Wednesday, October 9, 2013

Section 3(3) and 3(4) of the Competition Act, 2002: Difference in Standard of Proof

I have earlier written on Section 3 of the Competition Act, 2002 here, here and here. During the course of a discussion, I noticed that Section 3(4) does not provide for a presumption of appreciable adverse effect on competition (AAEC), unlike Section 3(3) which gives rise to a presumption of AAEC. What is the consequence of the difference in the language of the two sub-sections?

Section 3(3) enumerates agreements which “shall be presumed to have an appreciable adverse effect on competition”, whereas Section 3(4) lists agreements which cause or are likely to cause an appreciable adverse effect on competition. It could be said that the absence of presumption in the latter translates to higher burden of proof on the Competition Commission to establish that parties are in contravention of Section 3(1) by virtue of an agreement which attracts Section 3(4).

In other words, under Section 3(3), so long as the Commission is able to establish that the agreement entered into by the parties deals with one of the four situations enumerated thereunder, it shall be presumed, without any further empirical evidence, that the agreement has an appreciable adverse effect on competition. Such agreements include the ones which directly or indirectly determine purchase or sale prices, limit or control production, supply, technical development, investment etc, market allocation and bid rigging, among others. Simply put, these agreements shall per se be presumed to have an AAEC unless such presumption is rebutted.

On the other hand, under Section 3(4) which deals with tie-in arrangements, exclusive supply arrangements, refusal to deal arrangements and resale price maintenance, the Commission has to arrive at the conclusion that such agreements have indeed caused AAEC or are likely to cause AAEC, but cannot be presumed to cause AAEC. Therefore, these agreements are not per se anti-competitive.