Section 3(1) of the Competition Act, 2002 prohibits five types of agreements between companies. Briefly explain those agreements.
CS Professional · Secretarial Audit, Compliance Management and Due Diligence · PYQS · December 2018
Section 3(1) of the Competition Act, 2002 prohibits five types of agreements between companies. Briefly explain those agreements.
Answer & Explanation:
Section 3 of the Competition Act, 2002 relates to "Anti-Competitive agreements". Section 3(1) of the Competition Act, 2002 reads as under: 3(1) No enterprises or association of enterprises or person or association of persons shall enter into an 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. In terms of Section 3(4), the following agreements are considered as an agreement in contravention of sub-section 3(1) of the Competition Act, 2002, if such agreement causes or is likely to cause an appreciable adverse effect on competition in India: "tie-in arrangement" includes any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods; "exclusive supply agreement" includes any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods of the competitor of the seller and other than those of the seller; "exclusive distribution agreement" includes any agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal or sale of the goods; "refusal to deal" includes any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought; "resale price maintenance" includes any agreement to sell goods on condition that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged. However, these agreements are not considered anti-competitive per se as in the case of horizontal agreements and have to be judged by the rule of reason. Section 3(3) of the Competition Act, 2002 read as under: In terms of Section 3(3) of the Competition Act, 2002, any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which - directly or indirectly determines purchase or sale prices; limits or controls production, supply, markets, technical development, investment or provision of services; shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way; directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition.
Topics: Competition Act, 2002
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