Competition Act, 2002
Section 3 and Section 4 Compared
The two substantive prohibitions are built on different foundations. Section 3 is about agreements: two or more parties must have acted together, and the question is the effect of what they agreed. Section 4 is about position: one enterprise must be dominant, and the question is whether its conduct falls within a listed category. The differences that follow are not details of drafting; they determine what must be proved, who is liable, what defences exist and what the Commission may order.
1. The Comparison
Basis | Section 3 | Section 4 |
|---|---|---|
Subject | Agreements, horizontal and vertical | Unilateral conduct of a dominant enterprise or group |
Number of parties | Two or more | One |
Dominance | Not an ingredient | An ingredient, established first |
Market definition | Necessary for Section 3(4); not a precondition for Section 3(3) | Always necessary, since dominance is relative to a market |
Appreciable adverse effect | An ingredient: presumed for Section 3(3), proved for Section 3(4) | Not an ingredient |
Who is liable | Every party to the agreement | Only the dominant enterprise |
Statutory exemptions | Section 3(5) for intellectual property and exports; the joint venture proviso | None |
Effect on the agreement | Void under Section 3(2) | No voidness provision |
Leniency | Available for cartels under Section 46 | Not available |
Settlement and commitment | Available for Section 3(4) | Available |
Orders | Section 27 | Section 27, and division under Section 28 |
2. The Point of Principle
Section 3 rests on the idea that competitors, or parties in a supply relationship, have surrendered independent judgment to a common arrangement. The wrong is the coordination, and it is why the definition of agreement in Section 2(b) is drawn so widely that an arrangement, an understanding or an action in concert will do. Section 4 rests on a different idea: that a firm on which a market depends bears obligations that other firms do not, because conduct which is ordinary competition for a small firm may destroy competition when practised by a dominant one. The wrong is the use of the position, and that is why no agreement and no appreciable adverse effect need be shown.
3. Consequences Worth Remembering
- A single firm cannot contravene Section 3. There must be two or more parties, and a parent and its wholly owned subsidiary are ordinarily treated as one enterprise, so an arrangement between them is internal.
- A non-dominant firm cannot contravene Section 4, however aggressive its conduct. This is the answer to most complaints about predatory pricing by entrants and by platforms funded by investors.
- Section 4 requires no proof of effect. Once dominance is established and the conduct falls within a clause of Section 4(2), the contravention is complete. Effects re-enter through the assessment of whether a condition is unfair or access has been denied, but they are not a separate ingredient.
- The intellectual property saving is confined to Section 3. An enterprise dominant by reason of its intellectual property has no equivalent protection under Section 4.
- Both may apply to the same facts. Where a dominant supplier imposes restrictions by agreement, the Commission commonly finds contraventions of both, and the remedies are framed once.
⚠ The order in which to take them Define the relevant market. If the enterprise is dominant, take Section 4 first, because the analysis is shorter and the burden lighter. Take Section 3 in the alternative, distinguishing between Section 3(3), where the presumption does the work once the agreement and the category are established, and Section 3(4), where the effect must be shown through the Section 19(3) factors. Deal with justification once, and note which savings are available under which provision. |
4. Related Topics and Provisions
Topic or provision | Connection |
|---|---|
Anti-competitive Agreements: Section 3 | The prohibition and its two classes |
Abuse of Dominant Position: Section 4 | Dominance and the listed abuses |
Abuse of Dominance and Vertical Restraints Compared | Where the same conduct attracts both |
Sections 2(b), 3, 4, 19(3), 19(4), 27 and 28, Competition Act, 2002 | The provisions relied on here |