Anti-competitive agreements: section 3, cartels and bid rigging - Competition Law

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1. The prohibition and its consequence
2. Horizontal agreements: section 3(3)
3. Vertical agreements: section 3(4)
4. Rule of reason and per se: the Indian position
5. The leading cases
6. Exceptions: section 3(5)
7. Problem
How this is examined

Cases checked to exist. Read the judgment before quoting a holding.

Every case cited here has been checked to exist — the citation resolves and names the right parties. The propositions attributed to each case have not been verified line by line against the judgment. Case names link through to the full judgment: read it before quoting a holding in an examination answer, and never carry a proposition from notes into court on trust.

The examinable core. Section 3 has one prohibition and two methods. The prohibition (section 3(1)): no agreement which causes or is likely to cause an appreciable adverse effect on competition (AAEC) within India. The methods: for horizontal agreements between competitors, AAEC is presumed (section 3(3)); for vertical agreements, AAEC must be shown, weighing the factors in section 19(3) (section 3(4)). The first is the Indian form of the per se rule, the second of the rule of reason.

1. The prohibition and its consequence

Section 3(1) forbids any enterprise, association of enterprises, person or association of persons to 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 AAEC within India. Section 3(2) makes such an agreement void. “Agreement” in section 2(b) includes any arrangement, understanding or action in concert, formal or not, enforceable or not. Under section 32 the agreement may be made outside India if it has an AAEC in the relevant market in India.

2. Horizontal agreements: section 3(3)

An agreement between enterprises or persons (including cartels) engaged in identical or similar trade, or a practice or decision of their association, is presumed to have an AAEC if it:

(a) directly or indirectly determines purchase or sale prices;
(b) limits or controls production, supply, markets, technical development, investment or provision of services;
(c) shares the market or source of production by allocating geographical areas, types of goods or services, or numbers of customers;
(d) directly or indirectly results in bid rigging or collusive bidding.

The presumption is rebuttable: the parties may show, by reference to the section 19(3) factors, that the agreement has no AAEC, though in practice the burden is heavy. The proviso excludes efficiency-enhancing joint ventures. The second proviso, added in 2023, brings in hub-and-spoke arrangements: an enterprise or person not engaged in identical or similar trade is presumed to be part of the agreement if it participates or intends to participate in its furtherance — for example a distributor or a platform that carries price information between competing suppliers.

Bid rigging is defined in the Explanation to section 3(3) as any agreement between enterprises or persons engaged in identical or similar production or trading which has the effect of eliminating or reducing competition for bids, or adversely affecting or manipulating the process for bidding. Typical forms: cover bidding (deliberately high bids to let a chosen firm win), bid suppression, bid rotation, and market allocation among bidders.

3. Vertical agreements: section 3(4)

Agreements among enterprises at different stages or levels of the production chain in different markets, and since 2023 “any other agreement” not covered by section 3(3), including tie-in arrangements, exclusive supply (dealing) agreements, exclusive distribution agreements, refusal to deal and resale price maintenance, contravene section 3(1) if they cause or are likely to cause an AAEC. The 2023 proviso excludes agreements between an enterprise and an end consumer.

Section 19(3) lists the factors the Commission weighs. Three point to harm — creation of barriers to new entrants, driving existing competitors out, and foreclosure of competition. Three point to benefit — benefits or harm to consumers, improvements in production or distribution, and promotion of technical, scientific and economic development. The weighing of the two sets is the rule of reason.

4. Rule of reason and per se: the Indian position

The rule of reason asks whether, looking at the nature of the business, the restraint, its purpose and its actual or probable effect, the agreement harms competition more than it helps (Board of Trade of Chicago v. United States, 1918). The per se rule condemns certain agreements without such inquiry (Socony-Vacuum, 1940). Under the MRTP Act the Supreme Court applied the rule of reason to restrictive trade practices (TELCO, 1977). The Competition Act codifies both: a rebuttable presumption for section 3(3), and an effects analysis with listed factors for section 3(4). A 6-mark note on “rule of reason” should give this history and end with section 19(3).

