competition project - cartels

8/18/2019 Competition Project - Cartels

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COMPETITION LAW

General Perspective on Cartels

Name: Alvira.M

TABLE OF CONTENTS:-


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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. n 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. !n explicit agreement among rival firms not to compete and to restrict output and

raise the price of their products is called a cartel".

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. nstead, the former rivals maintain separate firms but act

jointly in fixing prices or dividing the market, or even both #artel 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.

%sually 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. n

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.

%STO!CAL BAC&G!O#N":

1 B2atia G.!. ;Com$atin1 Cartels in t2e mar4ets: ss9es < C2allen1es= Competition Commission o, n'ia

>CC)


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2The practice of cartels or business combinations has so much historical importance. #ombinations 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.

n 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 'ngland to control monopolies and restrictive practices were in

force well before the (orman #on)uest. The perceived threat to democracy and the free market from these

trusts led to the passing of Sherman and #layton !cts of "*+ and "+"-.

The !merican term anti$trust/ arose not because the %S statutes had anything to do with ordinary trust law

but because the large !merican corporations used trusts to conceal the nature of their business arrangements.

The 'uropean #ommunity has seen healthy competition as an essential element in the creation of a common

market free from restraints on trade. n accordance with this many countries enacted competition laws and

for example #ompetition !ct "++* was passed by 'ngland and #ompetition !ct 00 was passed by ndia.

1efore the present #ompetition !ct 00 came into existence, The 2onopolistic Trade 3ractice !ct "+4+

was enacted. The 25T3 !ct "4+4 was enacted in pursuant of a report submitted by 2onopolies n)uiry

#ommission/, which was setup by the 6overnment of ndia to review the economic condition of ndia 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 ndia.

7ith the change in the prevailing scenario it was felt that some changes should be brought to the 25T3 !ct,

because the commission constituted under the 2onopolistic 5estrictive Trade 3ractices !ct known as the

25T3# was not empowered to impose penalties !ct and at the same time it was not empowered with extra$

territorial jurisdiction powers.

!ction against an anti$competitive agreement could only be taken if it involved an ndian party and that too

only after the goods have been imported into ndia and lastly (on$cooperation on the part of the defendants

in the investigation. n addition to this many new concepts, like globalization, liberalization have emerged

for which ndia had to change its business policy within its jurisdiction and also outside.

Therefore the #ompetition !ct 00 came into force. This new act mainly came into force by the

recommendations of the 5aghavan #ommittee report, a committee setup by the 6overnment of ndia,

headed by S.V.S 5aghavan which has formed the basis for the enactment of the #ompetition !ct in ndia.

The problems of these cartel agreements were succinctly expressed by !dam Smith long back as ?A

monopol@ 1rante' eit2er to an in'ivi'9al or to a tra'in1 compan@ 2as t2e same e,,ect as a secret in

tra'e or man9,act9res. T2e monopolists $@ 4eepin1 t2e mar4et constantl@ 9n'er-stoc4e' $@ never

2 A. &9mar ;T2e Evol9tion o, Competition La in n'ia= COMPETTON LA+ TO"A7 / CONCEPTS

SS#ES AN" T%E LA+ N P!ACTCE D >Ne "el2i: O,or' #niversit@ Press D).


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,9ll@ s9ppl@in1 t2e e,,ect9al 'eman' sell t2eir commo'ities m9c2 a$ove t2e nat9ral price an' raise

t2eir emol9ments 2et2er t2e@ consist in a1es or pro,it 1reatl@ a$ove t2eir nat9ral rate.?

8e also pointed out that ?People o, t2e same tra'e sel'om meet to1et2er even ,or merriment an'

'iversion $9t t2e conversation en's in a conspirac@ a1ainst t2e p9$lic or in some contrivance to raise

prices. t is impossi$le in'ee' to prevent s9c2 meetin1s $@ an@ la 2ic2 eit2er co9l' $e eec9te' or

o9l' $e consistent it2 li$ert@ an' 39stice. B9t t2o912 t2e la cannot 2in'er people o, t2e same

tra'e ,rom sometimes assem$lin1 to1et2er it o912t to 'o not2in1 to ,acilitate s9c2 assem$lies m9c2

less to ren'er t2em necessar@=.

