OP. ED.

The Competition Act, 2002 (the Act) is a giant step towards reformation of anti-competitive policies over its precursor, the Monopolistic and Restrictive Trade Practice Act, 1969 (MRTP). Becoming fully operational in 2009, the Competition Commission of India (CCI) in these 9 years has witnessed varying kinds of cases coming up related to issues of economic concentration and unfair trade, with its jurisdiction extending to a wide area of e-commerce cases involving both online and offline transactions.[1] It has brought about many changes and has had wide-ranging effects on the business sector, both private and public.

Extraterritorial jurisdiction: To infinity and beyond

The Act incorporates extraterritorial jurisdiction as under Section 32 of the Act which is based on the “effects doctrine”.[2] The absence of such provision under the MRTP Act barred the scope of action against any anti-competitive conduct involving imports, and foreign cartels in particular.[3] The Act has categorically removed this restriction, thus having an enabling effect and giving CCI the power to take action against any foreign business entity indulging in any sorts of anti-competitive behaviour.

However, its application remains contentious as far as the turnaround time for the approval of combinations and quick decision making is concerned. There exist apprehensions if the CCI is logistically equipped sufficiently to strike a chord between the international competition law developments and domestic legislation and responsibilities. If the law does have extraterritorial reach and a domestic court or tribunal has jurisdiction to hear the case, practical problems of enforcement with respect to the obtaining of evidence and the implementation of any fines or penalties are likely to arise.

The CCI, despite being well empowered has not been successful in laying down any procedures or formulating any regulations to govern the time frame to act in matters falling outside India’s territorial jurisdiction. In today’s scenario, corporate dealing involving MNC’s often result in the creation of different synergies within different countries and hence are likely to give rise to conflicting opinions about the issue within competition regulators having jurisdiction over the case involved.[4] Considering the paucity of the jurisprudence on this issue, the stance of the CCI in the future matters would be of huge relevance in the determination of any well-settled position.

Penalising the guilt: The is and the ought

CCI imposes a plethora of penalties[5] for the reasons enshrined in the section and in Part VI of the act with the entire funds being credited to the Consolidated Fund of India.[6] In its first investigation, CCI had imposed a penalty of Rs 1 lakh on movie producers colluding against multiplexes.[7] However, recent trends show that former was nominal imposition for having an amicable start with penalties being imposed in huge proportions in the times to come. For example, the CCI did impose an equally hefty penalty of Rs 2500 crores in Automobiles case[8], Rs 1700 crores in the case against Maharashtra State Power Generation Company[9], etc.

In the last 9 years, the CCI has taken a different turn, recently approving the first ever leniency application for a cartel member because the partner of the firm confessed to the anti-competitive practices which prompted the CCI to reduce the fine by 75%. It recently notified the Competition Commission of India Lesser Penalty Amendment Regulations, 2017, stating that a confession about Cartelisation (if witness was complicit) will provide them with an amnesty/leniency from the imposed liability. This depicts that CCI is going through a streamlined approach adopting the propensity to charge more proportionally.

In Iridium India Telecom v. Motorola Inc.[10], the Supreme Court held that companies can be prosecuted for offences involving mens rea with the intent and direction provided by the directors and promoters being attributable to the company. However, under the Act there exists a criminal sanction only for non-compliance of the order passed[11] with no specific provision of such liability for anti-competitive practices. Keeping in view, these aspects the Act needs amendment for incorporation of criminal sanction to maintain the deterrence in conformity with Section 6 of the Act.

Appeals of CCI orders: Hear Hear

The increasing number of appeals to High Courts against the Competition Appellate Tribunal (COMPAT), the Competition Statutory Appellate Tribunal has not be welcomed positively since it leads to the overlapping of powers and multiplicity of efforts. In State of M.P. v. Nerbudda Valley Refrigerated Products Co. (P) Ltd.[12], the Supreme Court held that any writ petition cannot be accepted by any High Court if a statutory appellate mechanism exists. On the contrary, Paradip Port Trust v. Sales Tax Officer[13] laid down that no bar on such appeal to the High Court exists when there is any violation or non-compliance with the principles of natural justice or exceeding of jurisdictional limits by Compat, even if there exists any statutory appeal mechanism.

