evolution of cartel laws, MRTP act, Exceptions to cartel, case laws, broadcasters

1. Presentation on
Study of Cartels in India

2. Sections Involved
Cartel is defined in Section 2, sub section (c) of the Act.
Section 3, sub section (3) of the Act states:
“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-
(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical
development, investment or provision of services;

3. Sections Involved
(c) 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;
(d) directly or indirectly results in bid rigging or collusive
bidding, shall be presumed to have an appreciable adverse
effect on competition:”
Further:
Proviso to section 3, sub section (3) of the Act states:
“Provided that nothing contained in this sub-section shall
apply to any agreement entered into by way of joint ventures
if such agreement increases efficiency in production, supply,
distribution, storage, acquisition or control of goods or
provision of services.”

4. Pre-Enactment of Competition Act, 2002
(MRTPAct)
The Monopolistic and Restrictive Trade Practices Act 1969 (MRTP
Act), has its genesis in the Directives Principle of State Policy,
embodied in the Constitution of India. It was enacted:
• To provide for control of monopolies,
• To the prohibition of monopolistic and restrictive trade practices ex.
cartels, and
• To the prohibition of unfair trade practices.
Restrictive trade practices, are the generally those practices that have
an effect on prevention, distortion and restriction of competition.
For example, a practice, which tends to obstruct the flow of capital or
resources into the line of production, manipulation of prices and flow
of supply in the market, which may have an effect of unjustified cost
or restriction in choice for the consumers, is regarded as a Restrictive
Trade Practice.

5. MRTPAct Contd..
One example of a RTP is a cartel. As held in Union of India
& Others .v. Hindustan Development Corporation, “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.

6. Competition Act, 2002
The Competition Act, 2002 in Section 2(c) of the Act defines cartel
and its essential requisites are as follows:
• An agreement which includes arrangement or understanding;
• 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
• 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 addition to that, cartels are also covered under anti-competitive
agreements, which are prohibited agreements under Section 3, of
the Act.

7. Case Laws on Cartel
Alkali Manufacturers Association of India v. American
Natural Soda Ash Corporation (Soda ash cartel)
• This cartel was related to soda ash.
• Before formation of this cartel, there were 6 producers of
soda ash, these six producers joined together to form an
export cartel known as the American Natural Soda Ash
Corporation (“ANSAC” for brief).
• The ANSAC came into existence reportedly through a
membership agreement of December, 1983, between the
said six producers of soda ash in that country, “in order
not to compete with each other” and in order that “all
export sales by them or by any of their subsidiaries will
be made through the ANSAC”.

8. Alkali Case contd..
• For this reason the local producers of different nations started to
face difficulties to survive in the competition. In Indian also the
same problem occurred. The AMAI filed the present complaint
before the commission.
Held:
That there exists Prima facie the ANSAC is a cartel indulging in the
alleged trade practice of cartelization in so far as the soda ash exports
are concerned and as to fixation of a predatory price for the soda ash.
The Government of India charged a very high rate of anti-dumping
duty upon this cartel.

9. Case Laws on Cartel
FICCI Multiplex Association of India v. United
Producers/Distributors Forum and Others
The United Producers/Distributors Forum (UPDF) along with a
couple of other guilds collectively
• agreed to not release any films to multiplexes
• till they agreed to a revenue sharing ratio of 50% of the ticket
sale proceeds
• irrespective of the nature of the film or the week of release.
Held:
The Competition Commission of India held that the joint stand on
fixing the revenue ratio was unarguably an example of joint
price-fixing and thereafter concluded that had acted like a
“cartel” under Section 2 (c) of the Competition Act, 2002.

10. Case Laws on Cartel
Builders association of India v. Cement manufacturers
association and others
• The information was filed by the Builder’s Association of India.
• The CCI issued the order after investigations by the Director
General (CCI).
• In 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.
Held:
According to the CCI order, it found cement manufacturers violating
the provisions of the Competition Act. While imposing the penalty,
the commission considered the “parallel and coordinated behavior of
cement companies on price, dispatch and supplies in the market”. The
commission observed that the act of these cement companies in
“limiting and controlling supplies in the market and determining
prices through an anticompetitive agreement” was detrimental to the
entire economy.

11. Proviso to section 3, sub section (3) of the Act
The proviso to Section 3(3) of the Competition Act, 2002 provides an
exemption to agreements entered into by way of joint ventures, in the
event that such joint ventures increase efficiency in production,
supply, distribution, storage, acquisition or control of goods or
provision of services.
In Yogesh Ganeshlaji Somani v. Zee Turner Ltd., for example, the
Commission came to the conclusion that based on the nature of the
market structure and the circumstances under which the joint venture
was formed, efficiency reasons justify it in the facts of the case.
U.S. anti-trust law does not provide for a blanket efficiency
justification for joint ventures, and they are dealt with as ordinary
agreements that may or may not be anti-competitive.
For instance, in United States v. Topco, the U.S. Supreme court
found the joint venture to be per se illegal because it involved an
agreement between competitors at the same level of the market
structure to allocate territories in order to minimize competition.

12. Author’s View
The proviso of the Competition Act, 2002 clearly embarks a
difference between agreements that are entered through a Joint
Venture for increase efficiency in production, supply, distribution,
storage, acquisition or control of goods or provision of services (in
sort for the upliftment of the members of JV). That the said
agreements holds good in the eyes of law. Whereas according to
Section 1 of the Sherman Act states:
“Every contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal.”
So through the plain reading of the enactment it can be inferred that
the US law entails in its purview any agreement entertained by the
parties that hampers the market and is in restraint of trade.

13. Broadcasters vis-à-vis Competition law
TRAI is the governing body in Broadcasting services.
One of its main objectives is to provide a fair and transparent
environment that promotes a level playing field and facilitates fair
competition in the market.
As per TRAI regulations the broadcasters have not been barred to
enter into agreements to distribute their channels.
The prohibition that is laid to the broadcasters is that:
• they cannot mix their channels to form bouquets and
• to follow must provide services to MSO’s.
The broadcasters can form agreements or enter into JV’s for increase
efficiency in production, supply, distribution, storage, acquisition or
control of goods or provision of services as par Proviso 3(3) of
Competition Act, 2002.

14. Suggestions And Conclusion
There exists various small scale business where cartel goes
undetected. So governing authorities i.e. more units must be
constituted to the root level.
Cartels in form of anti-competitive agreements, are a threat to
consumer welfare and the economy of a state. It can be easily
inferred from that above that the CCI has been much better
empowered to tackle cartel cases than its predecessor the MRTP
as inclusion of definition of “cartel” and wide powers of director
General states its dominance and effectivity.