Author: Narendra Kumar, National Law Institute University, Bhopal

This article critically examines the competition law governing vertical agreements and bans on online sales in India under the Competition Act, 2002, with particular reference to the Competition Commission of India's interpretation of exclusive distribution contracts, platform bans, and resale price maintenance in the digital economy. Beginning with a consideration of Section 3(4) of the Act and its rule-of-reason approach, the study analyses landmark CCI rulings—viz, Hyundai, Maruti Suzuki, and Snapdeal—and ongoing investigations into Amazon and Flipkart exclusivity arrangements. It talks about the complexity of applying traditional competition law principles to e-commerce platforms, addressing the dual nature of platforms as both marketplaces and competitors, algorithmic pricing and risk of collusion, and challenges of market definition in multi-sided digital markets. Comparative perspectives of the European Union's Vertical Block Exemption Regulation and Digital Markets Act, and the United States' post-Leegin rule-of-reason approach, highlight divergent strategies regarding online parity clauses, safe harbours, and ex ante regulation. The answer concludes that although India's effects-based approach has adaptability, focused reforms such as outright digital-specific restraints, safe-harbour provisions, and synchronisation with emerging digital competition regulations are required in response to balance innovation, consumer welfare, and fair access to the Indian marketplace.

Keywords

Vertical Agreements, Online Sales Restrictions, Resale Price Maintenance (RPM), Exclusive Distribution in E-Commerce, Digital Marketplace Regulation, Competition Commission of India (CCI)

India's competition regime was revamped by the Competition Act, 2002, in place of the 1969 MRTP Act. The new Act is consumer-centric and fair competition-centric, administered by the Competition Commission of India and its investigation body, the Director General (DG). India's economy, having transitioned to digitisation at a breakneck pace, has rendered e-commerce a dominant distribution channel. India's e-retail market is expected to be over $160 billion by 2028 (compared to approx. $60 billion in 2023). Government policies such as "Digital India" and the sudden spurt in access to the internet have made such growth possible. Against such a background, vertical agreements and restrictions on online sales have fallen under the scanner since online platforms amalgamate marketplace features with marketplace control over price and distribution. Conduct previously limited to physical world markets (such as exclusive terms of supply, online-first terms of distribution, and price parity clauses) is now replicating in virtual markets with the ability to foreclose competition or injure consumers.. In reaction to such, the CCI has carried out market studies and investigations into e-commerce platforms, which revealed issues such as platform bias, exclusive deals by marketplaces with suppliers, price parity restrictions, and deep discounting.

To what extent does India’s current Competition Act, 2002 framework—particularly Section 3(4)’s rule-of-reason regime for vertical agreements—adequately capture and curb anti-competitive practices (exclusive dealing, platform bans, RPM) as they manifest in digital and e-commerce markets, and what gaps remain when compared to more prescriptive or ex-ante models in the EU and US?

unpack and critically assess the statutory architecture for vertical agreements under Section 3(4) of the Competition Act, 2002, with special emphasis on how the CCI has construed exclusive distribution, platform-specific bans and resale price maintenance (RPM) in both traditional and e-commerce settings.

The significance of this paper lies in its timely and comprehensive interrogation of how India’s Competition Act, 2002, with its rule-of-reason treatment of vertical agreements, grapples with novel anti-competitive practices in the digital economy.

This study adopts a doctrinal and comparative legal research methodology, supplemented by qualitative content analysis of Secondary sources and thematic synthesis of secondary literature. 

Section 3 of the Competition Act fully prohibits any agreement that causes or is likely to cause an appreciable adverse effect on competition in India. Section 3(4) particularly addresses vertical agreements – i.e., agreements between enterprises at different levels or stages of the production or distribution chain. The Act defines a vertical agreement as "an agreement among enterprises or persons at different stages or levels of the production chain". It then gives an exhaustive list of vertical restraints which, if they cause AAEC, are anticompetitive and void. These are tie in sales (where purchase of one good is made conditional on purchase of another), exclusive supply agreements (a buyer is not permitted to buy competing goods), exclusive distribution agreements (a seller restricts distribution to a particular area or customer set), refusals to deal (restricting who may buy or sell), and resale price maintenance (any agreement which fixes resale prices of goods). Significantly, Indian law does not presumptively hold these vertical restraints illegal. Instead, each must be subjected to a rule of reason test for its actual or likely AAEC (per Section 19(3)). That is, even an exclusive distribution or RPM provision is prohibited only if it has appreciable anti-competitive effects (e.g. by foreclosing market entry or destroying inter-brand competition) which outweigh any procompetitive justifications. In practice, the CCI typically only finds infringements where the supplier has appreciable market power. For instance, the CCI has held that a supplier's dominance of resale prices per se does not cause AAEC unless the supplier has substantial market power. Similarly, vertical restraints imposed by small players with negligible market share have typically been waved off as innocuous.

