Agreements which cause or are likely to cause appreciable adverse effect on competition are anti-competitive agreements. Horizontal agreements are those that are between enterprises at the same stage of the production chain. For example, agreement between two rivals is a horizontal agreement. In cases of agreements between rivals for fixing prices or for limiting production or for sharing markets, there is a presumption in the Act that such agreements cause appreciable adverse effects on competition.

Cartel is a horizontal agreement between producers of goods or providers of services for price-fixing or sharing of market, and is generally regarded as the most pernicious form of anti-competitive agreement. Vertical agreements are those that are between enterprises at different stages of the production chain. For example, an agreement between the manufacturer and a distributor is a vertical agreement.

The presumptive rule does not apply to vertical agreements. The question whether the vertical agreement is causing appreciable adverse effect on competition is to be determined by rule of reason, which essentially means that the positive as well as the negative impact of such agreement on competition will have to be taken into account before coming to any conclusion.

The law recognizes intellectual property rights and in order to facilitate their protection, it permits reasonable restrictions imposed by their owners. Since exports do not impact markets in India, agreement between exporters, in spite of being horizontal, are exempted.