NEE" FO! AN" #SEF#LNESS OF COMPETTON:-

t is increasingly recognized more than ever before that competition in markets promotes efficiency,

encourages innovation, improves )uality, boosts choice, reduces costs, leads to lower prices of goods and

services. t also ensures availability of goods and services in abundance of acceptable )uality at affordable

price. t is also a driving force for building up the competitiveness of the domestic industry9 businesses that

do not face competition at home are less likely to be globally competitive. #ompetition 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. t is

this imperative which has persuaded countries to either enact their competition law or to modernize their

existing competition law and to revamp #ompetition !uthorities, the number of countries having a

competition law has risen from :; in "++; to around " as on date.

CA!TELS #N"E! M!TP ACT (*:-

The 25T3 !ct, has its genesis in the


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Union of India & Others .v. Hindustan Development Corporation3 Cartel is an association o, pro'9cers

2o $@ a1reement amon1 t2emselves attempt to control pro'9ction sale an' prices o, t2e pro'9ct to

o$tain a monopol@ in an@ partic9lar in'9str@ or commo'it@=.

%nder the 25T3 !ct, cartel is categorized as an 5T3, which has been defined as ;a tra'e practice 2ic2

2as or ma@ 2ave t2e e,,ect o, preventin1 'istortin1 or restrictin1 competition= , Section 0=o> of the

25T3 !ct.

Various categories of agreements enumerated under section ::="> of the 25T3 !ct, including agreement,

which restrict persons from whom certain goods can be purchased have been recognized as per se restrictive.

#artels, fall under clause =d> of the section, which states that ;an@ a1reement to p9rc2ase or sell 1oo's or

to ten'er ,or t2e sale or p9rc2ase o, 1oo's onl@ at prices or on terms or con'itions a1ree' 9pon

$eteen t2e sellers or p9rc2asers s2all $e 'eeme' ,or t2e p9rpose o, t2is Act to $e an a1reement

relatin1 to restrictive tra'e practices an' s2all $e s9$3ecte' to re1istration as 9n'er Section H o, t2e

M!TP Act=.

CASES #N"E! M!TP ACT AN" T%E! +EE&NESSES:-

A) DG (IR) vs. Modi l!ali and Chemi"als #td $ an anonymous complaint was received alleging that some

of the leading undertakings in (orthern ndia have formed a cartel for hiking the prices of their products.

The prices of chlorine gas and hydrochloric acid had an increase of 0AAB and 0B within six and four

months respectively in the year "++0. 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 #ommission was of the view

that, except the use of expression IcartelJ, there was no material evidence to suggest parity of prices or

meeting of minds. The #ommission was of the view, that the notice of en)uiry and the subse)uentinvestigation lacked relevant and necessary information in regard to the parties forming a cartel leading to

distortion and restriction of competition in the market. 8aving the essential factors not being proved, the

#ommission agreed with the respondents that prima facie there was no case of a cartel.

+ee4ness - #artels were not defined in the 25T3 !ct "+4+ but the understanding of cartels was only

possible to be drawn from the section 0=o> i.e., restrictive trade practice.

3 ( CT5 >SC) >M!TP)

4 CT5 H >M!TP)


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B) l!ali & Chemi"al Corporation of India #td. nd %aer India #td ' 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.

8owever, there was no direct evidence available behind the increase in prices. The 25T3# observed while

making its judgment, that ;in t2e a$sence o, an@ 'irect evi'ence o, cartel an' t2e circ9mstantial

evi'ence not 1oin1 $e@on' price parallelism it2o9t t2ere $ein1 even a s2re' o, evi'ence in t2e proo,

o, an@ pl9s ,actor to $olster t2e circ9mstances o, price parallelism e ,in' it 9nsa,e to concl9'e t2at

t2e respon'ents in'9l1e' in an@ cartel ,or raisin1 t2e prices=.

