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Area allocation when not anti-competitive

26 October 2015

The Competition Commission of India on 12-10-2015 has held that though the Opposite Party 1 in the case before it had indulged in anti-competitive practices by involving in area allocation in respect of its distributors and stopping supplies to the informant in the case, there was no adverse effect on competition. The Commission thus disagreed with the conclusion of the DG that the vertical restraints imposed by the manufacturer on its distributors caused appreciable adverse effect on competition in the market. Noting that whether an agreement restricts the competitive process is always an analysis of the balance between the positive and the negative factors listed under Section 19(3)(a)-(f), the Commission was of the view that there was no dearth of products of other equally and better brands in the market, and that the DG had left out market study of other players in the sector.

The CCI further in this case of Ghanshyam Dass Vij v. Bajaj Corp. Ltd. held that the FMCG distributor’s association, by creating bye-laws by way of which any new dealer before starting any work with a company was required to seek permission (NOC) from the old dealer, and by imposing geographical restrictions, had disturbed free trade and limited competition among the distributors of particular category of products in a specified area. It was further held that the bye-laws of the Association besides limiting/ controlling the supplies also allocated the markets and as such fell within the presumption under Section 3(3)(b) and (c) of the Competition Act. The Commission in this regard relied upon the material collected by the DG in its investigation and noted that the provision that grants territorial protection to a dealer from all competition in the market indicates that the very object of the provision is anti-competitive in nature.
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