In 2013, the position was finally settled that such writ petitions filed against the CCI order are procedurally unfair as they lead to a direct appeal to High Court by surpassing COMPAT’s authority. In the Automobiles case[14] between Mahindra and Tata Motors the Court held the order should be challenged before COMPAT since it is functional. High Courts are not to interfere at this stage unless it is found to be a case of gross transgression of the jurisdiction or results in the breach of natural justice principles.[15] Otherwise, constitutionally, Article 226 is of a discretionary nature granting power to exercise the same to the High Court. Since most of the cases of appeal deal with statutory authority such conflict of jurisdiction requires a settled position of law.

Case closed or not

According to the Act, the Commission on the receipt of a complaint has to direct the initiation of an investigation into the allegations, based on which the Director General is supposed to submit a report. Though the Act explicitly grants CCI the authority to direct the Director General to investigate and close the matter if he detects no contravention and furthers the investigation, it does not provide for closure of the case even if the Director General finds any contravention with the Act during the investigation. Section 26 of the Act fails to provide for a situation where the Commission may not agree with the Director General’s findings after it finds a contravention, often nullifying the power of the parties to appeal to the higher authorities such as to the COMPAT or to the Supreme Court after the case has been struck down by the Commission.

Such a lacuna inherent in the Act has often led to a dispute about the powers granted under the Act to CCI and the authority and binding value of the Director General’s report. This contention was laid to rest in Gulf Oil Corp. Ltd. v. CCI[16] where the Court held that Director General’s report merely has a recommendatory nature and the CCI need not proceed under Section 26(7) in every case where it disagrees with the Director General’s report. There have been situations where cases have been closed by the Commission despite Director General stating otherwise, but this uncertainty can be resolved only when there is either a legislative amendment or by way of some purposive interpretation the judiciary.

Lag due to the lack: Recommendation for way ahead

The competition law requires multi-disciplinary inputs in its implementation and enforcement. The data reflects the inability of CCI to keep pace with the new market players due to technological advancements, insufficiency of data and shortage in staff and panel experts, thus affecting the process of expediting investigation and adjudication of matters. The initial few years witnessed a trend of delay in the disposal of cases due to lacking number of officials requiring appointment of experts from legal and economic backgrounds at different levels to help handle these cases. Resultantly, the performance has improved with respect to the disposal of case with the average disposal rate of merger control cases reducing from around 16.5 days in 2011-2012 to around 26.4 days in 2015-2016.[17]

To deal with the existing laxity, greater man power is needed which is presently built up through deputations and imports of officers from other departments. Thus a specialised task force would be more advantageous that this deputation based enforcement since such enforcement needs the expertise and sufficiency of manpower oriented to handle anti-competitive wrongdoings to move ahead. Thus, we recommend instituting a separate cadre for the CCI through the Indian competition services for the better and speedier addressing of the matters at hand. Under this service, we recommend to institutionalise the existing task force which would remove arbitrariness in the existing subjective standards.

The reason why CCI lags behind is because of its inability to keep pace with the latest advancements. An institutionalised workforce would address these concerns by providing a better equipped organisation structure that would facilitate in disposal mechanism, etc. The Indian competition regime has come a long way in the fields analysed above and it still has a long way to go to maintain the “fairplay” in Indian markets.

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* IIIrd year students, BA, LLB (Hons.), Batch of 2021, National Law University, Delhi.

[1]  Fairplay, Quarterly newsletter of CCI (2016) p. 19.

[2]  Kartik Maheshwari, Simonc Reis Extraterritorial Application of the Competition Act and its Impact, (2012) CompLR 144, 148.

[3]  Haridas Exports v. All India Float Glass Manufacturer’s Assn., (2002) 6 SCC 600 : AIR 2002 SC 2728.

[4]  Haridas Exports v. All India Float Glass Manufacturer’s Assn., (2002) 6 SCC 600 : AIR 2002 SC 2728.

[5]  Competition Act, 2002, S. 27.

[6]  Competition Act, 2002, S. 47.

[7]  Film & Television Producers Guild of India v. Multiplex Assn. of India, 2013 SCC OnLine CCI 89.

[8]  CCI, Shamsher Kataria v. Honda Shiel Gas India Ltd., 2015 SCC OnLine CCI 114 : [2015] CCI 133

[9]  Maharashtra State Power Generation Co. Ltd. v. Mahanadi Coalfields Ltd., 2017 SCC OnLine CCI 11.

[10]  (2005) 2 SCC 145.