+ee4ness / The 25T3# 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) meri"an atural oda sh Corporation (C) vs. l!ali Manufa"turers sso"iation of India

(MI) and others !(S!#, a joint venture of six %S! soda ash producers attempted to ship a

consignment of soda ash to ndia. !2!, whose members included the major ndian soda ash producers,

complained to the 25T3# to take action against !(S!# for cartelised exports to ndia.

The Supreme #ourt did not go into the allegation of cartelisation, but instead held that the wording of the

25T3 !ct did not give the 25T3# any extra$ territorial jurisdiction. The 25T3# therefore could not take

action against foreign cartels or the pricing of exports to ndia, nor could it restrict imports. !ction could be

taken only if an anti$competitive agreement involving an ndian party could be proved, and that too only

after the goods had been imported into ndia. The Supreme #ourt overturned the order of the 25T3#.

+ee4ness / The 25T3 !ct did not empower the 25T3# with the 'xtra$Territorial Curisdiction powers. t

could only handle cases that emerged in the ndian market but not the cases that emerged outside ndia,

however having the effect in the ndian 2arket.

") irmur *ru"! Operators "ase+ and *ru"! Operators Union vs. Mr. .C. Gupta & Mr. ardar , "ase 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 25T3# 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 0 =o> of

5 &9mar S.S ;Cartels an' Price Fiation: +orst t@pe o, anti-competitive practices=

6 >(H) CT5 >M!TPC)

7 >(H) CT5 >M!TP)


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the 25T3 !ct. !ccordingly, the #ommission issued an order of Icease an' 'esistJ against the respondents

and directed them to stop the trade practice.

E) DG (IR) vs. umitomo Corporation- *o!o- apan and others/ the 25T3# was called upon to decide on

the charges of restrictive trade practices of manipulating prices of products within the meaning of Section

0=o> =ii>+ of the 25T3 !ct. @n information being received by the commission regarding collusive tendering

in the steel industry and )uoting of identical prices, the commission appointed a consultant who reported

that the Capanese companies along with their ndian agents have colluded and are )uoting identical prices in

respect of input material re)uired by the steel plant.

n lieu of the gateway available to the defendants, the (otice of 'n)uiry is discharged. The allegation of

cartelisation is only being discharged on the grounds of the availability of the gateway to the 5espondents.

+ee4ness / The presence of such gateways acted as a deterrent in successfully charging the companies of a

restrictive Trade 3ractice !ct. t weakened the 25T3 !ct and gave the companies the gateways to escape3unishments.

To sum up the above, the M!TP)

9 Section >o)>ii) / 5estrictive Trade 3ractice / ;2ic2 ten's to $rin1 a$o9t manip9lation o, prices or

con'itions o, 'eliver@ or to a,,ect t2e ,lo o, s9pplies in t2e mar4et relatin1 to 1oo's or services in s9c2 manner

as to impose on t2e cons9mers 9n39sti,ie' cost or restrictions=.

10 Pra'eep S Me2ta < A & &o9l ;St9'@ o, Cartel Case Las in Select 59ris'ictions / Learnin1s ,or t2e

Competition o, n'ia= (Ht2 Octo$er Pa1e : D availa$le at

2ttp:KK.c9tsccier.or1KCA!TELKp',KSt9'@o,CartelCaseLasinSelect59ris'ictions-

Learnin1s,ort2eCC.p',


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committee known as the 5aghavan #ommittee and after considering its report and suggestions from various

stakeholders, enacted a new law called the #ompetition !ct, 00. The #entral 6overnment also constituted

the #ompetition #ommission of ndia. !ccording to the #ompetition !ct a cartel is formed if three

prere)uisites are fulfilled

a) An a1reement 2ic2 incl9'es arran1ement or 9n'erstan'in1

$) A1reement is amon1st pro'9cers sellers 'istri$9tors tra'ers or service provi'ers i.e. parties

are en1a1e' in i'entical or similar tra'e o, 1oo's or provision o, service an'

c) T2e a1reement aims to limit control or attempt to control t2e pro'9ction 'istri$9tion an'

sale or price o, or tra'e in 1oo's or provision o, services

11n line with international trend and to cope with changing realities, ndia reviewed the 2onopolies and

