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Published : October 17, 2016 | Author : manishranjan
Category : Miscellaneous | Total Views : 2793 | Rating :

Manish Ranjan, NUSRL RANCHI The author can be reached at manish.nusrlranchi@gmail.com

Meaning of the per-se rule in Indian Competition Law, in light of Section 3(3) of the Competition Act, 2002 it presumes certain agreements to have an appreciable adverse effect on competition in India

Answer: - Any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India, is an anti-competitive agreement. Such agreements are void agreements. The term ‘agreement’ includes any arrangement or understanding or action in concert whether or not formal or in writing or is intended to be enforceable by legal proceedings.

In Registrar of Restrictive Trade Agreements v. W. H. Smith and Sons, the court observed, ‘people who combine together to keep up prices do not shout it from the house tops. They keep it quiet. They make their own arrangements in the cellular, where no one can see. They will not put anything into writing nor even into words. So it includes not only an ‘agreement’ properly so called but any ‘agreement’ however informal’.

To bring in the application of Section 3, it is pertinent that the effect on competition must be ‘appreciable’. In Law Lexicon where ‘appreciable’ is defined as ’capable of being estimated, weighted, judged of or recognized by the mind’ which is ‘perceptible but not a synonym of substantial.’

Section 19(3) of the Act states that while determining whether an agreement has an appreciable adverse effect on competition under section 3, the commission shall give due regard to all or any of the following factors:

1. creation of barriers of new entrants in the market;
2. driving existing competitors out of the market;
3. foreclosure of competition by hindering entry into the market;
4. accrual of benefits to consumers;
5. improvements in production or distribution of goods or provision of services;
6. Promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.

In Automobiles Dealers Association v. Global Automobiles Limited & Anr., CCI held that it would be prudent to examine an action in the backdrop of all the factors mentioned in Section 19(3). The agreement should be the cause of the adverse effect on the competition. Even if such a consequence is probable, the agreement is anti-competitive. The probability and not mere possibility of its consequence as appreciably affecting competition is the requirement.

According to the Section 3(3)., it is presumed that such agreements causes appreciable adverse effect on competition. Thus the burden of proof in any cartel case is on the defendant to prove that the presumption is not causing appreciable adverse effect on competition. A specific goal of Competition Act is the prevention of economic agents from distorting the competitive process either through agreements with other companies or through unilateral actions designed to exclude actual or potential competitors.

A cartel is a horizontal agreement to fix prices, allocate customers or territories, restrict output or rig bids. Owing to the seriousness of cartels, they are subject to the per se rule in many jurisdictions. The most crucial ingredient of cartelisation behaviour is collusive manipulation of prices by the competitors. A mere simultaneous movement of prices, especially for homogeneous products, is not by itself sufficient to prove a cartel.

In Builders association of India v. Cement manufacturers association and other it was a first-of-its-kind order, the CCI has imposed a penalty of over Rs 6,000 crore on 11 leading cement producers after finding them guilty of forming cartels to control “prices, production and supply” of cement in the market. According to the CCI order, it found cement manufacturers violating the provisions of the Competition Act. The CCI issued the order after “investigation by the Director General (CCI) upon information filed by the Builders’ Association of India”.

There is a presumed appreciable adverse effect on competition if the said agreement falls under Section 3(3) of the Competition Act, 2002. In order to truly discern the spirit of sub-section (3) of section 3 the language of the provision must be given utmost supremacy. In order to unlock the mystery surrounding section 3(3) the words “shall be presumed” must be given utmost importance. “Presumptions operate where certain facts may be presumed to exist even in the absence of complete proof.” The court is bound to take the fact as proved until evidenced is given to disprove it. The presumption raised under Section 3(3) is that of “AAEC”.

The principle of ‘shall presume’, used in section 3(3) has been explained by courts in India

‘A presumption is not itself evidence but only makes a prima facie case for the party in whose favour it exists. It indicates the person on whom the burden of proof lies. But when the presumption is conclusive, it obviates the production of any other evidence. But when it is rebuttable, it only points it the party on which lies the duty of going forward on the evidence on the fact presumed, and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of presumption is over’

It is perceptible that the language used in section 3(3) imposes a limitation on the competition authorities to apply the per se rule in its true spirit. Indian Competition law vide Section 3 does not provide for a case-by-case application of the per se rule. If the “per se” rule has to be applied in its true spirit, then the legislature has to rephrase the language of the section. The words, “shall be presumed” creates considerable doubt in the minds of legal practitioners. There is an absolute need to have a ‘per se’ rule in India especially while dealing with serious offences like bid-rigging. However, policy makers must also conceive of a “per se” rule that suits Indian conditions.

# (1968) 3 All ER 721
# CCI Case No 33 of 2011, decided on July 3, 2012
# Cartels are agreements between enterprises (including association of enterprises) not to compete on price, product (including goods and services) or customers. The purpose of a cartel is to raise price above competitive levels, resulting in injury to consumers and to the economy. For the consumers, cartelization results in higher prices, poor quality and less or no choice for goods or/and services.
# Horizontal agreements refer to agreements among competitors, i.e., agreements between two or more enterprises that are at the same stage of the production chain and in the same market.
# CASE NO. 29/2010, DATED 20.06.2012
# Sodhi Transport Co. v. State of Uttar Pradesh, AIR 1980 SC 1099

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