[11]  Competition Act, 2002, Ss. 42, 48.

[12]  (2010) 7 SCC 751.

[13]  (1998) 4 SCC 90.

[14]  CCI, (n. 8)

[15]  State of U.P. v. Mohd. Nooh, AIR 1958 SC 86.

[16]  2013 SCC OnLine Comp AT 132 : [2013] Comp AT 122.

[17]  Competition Commission of India, Annual Report 2015 (2016), p. 50.

Cyril Amarchand MangaldasExperts Corner

 

 


It is not uncommon for companies to commence integration process right after the deal documents for the transaction are signed. While the senior management of the parties delight at the prospect of speedy harmonisation between the two businesses pending regulatory clearances and formal closing, often the reasonable boundaries of legitimate information exchange are trespassed. This excessive exchange of information and coordination between parties prior to consummation of a transaction is often susceptible to antitrust laws and can lead to heavy penalties.

This issue has been scrutinised by the French Competition Authority (FCA) in a recent decision in Altice Case[1] (Altice order) where the parties to the transaction had exchanged strategic information between signing and closing, including the acquirer intervening in the targets commercial and pricing policy requiring the target to take buyers consent for few activities, and exchanging price sensitive information. The exchange of such information was considered to be “gun jumping” and the FCA imposed a penalty of EUR 80 million on Altice.

Considering the trend of exchanging information in mergers and acquisitions, a common query that often arises is what can be done, and what cannot be, to ensure a seamless transition yet not draw the wrath of the antitrust authorities. In pursuance of answering this question, the Federal Trade Commission of United States of America has recently issued a brief guidance (FTC Guidance) explaining how the parties can reduce antitrust risk when exchanging competitively sensitive information prior to closing.

The FTC Guidance provides that the party disclosing the information should share the least amount of information needed for effective due diligence or premerger integration planning issue and such information should be narrowly tailored. If more detailed information is required for integration purposes, then resort should be taken to have clean teams to share such information. The Guidance further provides that if customer and competitive information is required to be given, then such information should be masked and consolidated and customer identities should be protected through redactions. Care should also be taken to ensure that information is not provided in tranches which can be consolidated to recover confidential information. Lastly, due care should also be taken to ensure that post due diligence or in the event of failure of the transaction finally taking place, the information provided is destructed. As for the receiving party, the FTC Guidance provides that, any employee handling the confidential information should be aware of the terms of confidentiality and clean teams should be established with third-party consultants. Clean team should also be vetted by outside counsel, and members of the clean team should have a strategy in place regarding who may access the acquired information. Clean teams should also undertake diligence to ensure that information meant for the clean team is not provided to members outside the clean team, and if such information is required to be provided, then, such information should be blinded, aggregated and vetted by an outside counsel before dissemination.

While this is an FTC Guidance, “gun jumping” issues are similar across all jurisdictions where there is a mandatory merger control regime which requires a pre-clearance before closing. India too is a mandatory suspensory regime where transactions which require a notification to the Competition Commission of India (CCI) pursuant to the Competition Act, 2002 (Act) are required not to consummate the transaction in part or whole before the CCI clearance or the expiry of the waiting period of 210 days. Since 2011, while the CCI has passed significant number of orders under Section 43-A of the Act penalising companies which have partly/wholly consummated the transaction before the same is notified to the CCI or before the receipt of approval, thus far there has been no specific decision in relation to gun jumping issues relating to information exchange. However, the CCI in its recent order in Hindustan Colas (P) Ltd./Shell India Markets (P) Ltd.[2] has furthered its jurisprudence by holding that pre-payment of consideration constitutes gun jumping as it creates a tacit collusion which may cause an adverse effect on competition even before consummation of the transaction, effectively stating that the actions of the parties which can have a possibility of affecting the independent behaviour of the transacting parties could be amenable to antitrust scrutiny.

The issue of what affects the independent behaviour of transacting entities prior to the final closing is somewhat foggy in India. However, what is rather clear is that while the exchange of benign information between the parties pre-closing is permissible, information which is commercially or competitively sensitive in nature such as strategic pricing information etc. would constitute “gun jumping” and therefore frowned upon. Having said that, given the practicalities of conducting business, sensitive business information is often shared even prior to closing through a safeguarded mechanism such as the one mentioned in the FTC Guidance (i.e. clean teams).

