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Role of trade associations in ensuring compliance under the Competition Act: An Analysis

Jidnyasa Sakpal

The role of trade associations as far as ensuring compliance of competition laws from the business entities is concerned is unique. While the presence of such organization allows the member entities to come together and work for the welfare and promotion of the given industry irrespective of their size, the information exchanged through the conduct of such meetings and events may sometimes result into competition concerns. Such concerns may be related to formation of a horizontal or vertical agreement prohibited under the Act.

‘Trade association’ is generally understood as a group formed by businesses in the same market to advocate and promote their interests and aims. Even though such an entity does not directly engage in the supply and purchase of goods or services, the functions of the same are considered as an ‘economic activity’ and therefore, covered under the definition of ‘enterprise’ under section 2(h) of the Act. Examining a trade association's operations from a competition law viewpoint is straightforward, i.e. to preserve a fair playing field which means no entity should have the authority to close or manipulate the market. Every decision or direction made by the Association must be reached by consensus as the membership is majorly constituted by the rivals. Any discussion pertaining to prices, production, and distribution and bidding undertaken by the member entities in the Association may trigger Section 3 of the Act and invite scrutiny of the statutory regulator.

The punishment for such activity, according to Section 27(b) of the Act, is ten percent of the turnover or three times the profits of the company found to be in violation of the Act, whichever is higher. However, if a cartel party provides full and truthful disclosure to the CCI and cooperates with the CCI in the investigation of the cartel, it may be eligible for a reduced penalty under Section 46 of the Act and its rules. The Bengal Chemist and Druggist Organization case was the first time the CCI not only fined the trade association, but also fined the office bearers and executive members who were in charge of the trade association's day-to-day operations. CCI further stated in that judgement that the provisions of Section 27 of the Act were adequate to hold office bearers responsible for violations without the help and assistance of Section 48 of the Act. Following its judgement in this case, CCI has adopted this approach in all matters involving trade groups.

The position under the EU law is that if trade organisations serve as a forum for participants to communicate their market positions and plans, this might lead to a decrease or elimination of market uncertainty, which could harm competition. The CCI specifically endorsed the ECJ's observation in Builders' Association case that when an exchange of information, based on its content and objectives in that particular legal and economic context, is capable of causing market distortion, there does not need to be an actual distortion of competition or a direct link between the concerted practise and consumer prices. If the exchange is capable of resolving ambiguities about the planned behaviour of the participating undertakings, it is contaminated with an anti-competitive goal.

As a result, when trade groups encourage this type of information exchange among rivals, they are found to have broken European competition law by engaging in a concerted conduct with an anti-competitive goal. In this case, CCI found evidence of parallel activity amongst market participants, thus it did not infer that a simple exchange of information would be a breach of Section 3 of the Act. It did note, however, that sharing of "Executive Summary-Cement Industry" and "Cement Statistics-Interregional Movement of Cement" provided data of each company's production and dispatch, which was problematic since it allowed anti-competitive behaviour. CCI went on to say that disclosing such sensitive information makes it easier for market participants to coordinate.

It further stated that the trade association's gathering of prices, whether at the request of the government or otherwise, was not anti-competitive in and of itself. However, because such information was shared with or otherwise disseminated or published to cement companies, it was deemed problematic that the trade association possessed sensitive commercial information that could facilitate anti-competitive outcomes and that it was actively shared among competitors. In light of these findings, the CCI fined the trade organisation Rs. 73 lakhs for violating Section 3 of the Act. Individual members of the association were also subjected to sanctions.


The development of such case laws suggest that the trade associations should be cautious while advocating the industrial cause from the perspective of competition laws. The competition regulators across the globe are conscious that the presence of such entities might very well act as a platform for rival entities to exchange in cartelization and exchange commercially sensitive information.