There are findings that a socialist economy cannot have absolute private monopolies and oligopolies while a capitalist economy can allow certain leeway’s in promoting competition. The aim of the competition policy in India is to formulate a business environment in which firms can compete with each other, while new entrants should have available spaces to enter the competition race with existing firms. This policy, encourages existing major players to keep innovating and adapting to the changing market demands while promotes new entrants to fulfil gaps in the market, thus forming perfect/imperfect/something competition.

Ordinarily, firms detest a competitive market, as it substantially reduces profit and makes the firms devoid of absolute control over factors such as market price, output quantity and profit margins. Therefore, firms prefer to coordinate and collude to form a cartel in order to decide prices and quantity of output to mimic a monopoly. Cartel is a subset of horizontal agreements. The horizontal agreements relating to price fixing or to allocate territories almost always have anticompetitive effects, are unambiguously harmful, as they have no redeeming economic or social benefits. Section 2(c) of the Competition Act, 2002 defines a cartel as, “cartel” includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services.

Cartels are function able in an oligopolistic market while living in a monopoly because in a monopoly there is only one producer and he cannot form a cartel because a cartel requires one or more producers competing for production and sale of a substitutable product which are substantially similar. i.e. a product which serves the same relevant market.

While the MRTP, 1969 Act had implicitly covered the scope and definition of a cartel under section 33(1); The Competition Act, 2002 was the first act to define and identity a cartel. A cartel is a more intense form of violation of competition law than other kinds of violation, primarily because it unambiguously causes damages and losses and also because it involves more than one player in the market. It is owing to this that the per se rule is applicable to cartels in the USA, UK and India. The Per Se rule states that cartels are in violation of the law merely by indulging in unlawful activities, without regard to the consideration as to whether or not some entity has actually been harmed due to the alleged cartelization. Section 3(3) of the Indian Competition Act, 2002 is in keeping with the UNCTAD’s Model Law of Competition. At the outset, if the Competition Commission of India (CCI), while inquiring into the alleged contraventions of section 3(1) or 4(1) may, if it opines that there exists a prima facie case order an investigation by the Director General (DG).

There are many issues which India or for that matter any system of competition law in the world would face;

• Like the extent to which the unilateral conduct of firms with market power should be controlled
• The extent to which transactions can be modified
• The price which a new player or customer should pay to access an essential facility
• The relationship between intellectual property and competition law and to what degree should a merger be prohibited.

One point solution of all these problems would be to scrutinise and keep an eye on agreements between independent firms which smell of restriction and establish a hierarchy and severity of cartelization involved and set up penal provisions accordingly.

Three necessary factors have been earmarked in order to establish the existence of a cartel;

• Agreement by way of concerted action suggesting conspiracy;
• The fixing prices and the intent to gain a monopoly or restrict or eliminate competition.
• Parities of prices coupled with a meeting of minds have to be established to prove cartel.

The test for concerted practice is that the parties have co-operated to avoid the risks of competition and this has culminated in a situation, which does not correspond with the normal conditions of the market. Such collusion is illegal by law and however, there is very thin line of distinction between legitimate co-operation and illegitimate collusion.

Section 19 of the Act, the Commission may inquire into any alleged contravention of the provisions of Section 3 of the Act which inter-alia proscribes cartels. Once the commission is satisfied that a prima facie case of a ‘cartel’ exists, it shall direct the DG to initiate an investigation and subsequently furnish a report. The Commission has the powers vested in a Civil Court under the Code of Civil Procedure in respect of matters like summoning or enforcing attendance of any person and examining him on oath, requiring discovery and production of documents and receiving evidence on affidavit. The Commission is empowered to impose on each member of the cartel, a penalty of up to three times of its profit for each year of the continuance of such agreement or 10% of its turnover for each year of continuance of such agreement, whichever is higher. In case an enterprise is a ‘company’, its directors/officials who are guilty are also liable to be proceeded against. The Act empowers the Commission to grant leniency by levying a lesser penalty on a member of the cartel who provides full, true and vital information regarding the cartel. This is basically a whistle blower scheme. This scheme is grounded on the premise that successful prosecution of cartels requires evidence supplied by a member of the cartel. Similar leniency schemes have proved very helpful to competition authorities of foreign jurisdictions in successfully proceeding against cartels.

Considering that the competition act in India has been enacted as recently as 2002, it may appear that the competition law in India is in its nascent stages. However, while framing the law, the legislators appear to have conducted thorough research about laws of other countries and framed laws with regard to India, and the glaring needs of the country.

The burden to establish that a cartel agreement exists, vests squarely on the CCI. As a new regulator, working with limited resources, the CCI has limited ability to dig out direct evidence of collusion. Perhaps being conscious of this, in most cartel cases, the CCI/DG attempt to establish trends in prices, production, dispatch etc. and then flip the burden onto the defendants to show how they reached their business decisions independent of their competitors. Defendants’ failure to meet this reversed burden has often formed the basis for a finding of infringement against them. Thus far, while contesting CCI’s decisions before the Competition Appellate Tribunal, the aggrieved parties appear to have focused on procedural improprieties committed by the CCI, which the Competition Appellate Tribunal has addressed by remanding CCI’s decisions back for reconsideration. Some other policy questions include whether sanctions should be available against individuals as well as companies and the extent of leniency, which can be given to whistle-blowers from within the cartels.