In this regard, although the competition regulators recommend that clean teams comprise external advisors, employees/personnel of the parties not closely associated with the day-to-day business operation and management of the transacting companies can also safely form a part of the clean teams arrangement subject to strict non-disclosure commitments ring-fencing the confidential information’s flow beyond the clean team members. This is one of the reasons why clean teams is fairly popular with the corporate houses as it allows effective integration planning sans the risk of antitrust concerns. Finally, in case of a doubt, it is best to seek the counsel of an external advisor to ensure that an otherwise harmless integration planning is not sabotaged resulting into a heavy fine from the CCI.

 

Anshuman Sakle is a Partner with the Competition Law Practice at Cyril Amarchand Mangaldas and can be contacted at anshuman.sakle@cyrilshroff.com. Anisha Chand is a Principal Associate with the Competition Law Practice at Cyril Amarchand Mangaldas and can be contacted at anisha.chand@cyrilshroff.com. Authors would like to thank Soham Banerjee, Associate, Competition Law Practice, for his contribution.

[1] Decision No. 16-D-24 of 8-11-2016.

[2] Combination Registration No. C-2015/08/299.

 

Cyril Amarchand MangaldasExperts Corner


The Indian telecom sector has witnessed continual activity in the recent years, with the entry of new players such as Reliance Jio, consolidation between existing players such as Vodafone and Idea Cellular and the exit of incumbent players such as Telenor and Tata Teleservices. This constant transformation has intensified the battle between industry players to garner market shares and attract consumers. In addition to competing in the marketplace, telecom operators have also been fighting legal battles on competition issues such as cartelisation and predatory pricing as well as on telecom issues such as interconnection. Given that the issues at the core of these matters relate to both competition and telecom laws, a turf war has arisen between the Telecom Regulatory Authority of India (TRAI) and the Competition Commission of India (CCI) re jurisdiction.

Notably, CCI had, through a letter to TRAI last year, highlighted its competence to look into matters relating to predatory pricing. The letter was a result of a consultation paper issued by TRAI in February 2017 on anti-competitive concerns in tariffs by Telecom Service Providers (TSPs).[1] In his letter, the CCI Chairperson stipulated that “issues and questions for consultation relating to delineation of relevant market, assessment of dominance and predatory pricing” are “issues of determination for the Commission”.[2]

Responding to CCI, TRAI stressed that it had the experience and capability to examine all matters, including competitive issues, falling within the purview of tariffs.[3] In line with its assertion, pursuant to the Telecommunication Tariff (Sixty-third Amendment) Order, 2018 (the Amendment Order)[4], TRAI has recently amended the Telecommunication Tariff Order, 1999 (the Tariff Order), to regulate tariffs offered by TSPs on the basis of competition law principles. Through the amendment, TRAI has introduced concepts of “significant market power” and “predatory pricing” in the Tariff Order.

According to TRAI, such regulatory powers are set out under the Telecom Regulatory Authority of India Act, 1997 (the TRAI Act), which requires it to take “measures to facilitate competition and promote efficiency in the operation of telecommunication services so as to facilitate growth in such services”. To further this mandate of facilitating competition, TRAI in its Amendment Order has provided guidance on non-predation, through the insertion of the following definitions:

(a) “Non-predation” has been defined as not indulging in predatory pricing by a service provider having significant market power;

(b) “Significant market power” has been defined as a TSP holding a market share of at least 30% in the relevant market, which is to be determined on the basis of either subscriber base or gross revenue. The Amendment Order simultaneously recognises that the concept of ‘SMP’ flows from the concept of ‘dominance’ under competition laws;

(c) “Predatory pricing” has been defined as the provision of a telecommunication service in the relevant market at a price which is below the average variable cost, with a view to reduce competition or eliminate the competitors in the relevant market—Interestingly, the Amendment Order also refers to the definition of “predatory pricing” under the Competition Act, 2002 (the Competition Act) to emphasise that intent is the key;

(d) “Relevant market” has been defined as the market which may be determined by TRAI with reference to the relevant product market for distinct telecommunication services (such as Wireline Access Service, National Long Distance Service, International Long Distance Service) and the relevant geographical market;

(e) “Relevant product market” has been defined as the market in respect of a distinct telecommunication service for which the licensor grants licence to the TSP;

(f) “Relevant geographic market” has been defined as a market comprising the respective licence service area for which the licensor grants licence to the TSPs to provide distinct telecommunication services.