5estrictive Trade 3ractices !ct, "+4+ and has enacted the #ompetition !ct, 00. The #entral 6overnment

has also established the #ompetition #ommission of ndia . The duties of the #ommission are9 $

a) to eliminate practices 2avin1 a'verse e,,ect on competition

$) to promote an' s9stain competition an'

c) to protect t2e interests o, cons9mers an' ens9re ,ree'om o, tra'e carrie' on $@ ot2er participants

in mar4ets in n'ia.

Some of the provisions of the !ct including those relating to competition advocacy have already been made

effective. @ne of the core enforcement areas of the !ct on its being made effective is ;Pro2i$ition o, Anti-

Competitive A1reements= having appreciable adverse effect on competition =!!'#> in markets, in ndia/.

The !!'# is a key factor before an agreement is dubbed as Ianticompetitive a1reementJ and declared

void. IA1reementJ includes any arrangement or understanding or action in concert,$

i> whether or not such arrangement, understanding or action is formal or in writing& orii> whether or not such arrangement, understanding or action is intended to be enforceable by legal

proceedings.

Thus Ia1reementJ 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 !ct prohibits anticompetitive agreements,

abuse of dominant position by enterprises, and regulates combinations =mergers, amalgamations and

ac)uisitions> with a view to ensure that there is no adverse effect on competition in ndia.

The !ct prohibits any agreement which causes, or is likely to cause, appreciable adverse effect on

competition in markets in ndia. !ny such agreement is void. !n 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.!. B%ATA( ;COMBATNG CA!TEL N MA!&ETS / SS#ES < C%ALLENGES= availa$le at

2ttp:KK.competition-commission-in'ia.nic.inKspeec2esarticlespresentationsKG!.B2atiaArticle.p',


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

in different markets.

• ANT / COMPETT0E AG!EEMENTS:-

The ;anti-competitive a1reements= as per the !ct, are of two kinds& namely

i> those agreements which are presumed to have appreciable adverse effect on competition =!!'#> in which

case the burden of proof shifts on the enterprise or person against which the charge is levelled. These

primarily include9

>a) 'irectl@ or in'irectl@ ,iin1 t2e prices

>$) limitin1 or controllin1 pro'9ction s9ppl@ mar4ets tec2nical 'evelopment investment or

provision o, services

>c) s2arin1 or allocation o, 1eo1rap2ical area o, mar4et c9stomers or in an@ ot2er similar a@ an'

>') 'irectl@ or in'irectl@ res9ltin1 in $i'-ri11in1 or coll9sive $i''in1.

ii> those agreements which are to be judged by 5ule of 5eason/ i.e., the burden of proof in respect of which

lies on the investigatorFprosecutor. These include tie$in arrangements, exclusive supply agreement, exclusive

distribution agreement, refusal to deal and resale price maintenance.

• "EFNTON OF CA!TELS :-

#artel is defined in section 0 clause =c> of the !ct9

12;Cartel= incl9'es an association o, pro'9cers sellers 'istri$9tors tra'ers or service provi'ers 2o

$@ a1reement amon1st t2emselves limit control or attempt to control t2e pro'9ction 'istri$9tion

sale or price o, or tra'e in 1oo's or provision o, servicesJ

#artels are agreements between enterprises =including a person, a government department and association of

persons F enterprises> not to compete on price, product =including goods and services> or customers. The !ct

gives a detailed definition of an enterprise in section 0 =h>.

The objective of a cartel is to raise price above competitive levels, resulting in injury to consumers and to

the economy. Dor the consumers, cartelisation results in higher prices, poor )uality and less or no choice for

goods orFand services.

