Trade Associations and Competition Law
Trade associations, also known as industrial or business associations, serve as unique forums where competitors within the same industry or sector convene to discuss common issues, find shared solutions, and advance their commercial or professional interests. Despite their valuable role, the activities of trade associations undergo close scrutiny by competition authorities worldwide.
An association or union is typically formed for the primary purpose of collective bargaining. The Indian Constitution, under Article 19, grants its citizens the right to form associations, unions, or cooperative societies.
Trade associations, which are commonly established to promote the economic sector they represent, play an active role in shaping the functioning of their respective industries. They contribute to market efficiency by providing a platform for discussion, information exchange, deliberation, and addressing common interests.
However, when members of a specific industry come together to collectively address issues, there is a potential risk of violating competition law.
Indian Competition law treats the activities of trade associations much like any other form of cooperation between competitors.
Trade associations, by their very nature, remain exposed to antitrust risks, hindering the survival and growth of the competitors in the market, despite their many pro-competitive aspects like trade promotion, industry cost analysis, product standardization, etc. Therefore, it becomes crucial to clarify the blurred line dividing the trade associations and cartels.
A significant portion of cartel cases pursued by competition agencies worldwide directly or indirectly implicates trade associations.
With CCI’s initial case involving actions of a trade association, it has not been an exception to the global trend. In this case, CCI imposed a nominal penalty of Rs. 1 lakh on each of the 27 film producers for colluding through an association to exploit multiplex owners. The Commission issued similar orders in cases involving Reliance Big Entertainment and UTV Software against Film Chambers of Commerce and Motion Picture Associations operating in different states in India.
The CCI has held in the case of Reliance Big Entertainment Limited and Others V. Karnataka Film Chamber of Commerce that if the role of the trade association is limited to being a platform for its members to discuss common issues and it does not undertake any commercial activities on its own then it will not be termed as an enterprise.
The CCI, through various orders, has time and again has sent a clear message to the trade associations that they must use the opportunity of coming together to further the legitimate interests of their business community and consumers and not indulge in anti-competitive activities.
The Act does not provide any exceptions for trade associations, and they are explicitly mentioned in Section 19(1) of the Act. Additionally, trade associations might fall under Section 2 (k) (v) of the Act, categorized as “Association of Persons.” The concept of the association of enterprises outlined in Section 3 of the Act could also encompass trade associations. Therefore, it is reasonable to infer that the legislative intent is to address and restrain anti-competitive behaviour by trade associations.