A Critical Examination of Cartelisation of MSME Enterprises in the Context of Competition Act, 2002

This Micro, Small, and Medium Enterprises (MSMEs) play a crucial role in India's economy, contributing significantly to employment and GDP. However, their competitive landscape is shaped by both government support and regulatory constraints under the Competition Act, 2002. The Competition Commission of India (CCI) aims to prevent anti-competitive practices, including cartelization, which poses a challenge when MSMEs form consortia to improve market position. While government initiatives like the National Small Industries Corporation (NSIC) encourage collaboration among MSMEs, such arrangements often raise concerns about violating anti-cartel provisions. This paper critically examines the intersection of MSME policies and competition law, analyzing whether MSME consortia function as legitimate business collaborations or as cartels that distort market competition. Through case studies and regulatory reviews, it highlights the legal ambiguities surrounding MSME cooperation and the CCI’s enforcement trends. Recent decisions demonstrate a nuanced approach, where MSMEs engaging in cartel-like behavior have been issued cease-and-desist orders rather than financial penalties, reflecting a shift towards leniency. The study argues for a balanced regulatory framework that differentiates between pro-competitive MSME alliances and harmful cartelization. It advocates for clearer legal provisions and regulatory guidance to ensure fair competition while allowing MSMEs to thrive in a challenging economic environment.