Of the Competition Act explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 3 of the Competition Act, 2002 prohibits agreements that cause or are likely to cause an appreciable adverse effect on competition in India. Sub-sections (1) to (3) set the general rule, the consequence (the agreement is void) and a strong presumption for agreements between competitors on prices, output, market sharing and bid rigging. The 2023 amendment adds a further proviso on persons who join such an agreement without being in the same trade.
As per the consolidated text of the Act published by the Competition Commission of India (amendments shown up to the Finance Act, 2017), read with the Competition (Amendment) Act, 2023 as published in the Gazette of India on 11 April 2023. An agreement that causes or is likely to cause an appreciable adverse effect on competition within India is prohibited and void. Agreements between competitors on price, output, market sharing or bid rigging are presumed to have that effect. The 2023 change applies from the date notified for that provision; the notification is not in the sources consulted and should be checked.
Section 3(1): the general prohibition
Section 3(1) says: "No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India."
Three things follow from the printed words. First, the subject can be an enterprise, a person or an association of either. Second, "agreement" has the wide meaning in Section 2(b) (see our article on agreement, cartel and relevant market): informal understandings count. Third, the test is the effect, actual or likely, on competition "within India". The factors the Commission weighs are in Section 19(3), explained in our article on the factors for adverse effect.
Section 3(2): the agreement is void
Section 3(2) says that "Any agreement entered into in contravention of the provisions contained in subsection (1) shall be void." The consolidated text prints "subsection" without a hyphen. A void agreement cannot be relied on, which affects the commercial position of the parties as well as any other consequence that follows. If a supply or distribution contract carries a clause of this kind, the clause is the first thing to review; our legal dispute resolution team can review it before a dispute or inquiry begins.
Section 3(3): the presumption for horizontal agreements
Section 3(3) applies to "any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services", which:
- (a) directly or indirectly determines purchase or sale prices;
- (b) limits or controls production, supply, markets, technical development, investment or provision of services;
- (c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way;
- (d) directly or indirectly results in bid rigging or collusive bidding.
Such an agreement "shall be presumed to have an appreciable adverse effect on competition". The consolidated text runs these closing words into clause (d) rather than printing them as a separate line; we read them as applying to all four clauses, and flag the layout as a printing slip. The text is silent on how a presumption may be answered; read the words "shall be presumed" as printed and take advice on the facts.
Example. Three transporters of bulk cement in one region meet through their association and agree that each will quote above a floor rate and that each will serve only certain districts. The first limb is price (clause (a)) and the second is market sharing by geographical area (clause (c)). Each is presumed to have an appreciable adverse effect on competition.
Bid rigging
The Explanation to sub-section (3) says "bid rigging" means "any agreement, between enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding". The consolidated text prints the Explanation without a closing full stop. Businesses that sell to public bodies should read this alongside our posts on MSME concessions in government tenders and the GeM portal, because bidding is the setting the Explanation describes.
The joint venture proviso
The proviso says that "nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services." So the presumption in sub-section (3) does not apply to a joint venture agreement that increases efficiency in those activities. It leaves sub-section (1) untouched on its own terms. For the structure of joint ventures see our post on joint ventures in India.
The 2023 further proviso
The 2023 Act (its Section 4(a)) inserts a second proviso after the existing one in sub-section (3). As inserted, it reads: "Provided further that an enterprise or association of enterprises or a person or association of persons though not engaged in identical or similar trade shall also be presumed to be part of the agreement under this sub-section if it participates or intends to participate in the furtherance of such agreement."
In plain terms, a party that is not itself a competitor, for example a consultant, platform or trade body that helps to operate a price or market-sharing arrangement, is presumed to be part of that agreement if it participates, or intends to participate, in its furtherance. The text states no further test and we add none. The words "intends to participate" should be read carefully: they reach a person who has not yet acted.
| Point | Before | After (2023 Act) |
|---|---|---|
| Who is within the presumption | Parties "engaged in identical or similar trade" | Also a person not engaged in identical or similar trade, if it participates or intends to participate in the furtherance of the agreement |
| Provisos to sub-section (3) | One (joint ventures) | Two: joint ventures, then the further proviso |
| Sub-sections (1), (2) and the Explanation on bid rigging | As printed | Not changed |
Practical points for businesses
Keep a record of why any joint pricing or sharing arrangement exists and whether it increases efficiency. Avoid exchanging price or capacity information through an association. Brief staff who attend trade meetings. A general guide to building such habits is in our post on competition compliance for businesses. For penalties see our article on penalties under the Act; the lesser-penalty route for cartel members is covered in the article on Section 46.
Need help with an agreement or a notice under Section 3?
If you have received a notice about a trade association meeting, a pricing arrangement or a tender, or want a draft agreement reviewed before it is signed, our team can help. Speak to us about legal dispute resolution and bring the agreement and any correspondence.
Key takeaways
- An agreement that causes or is likely to cause an appreciable adverse effect on competition within India is prohibited and void.
- Price fixing, output limits, market sharing and bid rigging between competitors are presumed to have that effect.
- A joint venture that increases efficiency is outside the presumption in sub-section (3).
- The 2023 Act extends the presumption to a person not in the same trade who participates or intends to participate in furtherance of the agreement.
- The 2023 change applies from the date notified for that provision; the notification is not in the sources consulted and should be checked.
Read next
- Vertical agreements: tie-in, exclusive dealing and resale price maintenance
- Agreement, cartel, relevant market, settlement and commitment defined
- Abuse of dominant position and predatory pricing
- Anti-competitive agreements under Section 3: guide
Disclaimer: Based on the consolidated text of the Competition Act, 2002 published by the Competition Commission of India (amendments shown up to the Finance Act, 2017), read with the Competition (Amendment) Act, 2023 as published in the Gazette of India on 11 April 2023, and on the regulations and guidelines of the Commission as notified in 2024, as consulted on 2 October 2026. Commencement notifications, notified thresholds, rules and later amendments should be checked. This article is general information, not legal advice; check the official text before acting.