This piece was first published in the August 2017 issue of The Practical Lawyer [(2017) PL (Comp. L) August 80]
Price fixing arrangements strike at the very heart of antitrust violations since they go against the accepted norm of price being determined by market forces. Such arrangements raise concerns in both horizontal and vertical markets. Under the scheme of the Competition Act, 2002 (Act), while horizontal pricing agreements (between competitors) are presumed to cause an appreciable adverse effect on competition (AAEC), there is no such presumption in the case of vertical agreements (between entities operating at different levels of the value chain), where the “rule of reason” approach is applied.
Interestingly, the treatment of vertical agreements and in particular resale price maintenance (RPM)[i], has been long debated in many jurisdictions. Initially, antitrust authorities in mature jurisdictions were in agreement that RPM, in principle, was a per se violation and as such, not subject to any justification. However, acknowledging the need for relaxation, the US Supreme Court and the European Commission refrained from adopting a strict per se presumptive approach in cases of RPM to apply the “rule of reason” standard. On the other hand, national competition authorities in the European Union continue to take a hostile approach towards RPM without considering any pro-competitive effects that may arise. Moreover, in the Indian context, while the CCI had reiterated the statutory construct in dealing with RPM, by stating that AAEC needs to be determined on basis of the factors provided under Section 19(3) of the Act, until recently the treatment of RPM (including its scope and standard of proof) lacked clarity.