The Section provides for a derogation from joint ventures received by the Parties where they increase the efficiency of the production, supply, distribution, storage, acquisition or control of goods or the provision of services. Article 3(1) of the Law cannot be relied on independently and must necessarily be used in conjunction with Article 3(3) as regards horizontal agreements or Section 3(4) as regards vertical agreements. It should be clarified, however, that Article 3(1) is not only a suggestive provision, but is essentially the `kind` of the law. It should also be invoked independently to serve the interests of consumers and also cover various other types of agreements that might not fall under the aegis of Article 3(3) or Article 3(4). Vertical agreements exist between companies at different stages of the production chain, such as an agreement between the manufacturer and a distributor. The presumption rule does not apply to vertical agreements. Whether the vertical agreement caused AAEC is determined by the rule of reason. If the rule of reason is applied, the positive and negative effects of competition will be analysed. To determine whether an agreement is contrary to section 3(4) in conjunction with section 3(1) of the Act, the following five essential elements of Section 3(4) must be fulfilled: the Act aims to prevent the practices of parties having AAEC in India. This can guarantee free trade and would protect the interests of all parties, including consumers.
However, such an objective could only be achieved if the parties doing business followed the principles set out in the law. For parties doing business in India, it is important to monitor the maintenance of anti-competitive elements in agreements between them. Companies should be proactive and conscientiously tasked with identifying existing anti-competitive elements arising from their current agreements. Staff can be trained to understand and avoid the effects of anti-competitive agreements. If necessary, people and companies can always call on experts who can lead them to a safer option. During activities in India, the parties are prohibited from entering into anti-competitive agreements. Generally speaking, agreements likely to have or likely to have an adverse impact on competition (AAEC) are anti-competitive agreements. These agreements can be horizontal or vertical. However, the Competition Act 2002 (“Act”) recognizes intellectual property rights and, to facilitate their protection, the Law permits appropriate restrictions imposed by their owners. Similarly, the law frees up agreements between exporters, as exports do not affect markets in India. The Competition Commission of India (“CCI”) has been empowered to order any company or person to modify, discontinue and not renew anti-competitive agreements and to impose penalties of up to 10% of the average turnover of the last three years. Horizontal agreements are agreements between companies at the same level of the production chain, usually between two competitors to set prices, limit production or distribute markets.
In all these agreements, there is a presumption in the law that such agreements cause the AAEC. The agreement is also a horizontal agreement. This usually occurs between manufacturers of goods or suppliers of pricing or market sharing services and is generally considered to be the most harmful form of anti-competitive agreements. The question here is what would be called anti-competitive. Section 3(2) of the Act provides that the main determinant of an anti-competitive agreement is its AAEC in India. . . .