such an agreement is unlawful and it
compels them to keep such agreement secretive and resultantly it is invariably not reduced to writing and it
is often found to be in the form of arrangement or understanding. Moreover, the best evidence against
Cartel is usually in possession of the charged parties, which are not likely to easily part with and make
available to the investigator or enquiring authority. These compulsions seem to have persuaded the law
makers to prescribe that Cartel is presumed to have AAEC.

CARTELS PRESUMED INJURIOUS:-

Agreements between enterprises engaged in identical or similar trade of goods or provision of services

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(commonly known as horizontal agreements) including cartels, of four types specified in the Act are
presumed to have appreciable adverse effect on competition and, therefore, are anti-competitive and void.
However, horizontal agreements of the above four types mentioned in the preceding paragraphs, entered into
by way of joint ventures are not presumed to have appreciable adverse effect on competition and are
excluded from the above provisions of section 3, sub section (3) of the Act if they increase efficiency in
production, supply, distribution, storage, acquisition or control of goods or provision of services.
Agreements other than those covered by section 3, sub section (3) of the Act, including:
a)
b)
c)
d)
e)

tie-in arrangement
exclusive supply arrangement
exclusive distribution agreement
refusal to deal
resale price maintenance are commonly known as vertical agreements and would not be presumed
to have appreciable adverse effect on competition, and would be evaluated by the Commission based
on facts using the rule of reason approach.

CHARACTERISTICS OF CARTELS:-

The following are the common characteristics of cartels. They are as follows:
a) Usually cartels function in secrecy
b) The members of a cartel, by and large, seek to camouflage their activities to avoid detection by the
Commission
c) Perpetuation of cartels is ensured through retaliation threats. If any member cheats, the cartel
members retaliate through temporary price cuts to take business away or can isolate the cheating
member
14 CARTELS AND ANTI COMPETITIVE AGREEMENTS available at
http://www.oecd.org/competition/cartels/

d) Another method, known as compensation scheme, is resorted to in order to discourage cheating.


Under this scheme, if a member of a cartel is found to have sold more than its allocated share, it
would have to compensate the other members

CONDITIONS CONDUCIVE TO THE FORMATION OF CARTELS:-

If there is effective competition in the market, cartels would find it difficult to be formed and sustained.

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Some of the conditions that are conducive to cartelization are:


a)
b)
c)
d)
e)
f)
g)
h)

high concentration - few competitors


high entry and exit barriers
homogeneity of the products (similar products)
similar production costs
excess capacity
high dependence of the consumers on the product
history of collusion
active trade association

INTERNATIONAL AND INDIAN CASE LAWS:


a) AIRLINES CARTEL
The Competition Commission in South Africa referred to its Competition Tribunal, a case alleging that four
airline companies had conspired to simultaneously announce in May, 2004 a fuel surcharge in identical
amounts. After the investigation, prompted by news reports of the price increase, an airline applied to the
Commission for leniency under the Commissions Corporate Leniency Policy. The applicant cooperated
with the Commission and was not cited as a respondent and the Commission recommended a fine up to 10%
of the turnover of each of the respondent
b) VITAMINS CARTEL
Leading producers of vitamins including Roche AG and BASF of Germany, Rhone-Poulenc of France,
Takeda Chemical of Japan formed a cartel dividing up the world market and price fixing for different types
of vitamins during the 1990s. The cartel operated for over 10 years and later prosecuted with the help of
Rhone-Poulenc which defected from cartel and cooperated with US authorities. Roche paid fines of US $
500 million and total fine collected exceeded US $ 1 billion in the US alone. The overcharges paid by 90
countries importing vitamins were estimated to the tune of US $ 2700 million during the 1990s. The analysis
also revealed that jurisdictions with weak cartel enforcement regime suffered more. Damage wise, India
incurred overcharges of more than US$ 25 million
15 Ministry of Company Affairs (2006-07), Competition (Amendment) Bill, 2006, Forty Fourth Report, Standing
Committee on Finance, Lok Sabha Secretariat

