Corporate Competition Law Cartel Prohibition
Corporate Competition Law – Cartel Prohibition
1. Legal Framework (India)
Cartel prohibition in India is governed primarily by:
Competition Act, 2002
Section 3(1) – Prohibits anti-competitive agreements
Section 3(3) – Specifically targets cartels and horizontal agreements
Under Section 3(3), agreements between competitors involving:
Price fixing
Output limitation
Market allocation
Bid rigging / collusive bidding
are presumed to cause Appreciable Adverse Effect on Competition (AAEC).
This is called a “presumption of illegality”, meaning CCI does not need detailed economic proof once the agreement is shown.
2. What is a Cartel?
Section 2(c), Competition Act
A cartel is an association of producers, sellers, distributors, traders, or service providers who agree to control price, production, distribution, or trade to distort competition.
Cartels are often:
Secret
Coordinated through meetings or trade associations
Designed to eliminate competition and maximize collective profits
3. Types of Cartel Conduct
| Type | Explanation |
|---|---|
| Price Fixing | Competitors agree on selling prices |
| Output Restriction | Limit production to increase prices |
| Market Sharing | Divide territories/customers |
| Bid Rigging | Manipulate tenders |
| Exchange of Sensitive Info | Sharing future pricing or capacity plans |
4. Presumption of AAEC
Under Section 3(3), cartel conduct is treated as per se anti-competitive. CCI only checks:
Existence of agreement (written, oral, or tacit)
Participation of competitors
No need to prove actual harm.
5. Role of Circumstantial Evidence
Cartels are rarely documented. CCI relies on:
Parallel pricing patterns
Call records
Meeting minutes
Trade association circulars
Tender behavior
6. Leniency (Lesser Penalty) Program
Section 46, Competition Act + CCI Lesser Penalty Regulations
Cartel members who disclose information can receive:
100% penalty waiver (first applicant)
50% / 30% reductions for subsequent applicants
Encourages cartel breakdown.
7. Penalties
Under Section 27:
CCI may impose penalty up to:
10% of average turnover (last 3 years) OR
3 times profit from cartel (whichever higher)
Individuals (directors/officers) can also be penalized.
8. Key Case Laws on Cartel Prohibition
1. Builders Association of India v. Cement Manufacturers’ Association (CCI, 2012)
Cement companies were found to have coordinated price increases and limited supply. CCI imposed heavy penalties, recognizing parallel conduct + communication through association as cartel evidence.
2. Excel Crop Care Ltd. v. CCI (Supreme Court, 2017)
Alleged bid rigging in pesticide tenders. Supreme Court upheld CCI’s power but clarified that penalty must be based on “relevant turnover”, not total turnover of diversified companies.
3. Rajasthan Cylinders & Containers Ltd. v. Union of India (Supreme Court, 2018)
SC set aside cartel finding in LPG cylinder tender due to insufficient proof of agreement. Held that parallel pricing alone is not enough without plus factors.
4. CCI v. Co-ordination Committee of Artists & Technicians (Supreme Court, 2017)
Film associations restricting artists from working with certain producers. Court held that even trade associations can be liable if they facilitate anti-competitive coordination.
5. In Re: Cartelisation in Sugar Mills (CCI)
Sugar mills were penalized for coordinated production control and price manipulation — shows cartels in commodity sectors are also targeted.
6. In Re: Alleged Cartelization by Tyre Manufacturers (CCI, 2020)
Major tyre companies fined for price coordination and exchange of sensitive data via trade associations.
7. Indian Jute Mills Association Case (CCI)
Jute manufacturers found guilty of bid rigging in government tenders; association platforms used for coordination.
9. Defences Available
Limited defences exist:
Agreement improves production/distribution
Benefits passed to consumers
No elimination of competition
However, Section 3(3) presumption makes defence difficult.
10. Compliance Measures for Corporates
Competition compliance programs
Avoid exchange of pricing info
Legal review of trade association meetings
Whistleblower policies
Internal audits
Conclusion
Cartels are treated as “hardcore antitrust violations” because they:
Inflate prices
Reduce consumer choice
Harm economic efficiency
Indian law adopts a strict, deterrence-based approach, supported by heavy penalties, leniency incentives, and strong judicial backing.
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