In addition to requiring the TSPs to conduct a self-check of tariffs at the time of reporting it to TRAI in order to ensure that there is no predation, the Amendment Order also confers suo motu powers on TRAI to examine tariffs to determine the occurrence of any predatory pricing, thus extending its jurisdiction to ex-post abusive conduct. In case of predation, a penalty not exceeding INR 50 lakhs per tariff plan for each service area can be imposed by TRAI.

Post the introduction of the Amendment Order however, officials of TRAI have clarified that dominant operators may match tariffs offered by a new entrant, and such actions would not be seen as predatory.[5]

On the other hand, the Competition Act established a sector agnostic regulator to prevent practices having adverse effect on competition and to promote and sustain competition in markets. The Competition Act sets out specific prerogatives of CCI to prohibit anti-competitive agreements and abuse of dominance. The abusive practices identified include predatory pricing. However, affording due consideration to the market dynamics, the Competition Act requires CCI to holistically examine such conduct. The in-depth examination required by CCI includes the delineation of the relevant market on the basis of factors such as end-use, pricing, consumer preferences, regulatory barriers, transport costs, etc.[6] Subsequently, CCI is required to make a determination of dominance giving due regard not only to the market share of the enterprise, but also to its size and resources, economic power, entry barriers, countervailing buyer power, market structure, etc.[7] Similar to clarifications from TRAI officials, the Competition Act also provides for a carve-out against predatory pricing if such pricing has been adopted to “meet the competition”.

However, contrary to the bright-line test of 30% under the Amendment Order, CCI’s decisional practice repeatedly cautions against adopting a blanket market share test for detection of dominance. As noted by CCI’s Chairperson in the letter to TRAI, market interactions should ideally be assessed on a case-by-case basis without any presumptions based on a formulaic framework.[8] CCI’s holistic approach is evidenced by its recent orders in the telecom sector, where it has approved mergers of key telecom players, despite the significant aggregate market shares, after having weighed in factors such as buyer power, increased switching, absence of switching costs, presence of other players, dynamic nature of the market, etc.[9]

The difference in the regulatory frameworks gives a preview of the contrasting approach to be adopted by the regulators for the same contravention and the conflicting regulatory views that the industry is likely to witness in the coming months. Moreover, while contrasting views may make compliance by TSPs difficult, similar findings may also lead to double jeopardy.

The regulatory conflict has already surfaced before courts, with the Bombay High Court finding that the Competition Act itself is not sufficient to decide and deal with the issues arising out of the provisions of TRAI Act and the contract conditions, under the relevant regulations.[10] The appeal to the Bombay High Court had been filed against a prima facie order of the CCI finding that TSPs, such as Airtel and Vodafone, had cartelised to deny adequate point of interconnections to Reliance Jio to thwart its entry into the telecom market. The decision of the High Court has now been appealed to the Supreme Court.

While the way forward is unknown, this fight for regulatory supremacy can only end with the CCI and TRAI joining forces to coordinate and consult with each other in matters that involve questions of competition and telecom laws. This will also be in line with the intent of the legislators who foresaw this situation and included a provision[11] under the Competition Act for a reference of matters inter se CCI and other statutory regulators.

 

Anshuman Sakle is a Partner with the Competition Law Practice at Cyril Amarchand Mangaldas and can be contacted at anshuman.sakle@cyrilshroff.com.  Arunima Chandra is a Senior Associate with the Competition Law Practice at Cyril Amarchand Mangaldas and can be contacted at arunima.chandra@cyrilshroff.com.

[1] Available at <http://www.trai.gov.in/sites/default/files/Consultation_paper_03_17_feb_17_0.pdf>.

[2]Available at <https://www.thehindubusinessline.com/info-tech/turf-war-rages-between-cci-and-trai-over-telecom-tariffs/article9791247.ece>.

[3]Available at <http://www.financialexpress.com/industry/trai-tells-cci-it-has-power-to-settle-competitive-telecom-tariff-issues/798026/>.

[4] Available at <http://trai.gov.in/sites/default/files/TTO_Amendment_Eng_16022018.pdf>.

[5]Available at <http://www.livemint.com/Industry/O00tAdsmeBgcObcQSE42uO/Telecom-firms-free-to-match-Reliance-Jios-cheap-tariffs-ru.html>.

[6] Sections 19(6) and (7) of the Competition Act.