c) LYSINE CARTEL
Lysine is an amino acid that stimulates growth and results in leaner muscle development in dogs, poultry and
fish. It is also mixed with corns and is an input for feed products. Between 1992 and 1995, five producers
belonging to Japan, Korea and US controlling more than 97% of the global capacity engaged in price fixing,
allocation of sales quota and monitoring of volume agreements. The search was undertaken with the
cooperation of FBI and on the basis of subpoenaed documents together with tape recordings of meeting of
the conspirators could make out a strong case of colluding on lysine prices around the world for three years
d) CEMENT CARTEL
Five cement companies in Argentina were prosecuted for operating a cartel that lasted for 18 years from
1981 to 1999 and the Argentine Authority imposed a total fine of US $ 107 million, which is more than three
times the highest fine assessed by Argentine Authority in any previous case. Rumania also fined total EUR
28,500,000 on its three cement companies for their participation in a cement cartel and the fine represented
6% of the companies annual turnover.

INQUIRY IN TO CARTELS:-

In exercise of powers vested under section 19 of the Act, the Commission may inquire into any alleged

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contravention of the provisions of section 3 of the Act which inter-alia proscribes cartels.The Commission,
on being satisfied that there exists a prima facie case of cartel, shall direct the Director General to cause an
investigation and furnish a report. The Commission has the powers vested in a Civil Court under the Code of
Civil Procedure in respect of matters like summoning or enforcing attendance of any person and examining
him on oath, requiring discovery and production of documents and receiving evidence on affidavit. The
Director General, for the purpose of carrying out investigation, is vested with powers of civil court besides
powers to conduct search and seizure.

POWERS OF THE COMMISSION:-

The Commission is empowered to inquire into any cartel, and to impose on each member of the cartel, a
penalty of up to 3 times of its profit for each year of the continuance of such agreement or 10% of its
turnover for each year of continuance of such agreement, whichever is higher. In case an enterprise is a
company, its directors/officials who are guilty are also liable to be proceeded against.
In addition, the Commission has the power to pass inter alia any or all of the following orders (section 27):
a) direct the parties to a cartel agreement to discontinue and not to re-enter such agreement
b) direct the enterprises concerned to modify the agreement
16 Oindrila De (2005), "Identifying Cartels in India", Unpublished M.Phil Thesis, Department of Economics, Delhi
School of Economics, University of Delhi

c) direct the enterprises concerned to abide by such other orders as the Commission may pass
and comply with the directions, including payment of costs, if any;
d) pass such other order or issue such directions as it may deem fit

LENIENCY SCHEME

Section 46 of the Act empowers the Commission to grant leniency by levying a lesser penalty on a member
of the cartel who provides full, true and vital information regarding the cartel. The scheme is designed to
induce members to help in detection and investigation of cartels. This scheme is grounded on the premise
that successful prosecution of cartels requires evidence supplied by a member of the cartel. Similar leniency
schemes have proved very helpful to competition authorities of foreign jurisdictions in successfully
proceeding against cartels.
The Commission has notified the Competition Commission of India (Lesser Penalty) Regulations, 2009
laying the process, procedure and methodology for granting leniency to the cartel members who break the
ranks of the cartel and become helpful to the Commission and instrumental in busting the alleged cartel.

INTERIM ORDER:-

Under section 33 of the Act, during the pendency of an inquiry the Commission may temporarily restrain
any party from continuing with the alleged contravention, until conclusion of the inquiry or until further
orders, without giving notice to such party, where it deems necessary.

APPEALS:-

The Competition Appellate Tribunal (COMPAT) is established under section 53A of the Act, to hear and
dispose of appeals against any direction issued or decision made or order passed by the Commission under
specified sections of the Act. An appeal has to be filed within 60 days of receipt of the order/ direction/
decision of the Commission

EFFECTIVE PENALTY:-

There will be no incentive to cartelize only if every cartel is detected, prosecuted and penalty is imposed and
recovered which is almost unattainable as per global experience. Recognizing that detecting and punishing
every cartel is formidable, competition authorities in different jurisdictions supplement and complement
penalties with the following:
a) imposing penalties on individuals in personal capacity and ensuring that penalties deposited by
them are not reimbursed by the delinquent enterprises
b) Sentencing individuals to prison
c) Declaring directors of errant enterprises to be disqualified for appointment as director for a
specified period

d) Publishing the order in the media, which seriously damages the reputation of enterprises found
to have cartelized

