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CS Executive · Economic, Commercial and Intellectual Property Laws · Competition Law

Three Indian cement manufacturers in the same region meet and agree on the minimum price at which each will sell cement to dealers. Under the Competition Act, 2002, what is the legal position of this agreement?

The agreement is presumed to have an appreciable adverse effect on competition. Section 3(3) covers agreements between competitors in identical or similar trade that directly or indirectly fix sale or purchase prices. The presumption applies without separate proof of harm, and the agreement is void if it contravenes section 3(1).

  1. AIt is presumed to have an appreciable adverse effect on competition because it directly or indirectly determines sale pricesCorrect
  2. BIt is lawful unless the Commission proves actual harm to consumers
  3. CIt is lawful because the manufacturers did not agree to limit production
  4. DIt is valid unless a dealer files a complaint within three years

Explanation

Section 3(3) covers agreements between enterprises engaged in identical or similar trade that directly or indirectly determine purchase or sale prices. Such agreements are presumed to have an appreciable adverse effect on competition. The option requiring proof of actual harm is wrong, because the presumption removes that burden at the first stage. Limiting production is only one of several listed heads.

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