! 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 )uotas, or to engage in collusive

12 P!O0SONS !ELATNG TO CA!TELS COMPETTON ACT availa$le at

2ttp:KK.cci.1ov.inKsitesK'e,a9ltK,ilesKa'vocac@$oo4let'oc9mentKcartel$oo4.p',


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bidding or bid$rigging in one or more markets. !n important dimension in the definition of a cartel is that it

re)uires an agreement between competing enterprises not to compete or to restrict competition.

!n 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.

!nimport cartel

comprises enterprises =including an association of enterprises> that get together for the

purpose of imports into the country.

!n eport cartel is made up of enterprises based in one country with an agreement to cartelize markets in

other countries. n the !ct, cartels meant exclusively for exports from ndia have been excluded from the

provisions relating to anti$competitive agreements.

• "ENTFCATON OF CA!TEL FO!MATON:-

13

#ertain practices need to be identified to establish the existence of a cartel under the #ompetition !ct.Section :=:> of the #ompetition !ct identifies four types of horizontal agreements =ie, cartel agreements>,

which are presumed to cause an !!'# in ndia9

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>.

• NG!E"ENTS TO CONSTT#TE A CA!TEL:-

The three ingredients to constitute G#artelE are9$

>a) an a1reement 2ic2 incl9'es arran1ement or 9n'erstan'in1

>$) a1reement is amon1st pro'9cers sellers 'istri$9tors tra'ers or service provi'ers i.e. parties are

en1a1e' in i'entical or similar tra'e o, 1oo's or provision o, service an'

>c) a1reement aims to limit control or attempt to control t2e pro'9ction 'istri$9tion sale or price o,

or tra'e in 1oo's or provision o, services

!n obvious )uestion arises as to why a G#artelE is presumed to have !!'#. n a layman language,

competition law seeks to promote, maintain and sustain competition in market being beneficial to various

13 FA!%A" SOBA!5EE ;N"A /LA+ AN" P!ACTCE= availa$le at

2ttp:KK.c2am$ersan'partners.comK19i'eKpractice-19i'esKlocationKK**D*K(-


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stakeholders in society. n case of G#artelE, competitors agree not be compete on price, product, customers

etc. since in the case of a #artel, 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. Durther, 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. 2oreover, the best evidence against

G#artelE is usually in possession of the charged parties, which are not likely to easily part with and make

available to the investigator or en)uiring authority. These compulsions seem to have persuaded the law

makers to prescribe that G#artelE is presumed to have !!'#.

• CA!TELS / P!ES#ME" N5#!O#S:-

14!greements between enterprises engaged in identical or similar trade of goods or provision of services

=commonly known as horizontal agreements> including cartels, of four types specified in the !ct are

presumed to have appreciable adverse effect on competition and, therefore, are anti$competitive and void.

8owever, 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 :, sub section =:> of the !ct if they increase efficiency in

production, supply, distribution, storage, ac)uisition or control of goods or provision of services.

!greements other than those covered by section :, sub section =:> of the !ct, including9

a) tie-in arran1ement

$) ecl9sive s9ppl@ arran1ement

c) ecl9sive 'istri$9tion a1reement

') re,9sal to 'eal

e> 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 #ommission based

on facts using the Grule of reasonE approach.

•C%A!ACTE!STCS OF CA!TELS:-

The following are the common characteristics of cartels. They are as follows9

a> %sually cartels function in secrecy b> The members of a cartel, by and large, seek to camouflage their activities to avoid detection by the

#ommissionc> 3erpetuation of cartels is ensured through retaliation threats. f any member cheats, the cartel

members retaliate through temporary price cuts to take business away or can isolate the cheating

member

14 CA!TELS AN" ANT COMPETT0E AG!EEMENTS availa$le at

2ttp:KK.oec'.or1KcompetitionKcartelsK


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d> !nother method, known as compensation scheme, is resorted to in order to discourage cheating.

%nder 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

•

CON"TONS CON"#C0E TO T%E FO!MATON OF CA!TELS:-

15f there is effective competition in the market, cartels would find it difficult to be formed and sustained.