[7] Section 19(4) of the Competition Act.

[8]Available at <http://www.livemint.com/Industry/uzSqE22Uk4Lgt1jX8PjCOJ/CCI-to-Trai-Consult-us-on-predatory-pricing-issues.html>.

[9]Vodafone/Idea, Combination Registration No. C-2017/04/502; Bharti Airtel Ltd./Tata Teleservices Ltd., Combination Registration No. C-2017/10/531.

[10] Vodafone India Ltd. v. Competition Commission of India, 2017 SCC OnLine Bom 8524.

[11] Sections 21 and 21-A of the Competition Act.

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): CCI has dismissed allegations of abuse of dominant position against Nissan Motor India Pvt. Ltd. in terms of after-sales service while observing that the issue raised in the information pertained to alleged deficiency in services and no case of contravention of the provisions of Section 4 of the Competition Act was made out against Nissan Motor India Pvt. Ltd. The information before the Commission was filed against Sterling Vehicle Sales Pvt. Ltd. (an authorised dealer of Nissan Motor) and Nissan Motor India Pvt. Ltd. alleging contravention of the provisions of Section 4 of the Act. Earlier, the services and maintenance of the Nissan car of the informant were done from the service centre (Sterling Vehicle Sales Pvt. Ltd.), but many defects like unusual sound, faulty engine etc. emerged after the servicing. The Informant alleged that either the car has manufacturing defect or was damaged by service centre’s carelessness and negligent handling. Before CIC, informant prayed the Commission to issue a cease and desist order against the Opposite Parties restraining them from indulging in the alleged unfair and erroneous trade practices and direct them to exchange the defective car with a brand new car of the same model. The Informant also prayed that the Opposite Parties be directed to pay compensation to the tune of Rs. 2 lakhs towards the mental harassment and inconvenience caused. After hearing the parties, CIC observed that for making out a case for contravention of the provisions of Section 4 of the Act, the dominant enterprise has to be shown to have abused such position in the relevant market but the informant has not indicated any relevant market where any of the Opposite Parties is shown to be dominant. While observing that, “the grievances made by the Informant essentially pertain to alleged deficiency in services and none of the abusive instances as alleged in the information comes within the purview of Section 4(2) of the Act,” CIC closed the matter. [Jolly Diclause v. Sterling Vehicle Sales Pvt. Ltd., [2016] CCI 25, decided on June 7, 2016]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Business strategy by Bajaj Corporation for its product ‘Almond Drop Hair Oil’ was scanned by the competition regulator on information received by one of the distributors of Bajaj. CCI found that Bajaj had allocated area of business to every dealer and there was a vertical restraint imposed on the distributors to supply the products in the area limited by the company and the arrangement was monitored and enforced by Bajaj Corp. Such the practice of allocation of geographical area to its distributors amounts to exclusive distribution agreement (EDA) under section 3(4)(c) of the Competition Act. Bajaj had also indulged in resale price maintenance (RPM) by prescribing rate at which its products were to be re-sold by the dealers to the retailers. It was alleged by the informant that in order to ensure that there was no intra-brand competition or price competition of its products, Bajaj imposed RPM type vertical restrictions upon its dealers.

