LL.B. (Three Years) Sem 4 Competition Law Oct 2025 Question Paper with Solutions

For full marks, cover: the meaning of a cartel (section 2(c)) and of an agreement (section 2(b)); why cartels are the most harmful practice; the presumption in section 3(3); the types: price fixing, output and supply limits, market sharing, bid rigging, buying cartels, trade association cartels, hub-and-spoke cartels and international cartels, each with a case; how a cartel is proved (parallelism plus); penalties (section 27(b) proviso) and lesser penalty (section 46); a table; a conclusion.

Introduction

A cartel is a group of competitors who secretly agree not to compete. They fix prices, cut supply, divide markets or rig tenders. Competition law treats the cartel as the most harmful practice it deals with. It carries all the harm of a monopoly, without any of its possible benefits.

2. Less output and choice. Supply is held back to keep prices up.
3. Secrecy. Members agree in secret, so cartels are hard to find.

So the law combines three tools. They are a presumption of harm (section 3(3)) and a very high penalty (proviso to section 27(b)). The third is a reward for the first to confess (section 46).

The presumption in section 3(3)

Section 3(3) covers agreements between enterprises, persons or their associations "including cartels", engaged in identical or similar trade. Such an agreement shall be presumed to have an appreciable adverse effect on competition if it:

1. (a) directly or indirectly determines purchase or sale prices;
2. (b) limits or controls production, supply, markets, technical development, investment or provision of services;

In the United States, United States v. Trenton Potteries Co., 273 U.S. 392 (1927), held that a reasonable price is no defence to price fixing. "The power to fix prices, whether reasonably exercised or not, involves power to control the market."

2. Output and supply cartels (section 3(3)(b)). Competitors agree to cut production or hold back supply, so that prices rise. In the cement case, capacity utilisation fell while capacity rose. That pointed to an agreement to limit supply.

3. Market-sharing cartels (section 3(3)(c)). Competitors divide the market among themselves. They may divide it by area, by type of goods, or by customers. Each member then acts as a small monopolist in its share. For example, two milk dairies may agree that one sells only in Pune city and the other only in Pimpri-Chinchwad. Each then faces no rival.

4. Bid-rigging cartels (section 3(3)(d)). Bidders in a tender agree who will win. The Explanation to section 3(3) defines bid rigging as an agreement that eliminates or reduces competition for bids, or manipulates the bidding process. Common forms are:

1. cover bidding, where the others bid high on purpose;
2. bid suppression, where some bidders stay out;

6. Trade association cartels. Section 3(3) also covers a practice carried on, or decision taken by, an association. In Santuka Associates Pvt. Ltd. v. All India Organization of Chemists and Druggists (Competition Commission of India, 19 February 2013), the chemists' association required drug companies to get its No Objection Certificate before appointing a stockist. It also fixed trade margins and boycotted companies that did not comply. The Commission found a breach of section 3(3)(a) and (b). It fined the association 10 per cent of its average receipts.

7. Hub-and-spoke cartels. Competitors (the spokes) do not talk to each other directly. They exchange information through a common third party (the hub), such as a supplier or a platform. Since 2023, the second proviso to section 3(3) covers a person not in the same trade. It is presumed part of the agreement if it participates in furthering it.

In Samir Agrawal v. Competition Commission of India, AIR 2021 SC 199, an informant alleged that Ola and Uber fixed fares for their drivers through their apps. The Supreme Court held that any person may give information, because the proceedings are in rem. On the facts, the finding that the apps did not facilitate a drivers' cartel stood.

In Rajasthan Cylinders and Containers Ltd. v. Union of India, AIRONLINE 2018 SC 736, makers of LPG cylinders quoted identical prices in Indian Oil's tender. The buyer itself set the specifications and negotiated the price. The Supreme Court held that identical prices did not by themselves prove an agreement, and set the penalties aside. Compare the cement case, where meetings and data exchange were the plus factors.

Exclusion for efficient joint ventures

The first proviso to section 3(3) excludes an agreement by way of joint venture. The joint venture must increase efficiency in production, supply, distribution, storage, acquisition or control of goods or services.

Penalties and the lesser penalty

1. Cartel penalty (proviso to section 27(b)). Each member may be fined up to three times its profit for each year of the cartel. The other measure is ten per cent of its turnover for each year, whichever is higher. Since 6 March 2024, turnover means global turnover (Explanation 2).

Conclusion

Conclusion. A cartel is an association of competitors who, by agreement, limit or control production, distribution, sale or price (section 2(c)). The agreement may be any understanding or action in concert (section 2(b)). Cartels fix prices, limit output, share markets, rig bids, act as buyers, work through trade associations or hubs, and operate across borders. Section 3(3) presumes them harmful, but the presumption is rebuttable (Rajasthan Cylinders). Parallel prices need plus factors (the cement case). Excel Crop Care and Santuka show the law at work. The penalty can reach three times profit or ten per cent of turnover for each year. The first to confess may pay less (section 46).