Cabinet DecisionsLegislation Updates

The Union Cabinet has given its approval for rightsizing the Competition Commission of India (CCI) from 1 Chairperson and 6 Members (totalling seven) to 1 Chairperson and 3 members (totalling 4) by not filling the existing vacancies of 2 members and 1 more additional vacancy, which is expected in September, 2018 when one of the present incumbents will complete his term.

Benefits:

The proposal is expected to result in reduction of 3 posts of members of the Commission in pursuance of the Governments objective of “Minimum Government – Maximum Governance”.

As part of the Governments objective of easing the mergers and amalgamation process in the country, the Ministry had revised de minimis levels in 2017, which have been made applicable for all forms of combinations and the methodology for computing assets and turnover of the target involved in such combinations, has been spelt out. This has led to reduction in the notices that enterprises are mandated to submit to the Commission, while entering into combinations, thereby reducing the load on the Commission.

The faster turnaround in hearings is expected to result in speedier approvals, thereby stimulating the business processes of corporates and resulting in greater employment opportunities in the country.

Background:

Section 8(1) of the Competition Act, 2002 (the Act) provides that the Commission shall consist of a Chairperson and not less than 2 and not more than 6 members. Presently, the Chairperson and 4 members are in position.

An initial limit of 1 Chairperson and not more than 10 members was provided in the Act, keeping in view the requirement of creating a Principal Bench, other Additional Bench or Mergers Bench, comprising at least 2 members each, in places as notified by the Central Government. In the Competition (Amendment) Act, 2007 (39 of 2007), Section 22 of the Act was amended removing the provision for creation of Benches. In the same Amendment Act, while the Competition Appellate Tribunal (CAT) comprising one Chairperson and 2 members was created, the size of the Commission itself was not commensurately reduced and was kept at 1 Chairperson and not less than 2 but not more than 6 members.

The Commission has been functioning as a collegium right from its inception. In several major jurisdictions such as in Japan, USA and U.K. Competition Authorities are of a similar size.

[Press Release no. 1527701]

Cabinet

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): The CCI has passed final order in two cases involving bid rigging/collusion in three tenders floated by Pune Municipal Corporation for Design, Supply, Installation, Commissioning, Operation and Maintenance of Municipal Organic and Inorganic Solid Waste Processing Plant(s). These cases were taken up by CCI suo motu under Section 19 of the Act based on the disclosure by firms under Section 46 of the Competition Act, 2002 (‘the Act’) read with the Competition Commission of India (Lesser Penalty) Regulations, 2009 (‘Lesser Penalty Regulations’). All firms in these cases had approached CCI as lesser penalty applicants.

While in one case, the tenders pertained to Financial Year 2013-14, in other case the tender pertained to Financial Year 2014-15. From the evidence gathered during investigation, CCI found that there was bid rigging/collusive bidding in the Tender Nos. 21 and 29 of 2013 and Tender No. 59 of 2014 floated by Pune Municipal Corporation for Solid Waste Processing Plant(s), in contravention of Section 3(3)(d) read with Section 3(1) of the Act by way of submitting proxy/ cover bids.

In case involving tender floated in Financial Year 2013-14 penalty was imposed on four firms in terms of Section 27(b) of the Act at the rate of 10 percent of their average turnover for the years 2011-12, 2012-13 and 2013-14 i.e. three years preceding the year in which collusion took place. An amount of INR 46.45 Lakhs was imposed on Saara Traders Pvt. Ltd. (Saara), INR 33 Lakhs on Ecoman Enviro Solutions Pvt. Ltd. (‘Ecoman’), INR 11 Lakhs on Fortified Security Solutions (‘Fortified’) and INR 26.40 Lakhs on Raghunath Industry Pvt. Ltd. (‘Raghunath’). The penalty was also imposed on individual officials of three firms, namely, Saara, Ecoman and Raghunath at the rate of 10 percent of their average income for the same three years. No penalty was imposed on individual of Fortified as it is a proprietorship firm. Further, in view of penalty already levied in Case No. 50 of 2015 for infringement during the period 2014-15, no penalty was levied in case involving tender floated in financial year 2014-15.

Keeping in view the modus operandi of the cartel, the stage at which the lesser penalty application was filed, the evidences gathered by the DG independent of lesser penalty application and co-operation extended in conjunction with the value addition provided in establishing the existence of cartel, CCI granted 50 percent reduction in penalty to Saara and its individuals than otherwise leviable. Pursuant to reduction, penalty imposed on Saara was INR 23.22 Lakh and INR 74,513 on its individual. [In re, Cartelization in Tender Nos. 21 and 28 of 2013 of Pune Municipal Corporation for Solid Waste Processing, Suo Motu Cases Nos. 03 and 04 of 2016, decided on 31.5.2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India: CCI imposed penalty on three leading Indian Zinc-Carbon Dry Cell Battery manufacturers – Eveready Industries India Ltd. (‘Eveready’), Indo National Ltd. (‘Nippo’), Panasonic Energy India Co. Ltd. (‘Panasonic’) and their association AIDCM (Association of Indian Dry Cell Manufacturers) for colluding to fix prices of zinc-carbon dry cell battery in India. CCI invoked the provisions of Section 46 of the Competition Act, 2002 (‘the Act’) read with the Competition Commission of India (Lesser Penalty) Regulations, 2009 (‘Lesser Penalty Regulations’) to reduce the penalty imposed upon Panasonic, Eveready and Nippo by 100 percent, 30 percent and 20 percent respectively .