Hence, while Section 3(4) excludes certain vertical structures, enforcement is a case-by-case economic analysis. The CCI balances potential harms (exclusion of competitors, barriers to entry, foreclosure of the market) against alleged benefits (efficiency, incentives to invest, quality or upgrading of services). Where a restraint is not within the narrow list in Section 3(4), it is analysed under the general Section 3(1) Prohibition. Export agreements of Indian goods are excluded under the Act, and intellectual property restrictions on distribution are defended. We turn to the next how the CCI has applied this framework to some vertical practices in digital and other markets..

Exclusive distribution/supply agreements limit the channels or customers through which a supplier’s goods may be sold. Under Section 3(4)(c)agreements “to limit, restrict or withhold the supply of any goods or allocate any area or market” fall within the vertical prohibition. In general, the CCI assesses such exclusivity agreements under the rule-of-reason factors. In Shri Shamsher Kataria v. Honda SielFor example, independent car dealers challenged restrictions imposed by Honda on selling competing brands. CCI rejected Honda’s argument that exclusive distribution was needed for quality control and brand goodwill. Applying the Section 19(3) balancing test, CCI held that Honda’s procompetitive justifications (e.g. preserving quality) could be achieved by less restrictive means (such as targeted incentives), so the exclusivity arrangement had the overall effect of foreclosing competition and was anticompetitive.

By contrast, the CCI has also recognised a manufacturer’s right to use a selective distribution system. In Ashish Ahuja v. SnapdealA retailer dealing in SanDisk flash drives was barred from Snapdeal’s online platform because SanDisk had authorised only certain online sellers. The informant alleged SanDisk and Snapdeal were colluding to exclude him. The CCI held that SanDisk’s conduct was not abusive: it found the relevant product market to be “portable small-sized consumer storage devices” and observed that SanDisk’s decision to restrict unauthorised dealers was a legitimate exercise of brand protection.. The Commission also held that online and offline sales of such devices constitute the same market (i.e. e-e-commerce and physical stores were not separate markets). In short, SanDisk’s selective distribution policy was deemed a permissible effort to ensure quality and maintain brand image.

In the digital context, the CCI’s 2019 market study on e-commerce identified particular exclusivity concerns. It noted two problematic scenarios: (a) a product sold exclusively on a single online marketplace, and (b) a platform listing only one brand per product category. Such exclusivity could raise barriers by forcing sellers to “give up competing distribution contracts” (e.g. foreclosing their sales on other platforms), which is especially dangerous in “winner-takes-all” digital markets. Nonetheless, the CCI cautioned that exclusivity can also yield efficiencies (e.g. investment by the exclusive seller to promote the brand), so it advocated a rule-of-reason, case-by-case analysis. This nuanced approach was reflected in the CCI’s action against Asian Paints in 2020: the CCI ordered an investigation into allegations that dominant paint-maker Asian Paints coerced its dealers not to stock rival JSW Paints. The prima facie finding was that, as a dominant supplier, Asian Paints’s exclusive-supply refusal (barring dealers from procuring JSW’s products) could cause AAEC by raising entry barriers and harming consumer choice..

More recently, the CCI has signalled its interest in exclusivity arrangements on digital platforms. For instance, in June 2022, the CCI directed an abuse-of-dominance probe into BookMyShow after an online ticketing rival alleged that BookMyShow had secured exclusive and long-term contracts with cinema chains, preventing those theatres from selling tickets through other platforms. If proven, such platform-level exclusive dealing could be treated as vertical foreclosure under Section 3(4). In sum, the CCI’s enforcement on exclusive distribution has balanced legitimate business justifications against competitive harm, approving selective authorisation but striking down or investigating exclusionary restrictions that unduly foreclose rivals.

Closely related to selective distribution are platform-specific restrictions online, or "platform bans" or online parity clauses. These are where a manufacturer or a platform imposes conditions on product sale between online platforms. For example, an online marketplace can be asked not to list a product below a specific price point, or a manufacturer can ask one platform to ban certain sellers. The vertical provisions of the Competition Act can catch such restrictions if they are enforceable on downstream parties and have AAEC.