Some of the conditions that are conducive to cartelization are9

a> high concentration $ few competitors b> high entry and exit barriersc> homogeneity of the products =similar products>d> similar production costse> excess capacity

f> high dependence of the consumers on the productg> history of collusionh> active trade association

NTE!NATONAL AN" N"AN CASE LA+S:

a) A!LNES CA!TEL

The #ompetition #ommission in South !frica referred to its #ompetition Tribunal, a case alleging that four

airline companies had conspired to simultaneously announce in 2ay, 0- a fuel surcharge in identicalamounts. !fter the investigation, prompted by news reports of the price increase, an airline applied to the

#ommission for leniency under the #ommissionEs #orporate Heniency 3olicy. The applicant cooperated

with the #ommission and was not cited as a respondent and the #ommission recommended a fine up to "B

of the turnover of each of the respondent

$) 0TAMNS CA!TEL

Heading producers of vitamins including 5oche !6 and 1!SD of 6ermany, 5hone$3oulenc of Drance,

Takeda #hemical of Capan formed a cartel dividing up the world market and price fixing for different types

of vitamins during the "++s. The cartel operated for over " years and later prosecuted with the help of

5hone$3oulenc which defected from cartel and cooperated with %S authorities. 5oche paid fines of %S I

; million and total fine collected exceeded %S I " billion in the %S alone. The overcharges paid by +

countries importing vitamins were estimated to the tune of %S I 0A million during the "++s. The analysis

also revealed that jurisdictions with weak cartel enforcement regime suffered more. *-) ;Competition >Amen'ment) Bill *= Fort@ Fo9rt2 !eport Stan'in1

Committee on Finance Lo4 Sa$2a Secretariat


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c) L7SNE CA!TEL

Hysine is an amino acid that stimulates growth and results in leaner muscle development in dogs, poultry and

fish. t is also mixed with corns and is an input for feed products. 1etween "++0 and "++;, five producers

belonging to Capan, Jorea and %S controlling more than +AB of the global capacity engaged in price fixing,

allocation of sales )uota and monitoring of volume agreements. The search was undertaken with the

cooperation of D1 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

') CEMENT CA!TEL

Dive cement companies in !rgentina were prosecuted for operating a cartel that lasted for "* years from

"+*" to "+++ and the !rgentine !uthority imposed a total fine of %S I "A million, which is more than three

times the highest fine assessed by !rgentine !uthority in any previous case. 5umania also fined total '%5

0*,;, on its three cement companies for their participation in a cement cartel and the fine represented4B of the companiesE annual turnover.

• N6#!7 N TO CA!TELS:-

16n exercise of powers vested under section "+ of the !ct, the #ommission may in)uire into any alleged

contravention of the provisions of section : of the !ct which inter$alia proscribes cartels.The #ommission,

on being satisfied that there exists a prima facie case of GcartelE, shall direct the


15/18


16/18

') P9$lis2in1 t2e or'er in t2e me'ia 2ic2 serio9sl@ 'ama1es t2e rep9tation o, enterprises ,o9n'

to 2ave Icartelie'J

CONCL#SON:-

The objective of the #ompetition !ct 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. #ompetition !ct is truly reflective of the changing economic conditions.

#ompetition commission should act as a watch$dog for the introduction and maintenance of competition

policy. t should promote the introduction of the re)uired changes in the policy environment and should

perform a pro$active advocacy function for competition.

!greements 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.

1latant price, )uantity bid and territory sharing agreements and cartels should be presumed to be illegal.

3redatory pricing will be treated as an abuse only if it is indulged in by a dominant undertaking.

'xclusionary 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 #ompetition

Haw. The Haw should cover all consumers who purchase goods or services regardless of the purpose for

which the purchase is made. 1odies administering the various professions should use their autonomy and

privileges for regulating the standard and )uality 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 !ct is a step in right direction to harmonize the #ompetition policy with nternational trade

and policy and hope that #artels which hamper economic growth will be controlled with the introduction of

this new legislation.

! review of the ##Es decisions in cartel cases over the last five years indicates considerable progress

towards more sophisticated analysis of economic evidence.

