Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India:  A four-member bench comprising of Devender Kumar Sikri, Chairperson and Sudhir Mital, Augustine Peter and U.C. Nahata, Members, held that opposite parties, ‘Ola’ (OP 1) and ‘Uber’ (OP 2) did not contravene either Section 3 or 4 of the Competition Act, 2002.

The informant- ‘Meru’ cab, informed the Commission that the OPs were collectively the dominant players in the radio taxi services market. They entered into agreements with each other that were detrimental to the competition. The informant raised various points. Firstly, it was alleged that the OPs abused their dominant position by entering into agreements with each other that had an appreciable adverse effect on competition on the market. Secondly, the question was also raised as to the common investors (mainly ‘SoftBank’) which, as alleged, resulted in common control. Thirdly, it was alleged that the OPs had indulged in below variable cost pricing for a period of over two years. Considering the information received, the Commission, on 3-8-2017,  sought further information from the OPs primarily in regard to their shareholding pattern.

The Commission observed that the informant did not place on record any agreement entered into between the OPs and the drivers imposing exclusivity restrictions on drivers in contravention of Section 3(4) read with Section 3(1). Regarding dominance, the Commission was of the opinion that high market share was not in itself an indicator of dominant position. As for the allegation of collective dominance, the Commission observed that Section 4 does not contemplate in its fold the concept of collective dominance. The Commission held that the dominance of either Ola or Uber was not made out. The Commission showed some concern over the fact of common ownership (common investors like SoftBank) and held that policy needs to be framed in that regard, as such overlapping interest may result in the reduction of firms’ incentive to compete. However, on this point too, the Commission held that as per the law as it stood on the day, the OPs could not have been said to contravene the provisions of the Competition Act, 2002. Holding that investigation under the Act could not be held solely based on conjectures and apprehensions, the Commission closed the matter under Section 26(2) of the Act. [Meru Travel Solutions (P) Ltd. v. ANI Technologies (P) Ltd., Case No. 25 of 2017, dated 20-6-2018]

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: The Competition Commission of India (CCI) has found Grasim Industries Limited (GIL), Aditya Birla Chemicals (India) Ltd. (ABCIL) and Gujarat Alkalies and Chemicals Ltd. (GACL)to be in contravention  of the provisions of Section 3(1) read with Section 3(3)(d) of the Competition Act, 2002 for rigging Delhi Jal Board tenders which were floated for procurement of Poly Aluminium Chloride  (PAC) which is used for purification of water.  The final order was passed on a reference filed by Delhi Jal Board (DJB).

While rejecting the plea of being single economic entity taken by GIL and ABCIL, CCI noted in the order that these two companies are not only separate legal entities but also have participated in these tenders individually and separately. Further, CCI noted that the concept of single economic entity has no application in the context of the proceedings initiated under Section 3(3) of the Act, especially in a case of bid rigging/collusive bidding.

Apart from issuing a cease and desist order against the above companies, CCI has imposed a penalty of Rs. 2.30 crore, Rs. 2.09 crore and Rs. 1.88 crore upon GIL, ABCIL  and GACL respectively for the anti-competitive conduct. The penalty has been levied @ 8 % of the average relevant turnover of GIL and ABCIL of preceding three years. In case of GACL, penalty has been levied @ 6 % of the average relevant turnover of preceding three years. The conduct of GIL and ABCIL was noted by the Commission as egregious as these companies while apparently submitting separate bids, prepared and finalised the same through common channels creating a facade of competitive landscape.

Vide separate order passed in another reference filed by DJB in respect of alleged bid rigging in the tenders floated for Liquid Chlorine- another chemical used for purification of water, CCI found no contravention as no analysis was done by the Director General with respect to basic price, transportation cost, taxes and policy of profit margin of the parties as was done in the previous reference. [In re, Delhi Jal Board v. Grasim Industries Ltd., 2017 SCC OnLine CCI 48, decided on 05.10.2017]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India: The CCI recently passed an order under Sec. 26(2) of the Competition Act wherein the informant had filed information against several banks under Section 19(1)(a) of the above-mentioned Act alleging cartelisation between them to limit or control the safe deposit lockers services offered by them.

The facts of the case are that the informant had tried to avail a bank locker with a bank when he came to know that banks charge a certain amount of rent for providing locker services and the person availing the service is also made to sign an agreement wherein it is agreed that the banks shall hold no liability for any loss sustained to the articles that are kept inside the locker. The Informant noticed that till date no such mechanism has been introduced by banks to compensate their customers for any loss/ damage towards the articles kept inside the lockers. The informant alleged that banks in India have formed a monopoly over the system and them not compensating for any loss/ damage to the articles constitutes as them engaging in Cartelisation.

The informant contended that cartelisation is occurring due to non-compliance towards the principle of “Bailment” under the Indian Contract Act, 1872 by the banks in India. The informant argued that the mandatory agreement which is to be signed by the person applying for availing the bank locker is anti-competitive and prohibitive under Section 3 of the Act. The informant acknowledged that although there is no explicit agreement amongst the banks to show any evidence of such a practice being carried out, it is appropriate to inquire into cases of anti-competitive agreements on the basis of material and doing so will prove this practice amongst banks being anti-competitive. The informant also alleged that the banks have formed an association to prevent improvement of services thus affecting competition in the market and interests of consumers.

The Commission held that since there is no evidence given in regard to the allegation that the banks engage in cartelisation besides merely providing RTI responses that suggest that no responsibility is taken by the banks for any loss/damage to the articles inside the lockers, it cannot be considered by the Commission. The Commission mentioned that certain elements need to be fulfilled for Section 3(3) of the Act to have been contravened, which are:

i. the competitors need to enter into an agreement under Section 2(b) of the Act inclusively as an arrangement in concert or one that is enforceable by legal proceedings; and

ii. the object, if such an agreement is covered under Sec.tion 3(3) of the Act.

The Commission noted that for establishing a case in the preliminary stages, the above-mentioned elements need not be established in great details but there should at least be material that establishes a case prima facie in contravention of Section 3 of the Act. Hence, it held that no such prima facie case is being established considering the material that has been presented by the informant. [Kush Kalra v. Reserve Bank of India, Case No. 23 0f 2017, decided on 23/08/2017]

 

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India: The Competition Commission of India (CCI) issued an order stating that Reliance Jio Infocomm Limited (RJIL) introductory offers are not in contravention of Section 4 of the Competition Act, 2002.

The informant alleged that RJIL OP-1 has hidden objectives of abusing its dominant position by use of its financial status. Service users are required to have a smart phone which supports 4G network and voice over LTE. For that, RJIL is offering the 4G compatible Mobile Handsets @ Rs 3000 per handset unit. The informant asked for a detailed investigation on the activities of RJIL.

Commission viewed that the relevant product market in the facts and circumstances of the present case is the market for ‘provision of wireless telecommunication services to end users’. In regard to the relevant geographical market the Commission noted that the relevant geographic market in the instant case appears to be ‘each of the 22 telecommunication circles in India’. Therefore the relevant market in the instant case is the market for ‘provision of wireless telecommunication services to end users in each of the 22 circles in India’.

Commission held that it is difficult to construe dominant position being possessed by RJIL with 6.4% market share and also it is not likely to hold dominant position in such market on account of the presence of other competitors (Vodafone, Idea, etc.) who derive commercial and technical advantages due to their sustained and sound business presence in other telecom services. [In re C. Shanmugam, 2017 SCC OnLine CCI 27, decided on 15.06.2017]