Franflash - Competition Commission of India (CCI)'s active enforcement of Competition Law
02 August 2011
The Indian Competition Act 2002 (the
Act) which comes into force in stages between 2007 and 2011 is
likely to have a significant impact on franchisors entering the
subcontinent. The CCI have begun to impose fines and have sought to
break the cartels which have been in existence India for some time,
especially in relation to price fixing and various practices which
affected consumers. It is likely to now focus on vertically
integrated systems, including franchising. Franchising is covered
by Section 3 of the Act. It covers issues such as:
- resale price maintenance;
- purchase ties;
- exclusive supply;
- exclusive distribution;
- refusal to deal;
- exclusive territories, customers or supplier groups;
- limiting or controlling production or technical
development.
The rule of reason will be applied.
There is no pre-clearance protocol or block exemption in place for
vertical agreements. Each complaint is considered on a case by case
basis on its merits. There is no presumption that the activities in
Section 3 of the Act actually adversely affects competition and a
complainant has the burden of proof to show that the activity
complained of adversely affects competition in
India.
Although there are no reported
franchising cases under Section 3 yet, it is thought to be only a
matter of time before one arises given the growth of franchising.
Foreign franchisors are likely to be an easy target if they have
not fully taken into account the provisions of Section 3.