The case against these battery manufacturers was taken up by CCI suo motu under Section 19 of the Act based on the disclosure by Panasonic under Section 46 of the Act read with the Lesser Penalty Regulations. During investigation, DG (Investigation), CCI in exercise of the powers vested with it under Section 41(3) of the Act carried out simultaneous search and seizure operations at the premises of Eveready, Nippo and Panasonic on 23.8.2016 and seized incriminating material and documents there from. Subsequently, while the investigation was in progress and report from the DG was pending, Eveready and Nippo, approached CCI as lesser penalty applicants.

From the evidence collected, CCI found that the three battery manufacturers, facilitated by AIDCM, had indulged in anti-competitive conduct of price coordination, limiting production/ supply as well as market allocation in contravention of the provisions of Section 3(3)(a), 3(3)(b) and 3(3)(c) read with Section 3(1) of the Act. It was observed that the conduct was continuing from 2008, which is prior to 20.5.2009, the date on which Section 3 of the Act became enforceable, and up till 23.8.2016 i.e. the date of search and seizure operations by the DG.

Considering contravention of provisions of the Act, an amount of Rs. 245.07 crore, Rs. 52.82 crore and Rs. 74.68 crore was computed as leviable penalty on three battery manufacturers i.e. Eveready, Nippo and Panasonic, respectively, in terms of the proviso to Section 27(b) of the Act. While computing leviable penalty, CCI took into consideration all relevant factors including duration of cartel, industry conditions, etc. and decided to levy penalty on the three battery manufacturers at the rate of 1.25 times of their profit for each year from 2009-10 to 2016-17. Also, penalty of Rs. 1.85 Lakh was levied on AIDCM at the rate of 10 percent of average of its receipts for preceding three years. Additionally, considering totality of facts and circumstances of the case, penalty leviable on individual officials/office bearers of the three battery manufacturers and AIDCM was computed at the rate of 10 percent of the average of their income for preceding three years.

Considering the stage at which the lesser penalty application was filed and the co-operation extended in conjunction with the value addition provided in establishing the existence of cartel, CCI granted Panasonic and its individuals 100 percent reduction in the penalty than was otherwise leviable. Eveready and Nippo, along with their individuals, were granted 30 and 20 percent reduction in penalty, reducing it to Rs. 171.55 crore and Rs. 42.26 crore respectively. No penalty was imposed on Panasonic. [In re, Cartelisation in respect of zinc carbon dry cell batteries market in India, Suo Motu Case No. 02 of 2016, order dated 19.4.2018]

OP. ED.

After three years of rigorous investigation, the Competition Commission of India (CCI) has announced its landmark decision[1] against Google, holding Google guilty of contravention of competition law on three counts out of the many investigated and imposed a penalty of Rs 135.86 crores upon Google. Informations against Google were filed by bharatmatrimony.com and Consumer Unity and Trust Society (CUTS) in 2012. CCI, by majority of 4:2, has held Google guilty of abusing its dominant position by indulging into search bias and for imposing certain restrictions upon its direct search intermediation partners.

The Commission has analysed the conduct of Google in two separate markets of “Online General Web Search Services in India” and “Online Search Advertising Services in India”, wherein both, Google was found to be undoubtedly dominant. Keeping in mind that intervention in digital markets by a regulatory authority should be “targeted” and “proportionate” lest it stifles innovation, CCI examined the various innovative features introduced by Google in the design of its results page and the effect of these new product designs on the web publishers as well as the users. Though CCI found no problem with Google’s Universal Results (groups of results of a specific type of information like news, images, local, etc.), OneBoxes (display box showing the exact answer to user query from one web publisher selected by Google) and Commercial Shopping Unit (sponsored unit on top/right of results page showing advertisements with images from which Google earns revenue). Google was found to be on the wrong side of law with respect to the display of Universal Results at fixed 1st, 4th and 10th positions prior to October 2010. The majority was of the view that such fixed positions were not based on relevance and therefore, may have misled the users. However, the minority noted that since Google has self-corrected such conduct long back, any need for regulatory intervention is obviated.

Next, in regard to Google Flights Commercial Unit, the majority has found contravention by Google as firstly, prominent placement of Flights Unit on results page pushes down third-party travel verticals (like MakeMyTrip, Goibibo, etc.) which may be more relevant for the users leading to unfairness to both travel verticals as well as the users; and secondly, since clicking on “search flights” link in this Commercial Unit takes the users to Google Flights vertical page, it amounts to unfair diversion of traffic by Google to its specialised search vertical. On the other hand, the minority on this count has observed that Commercial Flights Unit is nothing but an enhanced ad format and it is clearly distinguished by labelling the Unit as “sponsored”. Also, there is no evidence on record to establish any actual misleading or degradation or user diversion as a result of such Unit as was the case with Google Shopping Commercial Unit in the European Union. Further, since the Flights Unit does not offer any booking service but is only a comparison service, it cannot as such be compared with third-party travel verticals at all.