CCI observed that there are many players in the FMCG market in India providing consumer products and services in the areas of Health and Beauty, which indicates that the market of hair oil is wide and consumers have various brands as options to choose from. Bajaj does not have position of strength in this sector in comparison with other brands in market structure of FMCG products and particularly the hair oil segment in India. CCI opined that in the presence of several companies and considering the dynamic nature of the sector, conducts of Bajaj are unlikely to affect the inter-brand competition in the market. After considering effect of the impugned conducts of Bajaj on the touchstone of factors elucidated under section 19(3) of the Act, CCI opined that vertical restraints imposed by Bajaj upon its distributors have not been shown to have caused appreciable adverse effect on competition (AAEC) nor is there any appreciable effect on the benefits accruing to the ultimate consumers. On RPM the Commission noted the price suggestion was merely recommendatory in nature and that a bulk purchaser was free to sell the product at lower price. [In Re: Ghanshyam Dass Vij and Bajaj Corp. Ltd., [2015] CCI 155 decided on 21.10.2015]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India: CCI in its closure order in a case against TN Cable TV Corporation for alleged abuse of dominance noted that there are different mechanisms for transmitting/ re-transmitting signals of TV channels e.g. Terrestrial, Cable TV (analog and digital), Direct To Home (DTH), Head-end In The Sky (HITS), Internet Protocol TV (IPTV) and Mobile TV etc. These platforms cannot be treated similar and can be divided in different market based on economic affordability and their reach to the masses. In the present case the informant, a broadcaster disseminating TV signals through cable TV and DTH, alleged that Tamil Nadu Arasu Cable TV Corporation (“OP”), a state owned Multi System Operator (MSO), is charging unfair and discriminatory prices and has blacked out the channel of the informant. OP has deliberately chosen not to sell/ fix price for the prime band which is the most precious band in the analog cable TV network. It alleged that OP has limited and restricted the choice of the consumers and thereby caused adverse effect to competition to favour the channels of a particular political class.
The Commission held that the relevant product market in the present case would be “Re-transmission of channels through Cable TV Networks”. The OP is found to be in dominant position in this relevant product market in the state of Tamil Nadu except city of Chennai. (Chennai was separated from relevant geographic market because the city is covered under Digital Addressable System of the Government of India). However, the Commission observed that determination of price charged by the OP was done through tender process in terms of the policy of Government of Tamil Nadu, therefore it cannot be termed to be unfair and discriminatory. The closed the matter noting that no prima facie case is made out to order investigation. It is also noteworthy that a writ petition filed by the informant against the conducts of the OP is sub judice before the Madras High Court. [Makkal Tholai Thodarpu Kuzhumam v. Tamil Nadu Arasu Cable TV Corporation, [2015] CCI 145, decided on 29.09.2015]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI):  CCI maintaining distance from the jurisdiction of electricity sector regulators State Electricity Regulatory Commissions (SERCs) denied to examine fixation of electricity tariffs under the provisions of S. 4 of the Competition Act, 2002. The informant association alleged abuse of dominance position by Tata Power Delhi, BSES Rajasthani Power, BSES Yamuna Power, Punjab State Power Corp, Haryana Bijali Vitaran Nigam and HP State Electricity Board by imposing unfair and discriminatory conditions and by influencing and making unreasonable suggestions to respective SERCs for increasing various charges for “Open Access” and the tariff for power. Informant alleged that by continuously increasing cross subsidy, Open Access charges the consumers have been constantly prevented from utilizing the feature of Open Access, and thereby cheaper power and it have resulted in denial of market access to the members of the Informant, creation of entry barriers and foreclosure of competition.

CCI opined on the jurisdiction issue that that there is no overlap in the jurisdictions exercisable by it and the SERCs. It said that sectoral regulators (here SERCs) focus on the dynamics of specific sectors, whereas the it has a holistic approach and focuses on functioning of the markets by way of increasing efficiency through competition. The roles played by the CCI and the sectoral regulators are complementary and supplementary to each other as they share the common objective of obtaining maximum benefit for the consumers.

CCI, to further examine the matter, made references to SERCs of Punjab, Haryana, Delhi and Himachal Pradesh on the central issue agitated by the Informant i.e. increase in Open Access charges. After considering replies of the SERCs and the provisions of Electricity Act, 2003, CCI observed that scheme of the Electricity Act and the regulatory architecture provided thereunder, makes is abundantly clear that the charges for Open Access are to be decided by the respective SERCs. The concerned State Electricity Regulator and the Appellate Authority in terms of the statutory architecture governing the regulation of open access and determination of the relevant tariffs thereto would deal any issue in this regard. It also noted that matters pertaining to this issue are already pending before the Appellate Tribunal for Electricity (APTEL) and the Supreme Court.

CCI ordered for closing the case observing that the issue highlighted by the Informant in the present case is essentially related to the regulatory functions discharged by the State Regulatory Commissions in respect of fixation of tariffs. No competition issue is involved in the factual matrix disclosed in the information. [In re: Open Access Users Association and Tata Power Delhi Distribution,  [2015] CCI 146decided on 29.09.2015]

Tribunals/Commissions/Regulatory Bodies

Competition Commission of India: The CCI while closing case against Ansal Properties & Infrastructure Ltd ruled that consumer related issues do not come under the ambit of the Competition Act, 2002 (the Act).

The informant was aggrieved by the conduct of Ansal Properties for non-compliance of an order passed by the Delhi Consumer Dispute Resolution Forum in two cases filed by the Informant and his wife.  It was alleged that Ansal was not paying the amount as directed by the Consumer Forum. 