5. The leading cases

Excel Crop Care Ltd. v. Competition Commission of India, 2017 INSC 1286, (2017) 8 SCC 47. Four suppliers of aluminium phosphide tablets quoted identical prices in Food Corporation of India tenders and boycotted one tender. The Court upheld the finding of a cartel and bid rigging, held that the Act applied because the conduct continued after sections 3 and 4 came into force on 20 May 2009, and held that penalty under section 27(b) is to be computed on relevant turnover (the turnover of the product in question), not total turnover. The 2023 amendment has since provided that turnover means global turnover, with the manner of computation left to regulations and guidelines.
Rajasthan Cylinders and Containers Ltd. v. Union of India, 2018 INSC 916. Manufacturers of LPG cylinders bidding in an Indian Oil Corporation tender quoted similar prices. The Court set aside the finding of bid rigging. The market was an oligopsony with a single dominant buyer that fixed conditions and largely determined cost-based prices; the number of suppliers was small and their costs similar. In such a market parallel pricing could be explained by the market structure, and similarity of bids alone did not prove an agreement.
Samir Agrawal v. Competition Commission of India, 2020 INSC 700. An informant alleged that Ola and Uber’s pricing algorithms enabled a hub-and-spoke cartel among drivers. The Court held that any person may give information to the CCI, which performs inquisitorial functions in the public interest, so locus standi is not restricted; but on the facts it upheld the CCI’s finding that no collusion was shown.
Competition Commission of India v. State of Mizoram, 2022 INSC 64. The CCI has jurisdiction to inquire into alleged bid rigging by bidders for appointment as lottery distributors, even though lotteries are regulated by a separate statute.
Competition Commission of India v. Co-ordination Committee of Artists and Technicians of W.B. Film and Television, 2017 INSC 211. Associations of producers and artistes in West Bengal forced channels to stop telecasting a dubbed Bengali version of a Hindi serial. The Court restored the CCI’s finding that this limited the supply of services under section 3(3)(b).

6. Exceptions: section 3(5)

Section 3 does not restrict (i) the right to restrain infringement of, or impose reasonable conditions necessary to protect, rights under the Copyright, Patents, Trade Marks, Geographical Indications, Designs and Semiconductor Layout-Design Acts and, since 2023, any other IP law; or (ii) the right to export, to the extent the agreement relates exclusively to production, supply or distribution for export. Unreasonable conditions attached to an IP licence are not protected.

Trap. Do not treat identical prices as proof of a cartel. Rajasthan Cylinders requires something more than parallel conduct — evidence of contact, exchange of information, a common boycott or pricing that cannot be explained by the market (“plus factors”). Excel Crop Care found a cartel because there was more: a joint boycott and identical bids that the market did not explain.

7. Problem

A State road corporation invites tenders for bus tyres. Five manufacturers bid. Four quote prices within one per cent of each other; the fifth does not bid. Emails show the four met at an industry association meeting before the tender and discussed “keeping prices firm”. Advise the corporation.

Issue. Whether the manufacturers have entered into a horizontal agreement amounting to bid rigging under section 3(3)(d), and what follows.

Law. “Agreement” includes an understanding or action in concert (section 2(b)). Bid rigging among firms in similar trade is presumed to cause an AAEC (section 3(3)(d) and Explanation). Parallel bids alone are not enough (Rajasthan Cylinders), but parallelism with contact and a boycott is (Excel Crop Care). A trade association’s decision is covered by section 3(3).

Application. The manufacturers are competitors in identical trade. The near-identical bids, the abstention of the fifth, and the emails about a pre-tender meeting together go beyond parallel pricing: they are evidence of an understanding. Unlike the LPG market, a tyre market is not structured around a single buyer that fixes costs, so the similarity is hard to explain innocently. The association may itself be liable.

Conclusion. The corporation, as a statutory authority, may make a reference, or anyone may give information under section 19(1). If the CCI finds a prima facie case it will direct the Director General to investigate (section 26(1)); on a finding of contravention it may order the firms to cease, and impose a penalty of up to three times profit or 10 per cent of turnover for each year of the cartel, whichever is higher (section 27(b) proviso), with penalties on responsible officers under section 48. Any manufacturer that comes forward first may obtain a lesser penalty under section 46. The tender may be cancelled and re-issued.

How this is examined

January 2026: “Discuss the agreements that are restricted under the Competition Act” and “Write a note on ‘Rule of Reasons’”; June 2025: “What is the role of Indian Competition Act in regulating anti-competitive agreements?” and a short note on anti-competitive agreements. The essay is sections 1 to 3 and 5 in that order; the note on rule of reason is section 4.