Advisory on Anti-Competitive Agreements: A Legal Perspective under Competition Law

In today’s competitive business environment, collaboration between enterprises is common and often essential. However, not all agreements between businesses are lawful. Certain arrangements may distort market competition, harm consumers, and invite serious regulatory consequences. Under the Competition Act, 2002, anti-competitive agreements are strictly prohibited, and businesses must exercise caution while structuring commercial relationships.

Legal advisory on anti-competitive agreements plays a crucial role in helping enterprises identify risks, ensure compliance, and safeguard against investigations and penalties by the Competition Commission of India (CCI).

Understanding Anti-Competitive Agreements

An anti-competitive agreement refers to any arrangement, understanding, or concerted practice between enterprises that causes or is likely to cause an Appreciable Adverse Effect on Competition (AAEC) in India.

Importantly, such agreements need not be in writing. Even informal understandings, emails, or parallel conduct may attract scrutiny if they influence market behaviour.

Types of Anti-Competitive Agreements

1. Horizontal Agreements

These are agreements between competitors operating at the same level of the market. Certain horizontal agreements are presumed to have an AAEC, including:

• Price-fixing arrangements

• Bid-rigging and collusive tendering

• Market or customer allocation

• Limitation or control of production or supply

Such agreements are considered per se illegal, and the burden shifts to the parties to rebut the presumption of harm.

2. Vertical Agreements

Vertical agreements occur between enterprises at different levels of the supply chain, such as manufacturers and distributors. Common examples include:

• Exclusive supply or distribution agreements

• Resale price maintenance

• Refusal to deal arrangements

• Tie-in and bundling practices

Unlike horizontal agreements, vertical arrangements are assessed under the rule of reason, considering their actual market impact.

Role of Legal Advisory in Anti-Competitive Agreements

Risk Identification & Assessment

Legal advisors conduct detailed reviews of existing and proposed agreements to identify clauses that may raise competition concerns. This includes evaluating pricing terms, exclusivity obligations, territorial restrictions, and information-sharing mechanisms.

Structuring Compliant Agreements

Professional advisory ensures that commercial agreements are structured to achieve business objectives while remaining compliant with competition law. This may involve redrafting clauses, introducing safeguards, or recommending alternative models.

Competition Impact Analysis

Advisors assess whether an agreement is likely to cause AAEC by examining factors such as market share, entry barriers, consumer harm, and efficiency justifications.

Advisory During Investigations

In the event of a CCI inquiry or Director General (DG) investigation, legal counsel assists in responding to notices, preparing submissions, and representing the enterprise during proceedings.

Leniency & Settlement Strategy

For cartel-related matters, legal advisors guide enterprises on leniency applications, cooperation strategies, and risk mitigation to reduce penalties.

Consequences of Non-Compliance

Failure to comply with competition law can result in:

• Penalties of up to 10% of average turnover

• Personal liability of key managerial personnel

• Nullification of agreements

• Reputational damage and business disruption

Given the seriousness of these consequences, proactive legal advisory is essential rather than reactive defense.

Importance of Proactive Compliance

Regular competition law audits, internal compliance programs, and employee training help businesses avoid inadvertent violations. Advisory services also play a critical role during mergers, joint ventures, distribution arrangements, and consortium bidding.