Anti-competitive agreement is any agreement between enterprises or persons that causes or is likely to cause an appreciable adverse effect on competition within India, including cartels, price-fixing arrangements, bid rigging, market-sharing, and certain vertical restraints. Under Indian law, anti-competitive agreements are prohibited by Section 3 of the Competition Act, 2002, and are void under Section 3(2), with penalties of up to 10% of average turnover and imprisonment of up to 3 years for individuals.
Legal definition
The Competition Act, 2002 provides a comprehensive framework for prohibited agreements:
Section 3(1): "No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India."
Section 3(2): "Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void."
Section 3(3): Horizontal agreements (between competitors) that: (a) directly or indirectly determine purchase or sale prices, (b) limit or control production, supply, markets, technical development, investment, or provision of services, (c) share the market or source of production or provision of services by allocation of geographical area, type of goods, or number of customers, or (d) directly or indirectly result in bid rigging or collusive bidding — are presumed to have an appreciable adverse effect on competition.
Section 3(4): Vertical agreements (between enterprises at different levels of the supply chain) including tie-in arrangements, exclusive supply agreements, exclusive distribution agreements, refusal to deal, and resale price maintenance are subject to a rule of reason analysis — the CCI must assess whether they actually cause an appreciable adverse effect under Section 19(3).
How courts have interpreted this term
Excel Crop Care Ltd. v. CCI [(2017) 8 SCC 47]
The Supreme Court upheld CCI's finding of bid rigging by manufacturers of aluminium phosphide tablets in government tenders. The Court affirmed the methodology for penalty calculation based on "relevant turnover" (turnover attributable to the product in question) rather than total turnover. The Court held that once a bid rigging agreement is established, an appreciable adverse effect on competition is presumed under Section 3(3)(d), and the burden shifts to the parties to prove otherwise.
Rajasthan Cylinders and Containers Ltd. v. Union of India [(2020) 2 SCC 368]
The Supreme Court examined the standard of evidence required to establish a cartel under Section 3(3) and held that direct evidence of an agreement is not necessary — the CCI can rely on circumstantial evidence, including parallel conduct, price parallelism, information exchange, and the economic irrationality of independent behaviour. However, the Court also held that mere parallel conduct without "plus factors" is insufficient to establish an agreement.
Types of anti-competitive agreements
The Competition Act distinguishes between two categories:
Horizontal agreements (Section 3(3)) — between competitors:
- Price fixing: Agreement to fix or coordinate prices, discounts, or margins
- Output restriction: Agreement to limit production or supply quantities
- Market sharing: Allocation of customers, territories, or products among competitors
- Bid rigging: Coordination between bidders in tenders, including cover bidding, bid suppression, bid rotation, and subcontracting arrangements
Vertical agreements (Section 3(4)) — between enterprises at different supply chain levels:
- Tie-in arrangements: Requiring purchase of one product as a condition for purchasing another
- Exclusive supply agreements: Restricting a buyer from purchasing from competitors
- Exclusive distribution agreements: Restricting distribution to specific territories or channels
- Resale price maintenance: Fixing or controlling the price at which goods are resold
Why this matters
Anti-competitive agreements are the most commonly prosecuted violation under the Competition Act. The CCI has imposed penalties aggregating thousands of crores of rupees on cartels in cement, real estate, auto components, pharmaceuticals, and public procurement. The presumption of adverse effect on competition for horizontal agreements under Section 3(3) makes these cases relatively easier for the CCI to establish compared to abuse of dominance cases.
For businesses, the leniency and lesser penalty programme under Section 46 of the Competition Act provides a strong incentive for cartel members to self-report. The first applicant who provides evidence of a cartel can receive up to 100% reduction in penalty, while subsequent applicants may receive reductions of up to 50% and 30% respectively. This programme has been instrumental in detecting cartels that would otherwise remain concealed.
For practitioners, the critical distinction between Section 3(3) (per se presumption) and Section 3(4) (rule of reason) determines the burden of proof. For horizontal agreements, once the agreement and its anti-competitive nature are established, the adverse effect is presumed. For vertical agreements, the CCI must demonstrate actual or likely adverse effects using the factors in Section 19(3).
Related terms
Parent legislation:
Sibling prohibitions:
Frequently asked questions
What is the difference between horizontal and vertical anti-competitive agreements?
Horizontal agreements are between competitors (enterprises at the same level of the supply chain) and include cartels, price-fixing, and bid rigging — these are presumed to be anti-competitive under Section 3(3). Vertical agreements are between enterprises at different levels (e.g., manufacturer and distributor) and include exclusive dealing, tie-in, and resale price maintenance — these are assessed under a rule of reason analysis under Section 3(4).
What is the leniency programme for cartels?
Under Section 46, a cartel member who makes a full, true, and vital disclosure to the CCI about a cartel may receive a reduction of up to 100% of the applicable penalty if they are the first applicant, or lesser reductions for subsequent applicants. The programme is designed to incentivise self-reporting and assist the CCI in detecting and prosecuting cartels.
Can individuals be imprisoned for cartel behaviour?
Yes. Under Section 48 read with Section 42, where a contravention of Section 3 is committed by a company, every person who was in charge of and responsible for the company's conduct may be liable. Section 42 provides for imprisonment up to 3 years and fine up to Rs 25 crore for failure to comply with CCI orders.
This entry is part of the Veritect Indian Legal Glossary, a comprehensive reference of Indian legal terminology grounded in statutory text and judicial interpretation.
Last updated: 2026-03-27. Veritect provides this content for informational purposes and does not constitute legal advice.