The ## has tended to give greater weight to conduct$based evidence over economic evidence. @nce a cartel

has been found, the ## has moved towards imposing significant, deterrent penalties, including penalties on

individuals.


17/18

!dmittedly, the recent #@23!T order introducing the concept of Grelevant turnoverE in calculating penalties

seems to run counter to the ##Es approach. The ## has appealed against #@23!TEs order in the Supreme

#ourt of ndia and the issue is far from resolved.

The leniency regime in ndia is still in its infancy but may become a more effective cartel detection tool

provided concerns surrounding confidentiality are effectively addressed by the ##. !part from this, the

##Es leniency programme may gain more momentum if the ## exercises its search and seizure powers

more fre)uently.

BBLOG!AP%7


18/18

STAT#TES !EFE!!E":

a> The #ompetition !ct 00 b> The 25T3 !ct "+4+

BOO&S !EFE!!E":-a> @indrila , Kdentifying #artels in ndiaK, %npublished 2.3hil Thesis, , #ompetition ssues in the ndian #ement ndustry/, Towards a

functional competition policy for ndia, 'd. 2r. 3radeep S 2ehta, #%TS nternational L !cademic

Doundation

c> !. Jumar, The 'volution of #ompetition Haw in ndia/ #ompetition Haw Today ? #oncepts,ssues !nd The Haw n 3ractice -A+, -* =(ew .

• +EBSTES B!O+SE":-

a) http9FFwww.oecd.orgFcompetitionFcartelsF$) http9FFwww.cci.gov.inFsitesFdefaultFfilesFadvocacyMbookletMdocumentFcartelB0book.pdf c) competitioncommission.gov.inFadvocacyF33$##M#artels(ewMAM"0.pdf ') http9FFwww.commonlii.orgFinFjournalsF(!HS!5Haw5wF0":F"".pdf e) http9FFwww.vaishlaw.comFarticleF3redictingB0businessB0cartels$B0sharma$22

B0Sharma.pdf ,) http9FFwww.competition$commission$

india.nic.inFspeechesMarticlesMpresentationsF65.1hatia!rticle.pdf

1) http9FFindialawjournal.comFvolume4Fissue$0Farticle-.html2) http9FFwww.cuts$ccier.orgF#!5T'HFpdfFStudyMofM#artelM#aseMHawsMinMSelectMCurisdictions$

HearningsMforMtheM##.pdf
http://www.oecd.org/competition/cartels/http://www.cci.gov.in/sites/default/files/advocacy_booklet_document/cartel%20book.pdfhttp://www.commonlii.org/in/journals/NALSARLawRw/2013/11.pdfhttp://www.vaishlaw.com/article/Predicting%20business%20cartels-%20sharma-MM%20Sharma.pdfhttp://www.vaishlaw.com/article/Predicting%20business%20cartels-%20sharma-MM%20Sharma.pdfhttp://www.competition-commission-india.nic.in/speeches_articles_presentations/GR.BhatiaArticle.pdfhttp://www.competition-commission-india.nic.in/speeches_articles_presentations/GR.BhatiaArticle.pdfhttp://indialawjournal.com/volume6/issue-2/article4.htmlhttp://www.cci.gov.in/sites/default/files/advocacy_booklet_document/cartel%20book.pdfhttp://www.commonlii.org/in/journals/NALSARLawRw/2013/11.pdfhttp://www.vaishlaw.com/article/Predicting%20business%20cartels-%20sharma-MM%20Sharma.pdfhttp://www.vaishlaw.com/article/Predicting%20business%20cartels-%20sharma-MM%20Sharma.pdfhttp://www.competition-commission-india.nic.in/speeches_articles_presentations/GR.BhatiaArticle.pdfhttp://www.competition-commission-india.nic.in/speeches_articles_presentations/GR.BhatiaArticle.pdfhttp://indialawjournal.com/volume6/issue-2/article4.htmlhttp://www.oecd.org/competition/cartels/

competition project - cartels

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