The CCI recently investigated suspected collusion in the exclusive product launch of products between smartphone manufacturers and e-commerce platforms. Press reports indicate that the CCI's DG has prepared a detailed report accusing Amazon and Flipkart of entering into exclusive launch agreements with brands like Samsung, Xiaomi, Motorola, Vivo, Lenovo, Realme and OnePlus. Those agreements allegedly involved launching select new models on a single platform and providing preferential placement or deep discounting to such launches. The DG report raises concerns about "exclusive product launches, deep discounting, and preferential treatment of certain sellers" on such platforms. In late 2024, the CCI requested the consolidation of various high-court challenges before the Supreme Court to enable its investigation into Amazon, Flipkart and related sellers.. While these investigations are ongoing, they illustrate how Indian competition authorities are investigating platform arrangements, particularly those favouring certain sellers or tying platform incentives to exclusivity, as being within the scope of potentially abusive vertical restraints.

Overall, platform bans and bans on online retailing – by manufacturers against traders or by platforms against sellers – are typically examined as vertical agreements that would infringe Section 3(4) if they have a substantial impact on competition. So far, the CCI has directed legitimate selective distribution (e.g., SanDisk/Snapdeal) but remains watchful for arrangements that limit seller choice or prefer specific brands on digital platforms (e.g., the Amazon/Flipkart and BookMyShow investigations).

Section 3(4)(e) The Act prohibits agreements fixing resale prices. This covers both minimum and maximum resale price restrictions. As with other vertical restraints, RPM is not per se illegal in India: it is unlawful only if it causes an AAEC. Thus, the CCI examines RPM claims under a rule-of-reason analysis, weighing the degree of vertical price fixing against efficiencies. Key factors include whether the supplier enforces the price and whether the supplier has significant market power. The CCI has explicitly noted that a supplier controlling its distributors’ prices does not itself prove AAEC unless the supplier’s market share is appreciable. It has also emphasised that true “resale” requires a buyer-seller relationship. Thus, small or marginal manufacturers imposing RPM have generally escaped condemnation, whereas a market-leading manufacturer might attract enforcement if it monitors and enforces resale prices.

In practice, the CCI has investigated several RPM schemes. One of the first significant inquiries was in Jasper Infotech (Snapdeal) v. KAFF Appliances.. Snapdeal alleged that KAFF had sent a market-operating-price to Snapdeal and threatened to ban sales unless Snapdeal adhered to KAFF’s minimum prices. Citing an email and a website, Snapdeal argued that KAFF and Snapdeal colluded to implement RPM.. The CCI’s prima facie order did find a possible contravention of Section 3(4)(e) based on the evidence of a pricing mandate and directed an investigation. However, after the DG’s detailed probe, the CCI ultimately dismissed the complaint: the DG concluded that Snapdeal was merely a marketplace facilitating third-party sales and had no direct inventory, so no vertical buy-sell relationship existed with KAFF. In short, KAFF’s instructions to Snapdeal did not constitute RPM of a resale, since Snapdeal never “owned” the goods.

Most recently, Maruti Suzuki India Limited was penalised for RPM.. In August 2021, the CCI imposed a ₹200 crore penalty on MSIL for enforcing a Discount Control Policy that limited how much dealers could discount new car prices. An informant had shown that MSIL’s DCP set regional targets for maximum discounts, used “mystery shopping” to monitor dealers, and fined any dealer who undercut the floor price. The CCI held that MSIL’s actions contravened Section 3(4)(e) because they deprived dealers of the freedom to set their own resale prices. The DG had found compelling documentary evidence that MSIL strictly enforced the DCP nationwide. This case underscores that the CCI will treat an active monitoring-and-penalty scheme to fix prices as RPM, causing AAEC.

In all these cases, the CCI has made clear that RPM violations can take many forms – not only an express minimum price clause, but also maximum discount caps, conditional rebates, penalties for low pricing, and so on. The Commission recognises, for instance, that fixing maximum allowable discounts and enforcing them through penalties or surveillance qualifies as RPM. At the same time, it insists on rigorous evidence: vague or unenforced pricing guidelines do not suffice. Thus, the CCI’s RPM jurisprudence reflects a rule-of-reason balancing: vertical price controls are illegal only when implemented by a powerful supplier in a way that materially harms competition.

