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

Zenith Appliances sells washing machines to a distributor on the condition that the distributor must also buy a specified quantity of its detergent, a distinct product. Under section 3(4), this is a tie-in arrangement. When is it in contravention of section 3(1)?

The tie-in contravenes section 3(1) only if it causes or is likely to cause an appreciable adverse effect on competition in India. Section 3(4) vertical agreements, including tie-ins, carry no automatic presumption. The Commission must establish the adverse effect, unlike horizontal agreements under section 3(3).

  1. AOnly if it causes or is likely to cause an appreciable adverse effect on competition in IndiaCorrect
  2. BAutomatically, because tie-in arrangements are presumed to have such an effect
  3. COnly if the agreement is between competing manufacturers
  4. DOnly if the penalty exceeds ten per cent of turnover

Explanation

Section 3(4) lists tie-in arrangements among vertical agreements. They contravene section 3(1) only if they cause or are likely to cause an appreciable adverse effect on competition in India. The presumption belongs to section 3(3), which covers horizontal agreements, so the second option is wrong. Penalty size does not decide whether the agreement is a contravention.

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