Authored By: Agnishikha (BBA LL.B.), Student at Banasthali Vidyapith , Tonk, Rajasthan, India, Research Writer at Law Audience®,
Edited By: Mr. Varun Kumar, Advocate, Himachal, Punjab & Haryana and Founder at Law Audience.
I. INTRODUCTION:
Commercial customary jurisprudence has historically remained a deprived and unevenly developed domain. From a legislative standpoint, the foundational concern of legal institutions governing commercial relations has not merely been regarding protection of social welfare through affirmative regulation, but also the circumvention of legal immunities that allow economic harm to persist under the guise of private autonomy. The losses and damage caused to society through distorted market practices often escape scrutiny when contractual freedom is interpreted too liberally.
This authorship seeks to establish the principled nature of the legal spirit underlying the Competition Act, 2002, particularly in its treatment of anti-competitive agreements as an aggressive economic menace. It also examines the jurisprudential condemnation of private monetary monopolies as symbols of economic inequity—highlighting the divergence between what ought to exist within a legal framework and what actually operates in practice.
The analysis engages with the interpretation of anti-competitive agreements and explores how such interpretation attracts the prerogative of recognising economic offences that may not appear criminal in form but cause significant structural harm. The discussion further evaluates the judicial validation of monopoly negation, the legitimacy of restrictive institutional intervention, and the rationale behind Section 3 of the Act emphasizing individual and enterprise liability rather than granting excessive statutory immunity.
II. DEFINITIVE VALIDITY AND GROUNDS OF PRESUMPTION:
The Competition Act, 2002, which replaced the Monopolies and Restrictive Trade Practices Act, serves as the parent legislation governing anti-competitive conduct in India. Section 3 of the Act forms the structural core of the prohibition against anti-competitive agreements. It explicitly declares that any agreement between commercial entities whether within or beyond the production and supply chain that creates restrictive obligations, facilitates monopoly, or reinforces structural dominance is penalised under the Act when such conduct adversely affects competition. The statutory interpretation of this definition reveals, if not anything in particular about public policy, it does so about public redemption, that anti-competitive agreements are not criminalised per se but are subjected to heightened scrutiny due to their potential to cause severe economic damage. This creates an interpretative challenge:
Whether privately negotiated commercial agreements, cloaked in contractual legitimacy, can be condoned when they undermine public welfare objectives.
The concern persists as to whether visible welfare objectives sufficiently justify intervention against private entities that erode public trust by concentrating competition and market power in limited hands. The Act answers this by prioritising market integrity over absolute contractual liberty. The statutory definition of anti-competitive agreements, read with Section 2 and Section 3 of the Act, identifies multiple essential elements grounded in commercial hierarchy and competitive restraint. The law does not primarily concern itself with hierarchical intent or private negotiation alone; rather, it focuses on the resulting public harm. The judiciary is thus entrusted with evaluating the infinite variations of commercial conduct and their cumulative impact on competition.
Section 3(1) of the Act provides:
“No enterprise or association of enterprises or person or association of persons shall enter into 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.”
This provision raises the fundamental question of whether commercial ingenuity can outsmart legislative authority by evading the centrality of public good. The statutory instrument deliberately anchors liability in consequences rather than intent, thereby shifting focus from contractual dignity to competitive impact.
III. STRUCTURAL RATIONALE OF SECTIONAL STUDY:
The prohibition contained in Section 3 is not merely suggestive but creates a binding compliance mechanism. The section is divided into multiple clauses, each addressing distinct forms of competitive distortion:
Section 3(1): General prohibition of agreements causing or likely to cause AAEC
Section 3(2): Anti-competitive agreements declared void
Section 3(3): Horizontal agreements presumed to cause AAEC
Section 3(4): Vertical agreements assessed under the rule of reason
Section 3(5): Exceptions for reasonable IPR protection and export agreements
Post-liberalisation reforms signaled a shift towards business autonomy; however, this autonomy was constrained by the need to prevent exploitative dominance. The Act was introduced to protect economic and social welfare from sovereign consumer choice being overridden by commercial concentration.
Section 3(1) reflects a policy-oriented constraint on contractual freedom, without entirely negating contractual enforceability. Section 3(2) voids agreements that fall within the prohibited scope, reinforcing the Act’s negative obligation framework. Importantly, these provisions must be read together—neither through a purely punitive lens nor through excessive liberal interpretation.
The classification of agreements into horizontal and vertical categories further clarifies the legislative intent. Horizontal agreements—entered into between competitors—are treated with strict suspicion due to their inherent tendency to distort competition and are presumed illegal. Vertical agreements, entered into between entities at different stages of the supply chain, are evaluated through a reasonableness standard to assess their actual market impact.
Section 3(5) provides limited immunity to agreements involving intellectual property rights and export arrangements, recognising that not all monopolistic structures are inherently harmful. These exceptions are grounded in economic logic and proportional restraint.
IV. LEGAL BRIEFING AND THE SCOPE OF CORRUPTION:
The evolution of institutional evasion mechanisms has resulted in increasingly sophisticated contractual strategies that mask anti-competitive intent. Anti-competitive agreements today often manifest through indirect coordination rather than explicit collusion. Any contractual clause that imposes competitive disability on market participants, restricts pricing freedom, or facilitates exclusionary conduct falls within the purview of Section 3.
Patterns such as price coordination, production limitation, trade association control, collective boycotts, and market allocation reflect not only suspicion but deliberate commercial manipulation. The judiciary has recognised these patterns through key decisions:
(i.) Excel Crop Care Ltd. vs. CCI (2017)[1]: Bid-rigging was held to constitute cartelisation under Section 3(3), with AAEC presumed and penalties calculated on relevant turnover.
(ii.) Builders Association of India vs. Cement Manufacturers Association (2012)[2]: Circumstantial evidence was sufficient to establish cartelisation through price-fixing and supply restriction.
(iii.) CCI vs. Coordination Committee of Artists & Technicians (2017)[3]: Trade associations were held liable for collective boycotts, expanding the scope of Section 3.
(iv.) Fx Enterprise Solutions vs. Hyundai Motor India Ltd. (2018)[4]: Resale price maintenance was examined under Section 3(4) using the rule of reason.
(v.) Coal India Ltd. v. CCI (2019)[5]: Public sector undertakings were confirmed to be subject to competition law scrutiny.
These cases illustrate that statutory compliance is as much about structural integrity as it is about reasonableness. Competition law thus operates as a constitutional safeguard against economic exclusion.
V. CONCLUSION AND AUTHOR’S NOTE:
Section 3 of the Competition Act does not reject liberalisation; it disciplines it. The violation of liberal interpretation in competitive contracts becomes justified when such interpretation enables market manipulation, concentration of power, and erosion of consumer choice. The law prioritises consequences over contractual form, recognising competition as a public good rather than a private privilege. This article adopts a jurisprudential approach that views anti-competitive agreements as systemic economic threats rather than isolated contractual deviations. By situating Section 3 within a broader framework of economic justice, the author argues for a balanced yet firm regulatory stance—one that preserves freedom of trade while preventing its abuse.
Footnotes & References:
[1] (2017) 8 SCC 47.
[2] CCI Case no 29 of 2010; decided on June 20, 2012.
[3] AIR 2017 SC 1449.
[4] CCI Case Nos. 36 & 82 Of 2014.
[5] Civil Appeal No. 2845 of 2017.