In the other market of online search advertising services, CCI has analysed three issues and found no problem in either of them. With regard to Google’s advertising platform of AdWords, CCI has opined that Google shares more than sufficient information with the advertisers to enable them to assess the performance of their ads and it does not discriminate with its House Ads. In respect of multihoming, CCI has found that AdWords API terms and conditions do not in any manner restrict the advertisers from transferring their ad campaigns on multiple platforms. In regard to allegations of trade mark law violation by Google allowing third parties to bid on trademarked keywords or using trademarked terms in AdTexts, CCI has very astutely restricted its jurisdiction noting that the same falls within the regulatory domain of the civil courts and an “isolated transactional imperfection” on account of “delay in whitelisting” cannot amount to competition law violation by Google.

Lastly, two more conducts of Google have been analysed — one with regard to Google’s distribution agreements and other with regard to Google’s direct intermediation/syndication agreements. In respect of distribution agreements which Google has with for instance Apple, whereby Google is the default search service provider in Safari web browser, CCI has found no “imposition” as default browser can be changed by the users at will. In regard to direct intermediation/syndication agreements, which enable website publishers to place Google services on their web pages, CCI has observed that Google offers two types of AdSense programs — search intermediation which enables web publishers to place Google search bar on their websites and ad intermediation which enables publishers to show Google ads on their websites, both search ads (AFS — AdSense for Search) and display ads (AFC — AdSense for Content). In direct ad intermediation, no contravention was found; however, in direct search intermediation, the restriction placed by Google on inclusion of any substantially similar search bar by web publishers on their websites has been found to be violative of the law. However, the minority, on this count too, has dissented and observed that since such restriction is not available in the online search intermediation agreements entered into by Google which are openly available to all web publishers, but is only put in the directly negotiated search intermediation agreements, the choice of the web publishers (consumers) is not forcefully restricted but rather such restriction is accepted at will. Further, since no independent “search intermediation/syndication services” market has been analysed, the finding given by the majority seems a bit presumptive.

Hence, as per the minority, no case of contravention by Google on any issue, is made out. However, the majority, taking Google’s revenue from its India operations into account, has imposed a penalty @ 5% of its average turnover, amounting to Rs 135.86 crores upon Google. Google, being an intricate part of every internet user’s life, this decision[2] of CCI is bound to have a wide impact. Since the matter involves high stakes, it is likely to go in appeal as well, may be even from both sides. However, as for now, CCI, vide this order, has shown exemplary understanding of the technical issues at hand, and yet again proven its balanced judicial prudence.

[1] Matrimony.com Ltd. v. Google LLC, 2018 SCC OnLine CCI 1.

[2] Ibid.

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): While observing that Magicbricks.com along with four other real estate websites is not dominant in the market of “services of real estate brokers/ agents in India”, CCI dismissed the allegations of monopolization of real estate broking business in India by the said websites. CCI was hearing an information filed by Confederation of Real Estate Brokers’ Association of India having combined membership of approximately 20,000 real estate brokers, against Magicbricks.com, Housing.com, 99acres.com, Commonfloor.com and Nobroker.in. It was alleged in the information that these online real estate listing portals have abused their dominant position by advertising ‘No Brokerage Policy’ (NBP) on their websites, mobile applications, newspapers etc. and imposed unfair and discriminatory conditions on the traditional real estate brokers who are doing real estate business on the basis of commission. It was further alleged that the websites were practicing ‘No NBP’ either through auction of properties or through the offer of ‘buy directly from owners’ on their websites and newspaper advertisements in order to eliminate competition and real estate brokers from the market. It was also averred in the information that due to conduct of said online real estate listing portals in indulging NBP or charging much less as brokerage fee compared to the traditional brokerage fee of 2% of the sale/ purchase value of a property while undertaking a real estate transaction or public auctioning of properties, traditional real estate brokers are getting eliminated from the market. After hearing both the parties and perusal of material on record, CCI observed that in India, no licence or registration is required to undertake the brokerage business in real estate sector, thus, the presence of a large number of listing sites and traditional brokers in the said relevant market pose competitive restraint on each other and hence, no specific player can act independently of the market forces and affect the consumers or other players in its favour. The Commission also perused the website ranking figures of Alexa.com submitted by the Association and noted that based on the said figures it was not possible to gauge the dominance of any of the five real estate websites in the relevant market because the ranking was limited to only the websites/ portals and does not include the off-line brokers. CCI further noted that in absence of dominance of any of the five real estate websites in the relevant market, there can be no case of contravention of the provisions of Section 4 of the Competition Act against any of the five real estate websites. [Confederation of Real Estate Brokers’ Association of India v. Magicbricks.com, [2016] CCI 19, decided on May 3, 2016]