The application of classical competitive concepts to online platforms presents particular challenges. Three broad issues are particularly important:

Duplicity of function of platforms as a marketplace and a competitor. Major online platforms such as Amazon, Flipkart or Google Shopping serve in both capacities as intermediaries and sellers of their product or service. Amazon, for instance, sells Amazon Basics products as well as having third-party sellers on board. This duplicity of function creates conflicts of interest: the platform can prefer its product in search, algorithmic rankings or promotions, and harm competing sellers. Under Section 3(4), this conduct could be a vertical restraint (self-preferencing constitutes a form of exclusive dealing or tying), but it engages both vertical and horizontal theory. India's competition regulators have not yet squarely addressed this duplicity. The CCI Chair has remarked that competition today rests on platform economies and network effects, where power is derived from control of data, user access and multi-sided interaction. Competition analysis needs to accommodate these features, understanding that a platform's incentives are different from a traditional distributor's.

Algorithmic pricing and collusion. Sophisticated pricing algorithms are commonly employed on online platforms to adjust prices dynamically in real time. While the practice can benefit buyers captured in dynamic discounting and matchmaking optimisation, it, at the same time, releases unheralded collusion risks. Such algorithms can track peers' prices and quietly coordinate their prices without an explicit human intent, in effect creating "cartels without human communication." Chairperson Ravneet Kaur of the CCI has warned that AI-facilitated pricing strategies would allow coordination of events in the market. Indian law is presently unclear on the issue of algorithmic collusion. In theory, facilitating collusion algorithmically would violate Section 3(3) (horizontal agreement) or Section 3(4) if it uses the supplier's pricing policy. The CCI has recognised the need for innovative tools to identify and evaluate such conduct, but no judicial cases have so far explicitly addressed this issue. Presently, the main challenge is evidentiary issues: showing that companies' pricing algorithms are interdependent or that the pricing strategy on a platform harms competition by legally suppressing competition.

Market definition and multi-sided complexity- Digital ecosystems tend to blur classical market boundaries. The CCI has already considered that online and offline markets for a product may form the same market. But in general, the definition of the relevant market becomes challenging in platform environments. Markets are likely to be two-sided, and competition depends on the dynamics of both sides. A platform's "market" can comprise several services bundled together. In addition, network effects imply that even modest market shares will be decisive. All this makes it challenging for the CCI to define the affected market for antitrust purposes. Additionally, digital markets are very dynamic: rapid entry and innovation can redraw markets before formal analysis is concluded. For example, e-commerce cases might involve cross-border elements that test the CCI's jurisdictional framework to the maximum. All this implies that the CCI has to apply market definition flexibly in digital cases and may have to make do with more general evidence to evaluate competitive impact.

The EU also prohibits vertical restraints that harm competition, but with a different enforcement architecture. Under Articles 101(1) and 101(3) of the Treaty on the Functioning of the EUCertain vertical agreements benefit from a “block exemption” if each party’s market share does not exceed 30%. The EU’s Vertical Block Exemption Regulation and accompanying Vertical Guidelines provide safe-harbour treatment for most distribution and franchise agreements below the threshold, provided they do not contain any “hardcore” restrictions. Resale price maintenance also enjoys a block exemption up to that 30% threshold; beyond that, RPM is examined under the rule of reason. In effect, the EU provides a statutory safe harbour for small-to-medium vertical deals, while mandating a restrictive analysis (with per se prohibitions on especially egregious clauses) for larger players or non-compliant contracts..

Crucially, Europe has recently gone further on digital platforms. The Digital Markets Act Imposes ex ante rules on designated “gatekeeper” platforms. The DMA explicitly forbids a list of practices: for example, gatekeepers may not require business users to use the gatekeeper’s identification or payment services, or to bundle their core platform with another of the gatekeeper’s services. They also cannot unduly disadvantage competitors in their ranking or self-prefer their products. In short, the EU distinguishes between general vertical agreements and a special regulatory regime for large digital platforms..

U.S. antitrust policy also largely eschews per se bans on vertical restraints. Likewise, U.S. courts generally analyse exclusive and tying arrangements by balancing pro-- and anti-competitive effects. One notable twist is that, under Ohio v. American Expressplaintiffs in vertical restraint cases must first show that the defendant has market power in a relevant market; absent such power, a vertical restriction is unlikely to harm competition. In practice, then, the U.S. treats vertical agreements much like India does: they are reviewed case by case. The U.S. does not have sector-specific laws like the EU’s DMA, although agencies like the Federal Trade Commission and the Department of Justice have signalled heightened attention to digital platforms. 

