Does competition law apply to intra-group agreements?

Sections 3(3) and 3(4) of the Competition Act, 2002, prohibit anti-competitive agreements between enterprises at the same level of the production chain and between those at different levels of the production chain respectively. However, the prohibition is not absolute.

Under section 3(3), a horizontal anti-competition agreement raises a rebuttable presumption that it would cause an appreciable adverse effect on competition (AAEC). Similarly, a restrictive arrangement between enterprises at different levels of the production chain constitutes an infringement of section 3(4) only if it causes an AAEC in India. However, an absolute qualification on both section 3(3) and section 3(4) is that the impugned agreement must be an agreement between distinct “enterprises”.

Agreements between a holding company and its subsidiaries have long been the subject of intense debate with respect to anti-competitive clauses. The “single economic entity” doctrine – consistently followed by competition authorities worldwide – lays down that elements within a single economic entity are not separate undertakings or enterprises and thus any agreements between them cannot be considered as “agreements between distinct undertakings/enterprises”.

Udwadia Udeshi & Argus Partners is a full-service law firm with offices at Mumbai, Delhi, Bangalore, Kolkata and Chennai. R Sudhinder is a partner and Vaibhav Manu Srivastava is an associate at the firm. The views expressed in this article are the personal views of the authors and do not reflect the views of the firm.