Competition Law - Presumption in Section 3(3)
In continuation to my last post, which may be accessed here. I will now, first, present arguments from the side that the presumption raised is irrebuttable.
Argument 1 - Presumption Irrebuttable
While interpreting a statute, the true intent of the legislature has to be gathered having due regard to the language used therein. However, when the language used is ambiguous and unclear, courts may resort to external aids of construction. Thus, while interpreting an Indian Statute, Indian Courts do not hesitate to refer to foreign statutes and foreign decisions of countries which follow the same system of jurisprudence as the Indian jurisprudence.
The new competition act has been drawn on the same lines as the competition law of other legal systems such as the U.S, EU etc. and therefore one may refer to these laws to decipher the intention of the legislature in determining whether the presumption raised in section 3(3) is irrebuttable.
USA follows two approaches in determining whether any agreement or any practice is anti-competitive- the “per se rule” and the “rule of reason.” Horizontal agreements which fix prices, allocate customers or territories, restrict output or rig bids are considered to be so pernicious to competition that they are subjected to the “per se” illegal rule. {see White Motor Co. v. United States 372 US 253 (1963); N.C.A,A v. Board of Regents of University of Oklahoma 468 US 85 (1985); Federal Trade Commission v. Superior Court Trial Lawyers Association 493 US 411(1990); US v. Topco Association Inc 405 US 596 (1972)}
The per se rule is the judicial principle that “a challenged action falls into the category of agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal”, regardless of whether it actually harms competition. {see Northern Pacific R. Co. v. United States 356 US 1 (1958); Northwest Wholesale Stationers Inc v. Pacific Stationery and Printing Co 472 US 284 1985); Arizona v. Maricopa County Medical Society 457 U.S. 332, (1982); United States v. Topco Associates, Inc.405 U.S. 596 (1972)}
A similar practice in EU law can be seen from Aricle 81 of the EC Treaty. Article 81(1) sets out a prohibition in the following terms:
“(1) The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.”
Thus, it can be seen that the trade agreements and practices outlined above are verbatim similar to trade agreements encompassed in Section 3 (3) of the Indian Competition Act. These kind of agreements are by their very nature considered to be so harmful to competition that no evidence needs to be entertained to show how a challenged action which fits into the said criteria, is not harmful in reality. And therefore, the presumption raised must be considered to be an irrebuttable presumption, similar to the practice in US and EU nations.
I have referred to only the US and EU practice here, but other legal systems too adopt a similar approach in respect of horizontal agreements illustrated in Section 3(3) of the Competition Act and in fact even impose a punishment for conducting such trade practices, without even giving an opportunity to present any defense for conducting the practice.
I will present 2 more arguments in support of this proposition in the next posts.
Argument 1 - Presumption Irrebuttable
While interpreting a statute, the true intent of the legislature has to be gathered having due regard to the language used therein. However, when the language used is ambiguous and unclear, courts may resort to external aids of construction. Thus, while interpreting an Indian Statute, Indian Courts do not hesitate to refer to foreign statutes and foreign decisions of countries which follow the same system of jurisprudence as the Indian jurisprudence.
The new competition act has been drawn on the same lines as the competition law of other legal systems such as the U.S, EU etc. and therefore one may refer to these laws to decipher the intention of the legislature in determining whether the presumption raised in section 3(3) is irrebuttable.
USA follows two approaches in determining whether any agreement or any practice is anti-competitive- the “per se rule” and the “rule of reason.” Horizontal agreements which fix prices, allocate customers or territories, restrict output or rig bids are considered to be so pernicious to competition that they are subjected to the “per se” illegal rule. {see White Motor Co. v. United States 372 US 253 (1963); N.C.A,A v. Board of Regents of University of Oklahoma 468 US 85 (1985); Federal Trade Commission v. Superior Court Trial Lawyers Association 493 US 411(1990); US v. Topco Association Inc 405 US 596 (1972)}
The per se rule is the judicial principle that “a challenged action falls into the category of agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal”, regardless of whether it actually harms competition. {see Northern Pacific R. Co. v. United States 356 US 1 (1958); Northwest Wholesale Stationers Inc v. Pacific Stationery and Printing Co 472 US 284 1985); Arizona v. Maricopa County Medical Society 457 U.S. 332, (1982); United States v. Topco Associates, Inc.405 U.S. 596 (1972)}
A similar practice in EU law can be seen from Aricle 81 of the EC Treaty. Article 81(1) sets out a prohibition in the following terms:
“(1) The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.”
Thus, it can be seen that the trade agreements and practices outlined above are verbatim similar to trade agreements encompassed in Section 3 (3) of the Indian Competition Act. These kind of agreements are by their very nature considered to be so harmful to competition that no evidence needs to be entertained to show how a challenged action which fits into the said criteria, is not harmful in reality. And therefore, the presumption raised must be considered to be an irrebuttable presumption, similar to the practice in US and EU nations.
I have referred to only the US and EU practice here, but other legal systems too adopt a similar approach in respect of horizontal agreements illustrated in Section 3(3) of the Competition Act and in fact even impose a punishment for conducting such trade practices, without even giving an opportunity to present any defense for conducting the practice.
I will present 2 more arguments in support of this proposition in the next posts.
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