Introduction
It is a well settled notion in common law that agreements which impose restraints on trade are not enforceable. This notion was developed further in the late 19th century and late 20th century and made applicable to what we call ‘competition law’ in the USA. It is important to note that the enactment of the Sherman Anti-trust Act, 1890 was a reason for this development.
What is the correlation between ‘restraint of trade doctrine’ and ‘modern competition law’? This article seeks to examine the relationship between the two by tracing back cases when the Sherman Act was newly enacted and the interpretation given by the US Supreme Court. The article has two parts. Part I deals with the doctrine of restraint of trade in order to have a clear understanding of it before stepping into part II where the correlation between the doctrine and competition law is analysed. Part III discusses the various provisions in different legislations enacted in India which deal with agreements in restraint of trade.
Part- I
The Common Law doctrine of ‘Restraint of Trade’
Limitations on freedom of contract:
Public Policy imposes certain limitations on the freedom of persons to contract. An ostensibly valid contract may be tainted with illegality. The source of the illegality may arise by statute or by virtue of the principles of common law.
Agreements in Restraint of Trade:
The doctrine of restraint of trade is a rule of public policy developed by the common law. It is a general principle of the common law that a person is entitled to undertake a lawful trade when and where he wishes. The common law does not favour agreements that prohibit or restrain a person in the exercise of a lawful trade, employment or profession. I ...