Cartel in India
- December 14, 2022
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Cartel in India
Subject : Economy
Why in the news?
Government plans to include businesses accused of cartel behaviour in the ‘settlement and commitment scheme’ of the Competition Amendment Bill.
Details:
It will enable cartels to settle their case with the Competition Commission of India (CCI) by paying settlement fees.
Concept:
- According to CCI, a “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”.
- The International Competition Network, which is a global body dedicated to enforcing competition law, states three common components of a cartel:
- an agreement
- between competitors
- to restrict competition
- Cartelization is when enterprises collude to fix prices, indulge in bid rigging, or share customers, etc. When prices are controlled by the government under a law, that is not cartelization.
- It enshrines a situation where a single entity in the market owns all aspects of products and services to make them available to the public in abundance.
- Some cartels formed in order to curb the competition while other cartels formed for illegal trade such as drugs and illegal substances.
- The Organization of Petroleum Exporting Countries (OPEC) is considered the world’s largest cartel.
Cartel and Indian law:
- Cartelization in India is a civil offence that is prohibited under the Competition Act, 2002.
- Section 3 of the act certainly prohibits and renders the agreement void when the business partners enter into an agreement with respect to the production of supply, distribution, storage, goods or provisions of the services which are likely to cause an ample amount of adverse effect to the competition in India.
- Section 3 also stipulates the provision which basically prohibits the anti-competitive agreement among the cartel enterprises which includes:-
- Implicit and explicit determination of purchase and sale of goods.
- Limiting the control of production, investment and sales services.
- Allocation of the geographical market.
- Indulging in the collusive bidding.
- All the enterprises who are involved in the formation of the cartel would get penalized with a fine of up to three times the stipulated collected profits or ten percent of the total turnover, whichever is higher.
- CCI can give full exemption from penalty to a cartel member who discloses the existence of the cartel and cooperates.
- The act also involves cases with a criminal offence in the following cases namely:-
- Non-compliance with the orders of the competition commission.
- Breaking an order of the National Company Law Appellate Tribunal (NCLAT) without any reasonable grounds.
- Under the cartel legislation stipulated under the Competition Act, 2002, both companies and individuals can be prosecuted.
- The Competition Act, 2002 also empowers the Competition Commission of India (CCI) to deal with the extraterritorial jurisdiction, thereby giving the power to inquire to any cartel which operates outside India or any foreign company forming a cartel within India.