Appreciable adverse effect on competition
Also called: AAEC · Topic: Market Structures, Market Failure and Competition · NCERT: Beyond NCERT
Meaning
Appreciable adverse effect on competition (AAEC) is the legal test in India's Competition Act 2002. It decides whether an agreement or a combination (a merger or acquisition) is anti-competitive. Agreements that cause AAEC are void, and so are combinations that cause it. Section 19(3) weighs harms against benefits.
- Harms: creating entry barriers, driving existing competitors out, and foreclosing competition (shutting rivals out of the market).
- Benefits: gains to consumers, better production or distribution, and technical, scientific or economic development.
Example
Horizontal agreements among rivals, such as price fixing, are presumed to cause AAEC. In the cement cartel case (CCI 2012), 11 firms were penalised about ₹6,307 crore. NCLAT upheld the penalties in July 2018. Vertical agreements are different: AAEC must actually be shown under the "rule of reason".
Don't confuse with
- Abuse of dominance: under Section 4, the question is whether a dominant firm misused its strength. AAEC is the effects test used for agreements and combinations.
Related concepts
- Anti-competitive agreements
- Horizontal agreement
- Bid rigging
- Vertical agreement
- Resale price maintenance
- Leniency programme
- Dominant position
- Relevant market
- Abuse of dominance
- Predatory pricing