CCI reiterates its stand on trade associations’ conduct

In an interview in 2013, Competition Commission of India (CCI) chairman Ashok Chawla was quoted as saying: “Rather than being party to a cartel, the trade associations should encourage their members and constituents to follow competition compliance norms at the corporate level.” The interview followed decisions by the CCI in 2012 against the Cement Manufacturers Association and the Chemists and Druggists Association of Baroda. These associations were found to be engaged in anti-competitive practices in contravention of section 3 of the Competition Act.

Section 3 provides that any agreements or decisions taken by associations of persons in identical or similar trades (i.e. horizontal arrangements) are presumed to have an appreciable adverse effect on competition in India and consequently void. In this connection, what can constitute an agreement is important and should not be construed narrowly. ”Agreement” is broadly defined under the Competition Act and includes any arrangement or understanding or action in concert, regardless of whether it is formal or in writing or whether it is intended to be enforceable by legal proceedings.

Recent cases

Recently, in two cases in December 2014 against the Film Distributors Association, Kerala (FDAK), the CCI held that FDAK was in violation of section 3 and in doing so, reiterated its position on the conduct expected from trade associations. In essence, there is heavy burden on trade associations to be cognizant of the wide ambit of anti-competitive practices owing to the high risk that such associations run of non-compliance with section 3. Therefore such associations need to be proactive and encourage members to operate within the ambit of competition law.

Kunal Chandra is a counsel at Trilegal and Gautam Chawla is an associate. The views expressed herein are their personal views. Trilegal is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad.