Section 59-69 of the federal competition and consumer protection Act focuses on restrictive agreements, its prohibition, what constitutes an exception to restrictive agreements, the penalties for breaching the provisions of the Act etc.
Section 59 -Prohibition Of Agreements In Restriant Of Competition.
- Section 59 serves to promote fair competition and protect the interests of consumers and the economy as a whole. It aims to prevent anti-competitive practices that could harm market dynamics, limit consumer choices, or stifle innovation. By prohibiting agreements and decisions that hinder competition, the law seeks to foster an open and level playing field for businesses.
- Sub-section 59(2) (a-e) of the Federal Competition and Consumer Protection Act outlines specific acts that are considered prohibited under subsection (1). These acts are aimed at preventing anti-competitive practices and promoting fair competition in the market.
(a) Directly or indirectly fixing a purchase or selling price of goods or services, subject to section 107 of this Act:
This provision prohibits undertakings from colluding to fix prices either directly or indirectly. Price-fixing agreements eliminate competition based on price, leading to artificially inflated prices for consumers. For example, if two competing mobile phone manufacturers agree to set a minimum price for their products, preventing any price competition between them, it would be a violation of this provision.
(b) Dividing markets by allocating customers, suppliers, territories, or specific types of goods or services:
This provision prohibits undertakings from engaging in market division, where they allocate customers, suppliers, territories, or specific types of goods or services among themselves. By doing so, they eliminate competition in certain segments, restrict consumer choice, and hinder market entry for potential competitors. For instance, if two competing beverage companies agree to divide the market by assigning specific regions to each company, thereby preventing competition in those regions, it would be a violation of this provision.
(c) Limiting or controlling production or distribution of any goods or services, markets, technical development, or investment, subject to section 108 of this Act:
Undertakings are prohibited from engaging in practices that limit or control the production, distribution, markets, technical development, or investment in goods or services. Such practices can hinder competition, innovation, and market entry. For example, if a group of pharmaceutical companies colludes to limit the production of a particular generic drug to maintain high prices, it would be a violation of this provision.
(d) Engaging in collusive tendering, subject to section 109 of this Act:
This provision prohibits undertakings from engaging in collusive tendering, where competing companies coordinate bids to manipulate the outcome of a tender or contract. Collusive tendering eliminates fair competition and may result in higher prices or inferior quality for the contracting entity. For instance, if two construction companies agree to submit artificially high bids to ensure one company wins the contract, it would be a violation of this provision. Another instance would be where several construction companies agree to take turns submitting intentionally non-competitive bids, they restrict genuine competition and artificially inflate prices.
(e) Making the conclusion of an agreement subject to acceptance by the other parties of supplementary obligations that have no connection with the subject of such agreement:
Undertakings are prohibited from imposing supplementary obligations that are unrelated to the subject of an agreement as a condition for its acceptance by other parties. This provision aims to prevent coercive practices and ensure that agreements focus on their intended purpose. For example, if a software company requires its customers to purchase unrelated additional services or products as a condition for licensing its software, it would be a violation of this provision.
SECTION 60- AGREEMENT AUTHORISED BY THE COMMISSION
- Section 60 (a-c) of the Federal Competition and Consumer Protection Act provides an exemption from the provisions of Section 59 for certain agreements among undertakings or decisions of associations of undertakings. This exemption applies when the entry into such agreements or decisions is authorized by the Commission, subject to certain conditions. Let’s analyse the key aspects of this provision:
(a) Contributes to the improvement of production or distribution of goods, services, or the promotion of technical or economic progress, while allowing consumers a fair share of the resulting benefit:
To qualify for exemption, the agreement or decision must demonstrate a positive impact on production, distribution, or technical and economic progress. Additionally, consumers must receive a fair share of the benefits generated. For example, if several pharmaceutical companies agree to collaborate on research and development to discover a cure for a life-threatening disease, and the resulting breakthrough benefits consumers by providing affordable access to the treatment, such an agreement could be exempted under this provision.
(b) Imposes only indispensable restrictions to achieve the objectives mentioned in condition (a):
The exemption applies only if the restrictions imposed by the agreement or decision are necessary and indispensable to achieve the mentioned objectives. This condition ensures that the restrictions placed on competition are proportionate to the benefits derived. For instance, if two competing car manufacturers enter into a joint venture to develop an electric vehicle technology, and as part of the agreement, they agree to share certain confidential technical information necessary for the project’s success, the limited sharing of information can be justified as indispensable to achieve the objective of promoting technical progress.
(c) Does not eliminate competition for a substantial part of the goods or services concerned:
The agreement or decision must not allow the participating undertakings to eliminate competition for a significant portion of the goods or services involved. This condition ensures that competition remains intact in the market, promoting consumer choice and preventing the creation of monopolies. For example, if two major electronics manufacturers agree to collaborate on a specific product line, such as smartphones, the collaboration should not result in the elimination of competition for smartphones in the market, allowing other manufacturers to continue offering competitive alternatives.
Section 60 recognizes that certain agreements or decisions, even if they may have some restrictive elements, can generate significant benefits for consumers and promote technical or economic progress. However, the exemption is subject to the fulfillment of specific conditions to ensure that competition is not unduly stifled, and consumers receive their fair share of the benefits.
