Cartels – Concept and Meaning under Competition Law

By | April 23, 2018
Competition Law Notes

Introduction –

The 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 product. Analysing the object of a cartel, in other words, it amounts to an unfair trade practice which is not in the public interest. The intention to acquire monopoly power can be spelt out from the formation of such a cartel by some of the producers. However, the determination whether such agreement unreasonably restrains the trade depends upon the nature of the agreement and on the surrounding circumstance that gives rise to an inference that the parties intended to restrain the trade and monopolise the same. [Union of India vs. Hindustan Development Corprn., (1993) 3 SCC 499]

Section 2(c) of the Competition Act, 2002 defines cartels:

“An association of producers, sellers, distributors, traders or service providers who, by agreement themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of the services.”

The three essentials of the cartel are:

  • The existence of an arrangement or understanding between the competition
  • The agreement is amongst producers, sellers, distributors, traders or service providers, that is, parties are engaged in identical or similar trade of goods or provision of service
  • The agreement aims to restrict, limit, control or attempt to control the production, distribution, sale, price of, or, trade in goods or provisions of services.

The antithesis of competition is monopoly, which is generally achieved when a few producers instead of competing with each other come together and forms an association or a cartel. The monopoly created by the cartels is as such, not conducive to progress. It retards growth and impedes the improvement the level of the living of the people.

Cartels are most egregious violations of competition law, and are widely considered the most harmful anti-competitive conduct prevalent in the market today, and are prohibited in most jurisdictions. Cartels are included in the agreements which are considered to cause an appreciable adverse effect on competition. Cartels can occur in almost any industry and can involve goods and services at the manufacturing, distribution and retail level.

Leading Case LawBuilders Association of India vs. Cement Manufacturers Association and Ors [Case No. 29/2010 Date of Order: 20.06.2012]

In this case, the Commission came up with the concept of ‘parallelism-plus’. The Commission observed that “Parallel behavior in prices, dispatch, supply, accompanied with some other factors indicating coordinated behavior among firms may become a basis for finding contravention or otherwise of the provisions relating to the anti-competitive agreement of the Act.

Contributed By – Lakshay Anand

Sources:

  1. SCC Online
  2. T. Ramappa, Competition Law in India, Oxford Publication, 2013

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