CONCLUSION:-

The objective of the Competition Act is not only to prevent practices which have an adverse effect on
competition, but also to promote and sustain competition in markets, to protect the interests of consumers
and to ensure freedom of trade. Competition Act is truly reflective of the changing economic conditions.
Competition commission should act as a watch-dog for the introduction and maintenance of competition
policy. It should promote the introduction of the required changes in the policy environment and should
perform a pro-active advocacy function for competition.
Agreements that contribute to the improvement of production and distribution and promote technical and
economic progress while allowing consumers a fair share of the benefits should be dealt with leniently. The
relevant market should be clearly identified in the context of horizontal agreements.
Blatant price, quantity bid and territory sharing agreements and cartels should be presumed to be illegal.
Predatory pricing will be treated as an abuse only if it is indulged in by a dominant undertaking.
Exclusionary practices which create a barrier to new entrants or force existing competitors out of the market
will attract the competition law.
The State monopolies, government procurement and foreign companies should be subject to the Competition
Law. The Law should cover all consumers who purchase goods or services regardless of the purpose for
which the purchase is made. Bodies administering the various professions should use their autonomy and
privileges for regulating the standard and quality of the profession and not to limit competition.
The competition law should be designed and implemented in terms of competition policy of the State which
is dynamic. This Act is a step in right direction to harmonize the Competition policy with International trade
and policy and hope that Cartels which hamper economic growth will be controlled with the introduction of
this new legislation.
A review of the CCIs decisions in cartel cases over the last five years indicates considerable progress
towards more sophisticated analysis of economic evidence.
The CCI has tended to give greater weight to conduct-based evidence over economic evidence. Once a cartel
has been found, the CCI has moved towards imposing significant, deterrent penalties, including penalties on
individuals.

Admittedly, the recent COMPAT order introducing the concept of relevant turnover in calculating penalties
seems to run counter to the CCIs approach. The CCI has appealed against COMPATs order in the Supreme
Court of India and the issue is far from resolved.
The leniency regime in India is still in its infancy but may become a more effective cartel detection tool
provided concerns surrounding confidentiality are effectively addressed by the CCI. Apart from this, the
CCIs leniency programme may gain more momentum if the CCI exercises its search and seizure powers
more frequently.

BIBLIOGRAPHY

STATUTES REFERRED:
a) The Competition Act 2002
b) The MRTP Act 1969

BOOKS REFERRED:a) Oindrila De (2005), "Identifying Cartels in India", Unpublished M.Phil Thesis, Department of
Economics, Delhi School of Economics, University of Delhi
b) Mehta, P and Nanda, N (2006), Competition Issues in the Indian Cement Industry, Towards a
functional competition policy for India, Ed. Mr. Pradeep S Mehta, CUTS International & Academic
Foundation
c) A. Kumar, The Evolution of Competition Law in India Competition Law Today Concepts,
Issues And The Law In Practice 479, 480 (New Delhi: Oxford University Press, 2008).

a)
b)
c)
d)
e)

WEBSITES BROWSED:http://www.oecd.org/competition/cartels/
http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/cartel%20book.pdf
competitioncommission.gov.in/advocacy/PP-CCI_CartelsNew_7_12.pdf
http://www.commonlii.org/in/journals/NALSARLawRw/2013/11.pdf
http://www.vaishlaw.com/article/Predicting%20business%20cartels-%20sharma-MM
%20Sharma.pdf
f) http://www.competition-commissionindia.nic.in/speeches_articles_presentations/GR.BhatiaArticle.pdf
g) http://indialawjournal.com/volume6/issue-2/article4.html
h) http://www.cuts-ccier.org/CARTEL/pdf/Study_of_Cartel_Case_Laws_in_Select_JurisdictionsLearnings_for_the_CCI.pdf

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