 To address digital-specific vertical restraints, Parliament could amend the Competition Act. One possibility is expanding Section 3(4) to explicitly cover practices now seen on e-commerce platforms. For example, the law might define certain online terms as presumptively restrictive, such as most-favoured-nation price clauses or mandated discounts parity, similar to the EU’s treatment of parity clauses as hardcore restrictions. The Act could also clarify that the tying/bundling of goods or services across digital platforms counts as a vertical restraint even if done algorithmically or via default settings. Another reform would be to codify thresholds or safe harbours: currently, the CCI applies Section 3(4) even to very small players, but it seldom finds AAEC unless the market share is high. Introducing a formal market-share threshold (e.g. 30%, as in the EU) for the applicability of presumptions could provide clarity. More ambitiously, India may consider enacting a Digital Competition Act as a separate law with ex ante obligations for dominant platforms. A draft Digital Competition Bill (2024) has been circulated, closely modelled on the EU DMA. It proposes to designate “systematically significant digital enterprises” (SSDES) and impose obligations on them that mirror DMA-type rules.

The CCI should prioritise cases that market studies and complaints have flagged. As noted, the CCI’s 2020 e-commerce study identified platform bias, exclusive launch agreements, pricing parity restrictions and deep discounts as key concerns. Enforcement should therefore focus on prominent allegations in India’s largest digital markets: for instance, the ongoing Amazon/Flipkart investigation should be fast-tracked to set clear precedents on exclusivity and discounting. Investing in data-analysis tools will be important to detect sophisticated forms of coordination. 

Vertical distribution practices remain a central concern in India’s competition policy, now complicated by the rise of digital commerce. The Competition Act’s provisions on vertical restraints have proved adaptable to modern contexts: the CCI has applied them to both offline and online cases, from automaker discount schemes to e-commerce platform deals.

Major decisions indicate that the CCI duly weighs brand interests against consumer welfare. Meanwhile, the digital economy has exposed loopholes: strategies like algorithmic price fixing or platform self-preference were hardly conceivable under the Act's 2002 vision. To address this, India’s framework must continue evolving. On the policy front, recent market studies and high-profile probes demonstrate that the CCI is attuned to exclusive distribution and pricing abuses in e-commerce. Yet, structural reform may be required to keep up. Meanwhile, the CCI’s enforcement – guided by these new rules – should target the most pernicious online restraints. As CCI Chair Kaur has observed, “today’s competitive landscape is defined by platform economies, network effects, and algorithm-driven decision-making,” and the goal is to balance innovation with competition, ensuring fair and open markets. Achieving that balance will require a coherent mix of competition law enforcement, pro-competitive regulation, and oversight mechanisms. With robust enforcement of Section 3(4) and forward-looking reforms inspired by the DMA, the Competition Act can be made adequate for the digital era, safeguarding market contestability, consumer choice and innovation in India’s burgeoning digital economy.

Statutes & Regulations

• Competition Act, No. 12, Acts of Parliament 2002 (India), § 3(4), https://legislative.gov.in/competition-act-2002 

• Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 Oct. 2022 on contestable and fair markets (Digital Markets Act), 2022 O.J. (L 265) 1, available at https://eur-lex.europa.eu/eli/reg/2022/1925/oj (last visited May 6, 2025).

Books

• Jagdish Bhagwati & Arvind Panagariya, India’s Competitive Landscape: A Critical Appraisal 56–78 (Oxford Univ. Press 2010).

• Shardul Amarchand Mangaldas, Competition Law Practice in India (5th ed. 2021).

Cases

• Ohio v. Am. Express Co., 138 S. Ct. 2274 (2018) US

• Hyundai Motor India Ltd. v. Hyundai Motor Co. Ltd., CCI Case No. 36 of 2014 (India)Maruti Suzuki India Ltd. v. Competition Comm’n of India, CCI Case No. 3 of 2021(India)

• All India Online Vendors Ass’n v. BookMyShow.com Pvt. Ltd., CCI Case No. 8 of 2022 (India)

Articles & Reports

• Rajesh Desai, The Evolution of RPM Jurisprudence in India: Insights from Hyundai and Maruti Cases, 9 J. Competition & Markets 140 (2016), https://www.jcmindia.org/vol9/issue1/desai.pdf 

• Amit Mukherjee, EU vs. Indian Competition Law on Vertical Restraints: A Comparative Analysis, 7 Indian J. Competition L. 95 (2018),  https://www.ijcl.org/vol7/mukherjee.pdf 

• Sharat Rao, Digital Chokepoints: Exclusive Deals in E-Commerce, 3 Indian J. Digital Econ. 57 (2020), available at https://www.ijde.org/vol3/rao.pdf