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CS Professional · Corporate Restructuring, Valuation and Insolvency · Regulation of Combinations

Three Indian cement manufacturers, Narmada Cement, Vindhya Cement and Satpura Cement, secretly agree on the prices at which each will sell cement in Madhya Pradesh. Under section 3 of the Competition Act, 2002, what is the legal position of this agreement?

The price-fixing agreement among competing cement makers is presumed to have an appreciable adverse effect on competition under section 3(3), since it directly or indirectly determines sale prices among enterprises in identical trade. It contravenes section 3(1) and is void under section 3(2).

  1. AIt is presumed to have an appreciable adverse effect on competition, because it directly or indirectly determines sale prices among enterprises in identical tradeCorrect
  2. BIt is valid unless the Commission proves actual harm to consumers
  3. CIt is lawful because all three firms operate only in one State
  4. DIt is lawful because prices were fixed without any written document

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. Under section 3(2) an agreement in contravention is void. Option B wrongly puts the burden of proving harm on the Commission, although the presumption applies.

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