The CCI found that allegation of the informant for non-compliance of Consumer Forum order does not fall within the jurisdiction of the CCI under the Act because the issue raised does not involve any issue which contravenes the provisions of the Act, In Re:Mr. Preetam Chhabra v. Ansal Properties & Infrastructure Ltd , Case No. 37 of 201, decided on 25.06.2015

 

Tribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): While rejecting the allegations of unfair trade practices against Bank of Baroda in the market of commercial/corporate loan in India, CCI closed an information filed by Uttarakhand-based firm Dhanvir Food Product in the matter. Said information was filed by Dhanvir Food Product, which had availed of a term loan of Rs 7.25 crore from the bank for construction of factory building and also to purchase plant and machinery, alleging that the penalty imposed by the Bank upon the Firm to foreclose the loan account was in violation of the guidelines issued by the Reserve Bank of India (RBI) and hence, arbitrary, unreasonable and anti-competitive. It was alleged in the information that the Bank had imposed a penalty of Rs.18,86,711/- to foreclose the loan account of the Informant for the residual period of 65 months in terms of clause 25 of the sanction letter. After perusal of relevant documents and hearing both the parties, CIC observed, “the Informant has not provided any material to show that Opposite Party-2 (Bank of Baroda) have been imposing pre-payment penalty or foreclosure charges in pursuance of some agreement entered into by them with any other enterprise engaged in similar trade or business. Thus, prima facie, no case of contravention of Section 3 can be made out against the Opposite Part-2 in the instant case.” The Commission also turned down the contention of the Informant regarding abuse of dominant position by the Bank on the ground that as Bank of Baroda was not in dominant position in the relevant market, it cannot be held guilty of abuse of dominant position, Dhanvir Food Product v. Bank of Baroda, 2015 CCI 10, decided on 02.06.2015

Tribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): CCI imposed a total fine of about Rs 64 crore on GlaxoSmithKline Pharmaceuticals Ltd. and Sanofi Pasteur India for collusive bidding in supply of a meningitis vaccine to the government for Hajj pilgrims and subsequently plotting to charge higher prices in the government tender for the said vaccine. The order of Commission came upon an information filed by Bio-Med Pvt. Ltd., a pharma company, which also makes polysaccharide Quadrivalent Meningococcal Meningitis (QMMV) vaccines. The information was filed against GlaxoSmithKline Pharmaceuticals Ltd., Sanofi Pasteur India and Health and Family Welfare Ministry was also made party in the matter. It was alleged in the information that Government introduced and modified the turnover conditions for eligibility of the participating bidders to supply the particular vaccine without any reasonable rationale and explanation. It was further alleged that GlaxoSmithKline Pharmaceuticals Ltd. and Sanofi Pasteur India, also cartelized through bid rotations and geographical allocations. CCI in its investigation found that both companies were acting pursuant to an anti-competitive agreement and formed a cartel to get government tenders to supply meningitis vaccine which was required to be administered upon the pilgrims who wish to go on annual pilgrimage of Hajj. After perusal of material on record and hearing both the parties, CCI found GlaxoSmithKline Pharmaceuticals Ltd. and Sanofi Pasteur India liable for violation of the provisions of the Competition Act, 2002 and levied penalty to the extent of three per cent of the turnover both on GlaxoSmithKline Pharmaceuticals Ltd. and Sanofi Pasteur India (aggregating to Rs 60.49 crore and Rs 3.04 crore, respectively) and gave both companies sixty days to deposit the amount. Apart from imposing penalties, the Commission has directed GlaxoSmithKline and Sanofi to “cease and desist” from anti-competitive practices, In re: Bio-Med Pvt. Ltd. v. Union of India, 2015 CCI 11, decided on 04.06.2015

Tribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): In the series of its orders against trade unions/associations for anti-competitive agreements, the CCI yesterday found the arrangement relating to distribution of films for releasing between the Opposite Parties (Ops) namely, Kerala Film Exhibitors Federation (OP1), Kerala Film Distributors Association (OP2), and Kerala Film Producers Association (OP3) in violation of section 3(3)(b) of the Competition Act, 2002.

The Commission held that OP-1, OP-2 and OP-3 have transgressed their legal contours and indulged in collective decision making to limit and control the exhibition of films in the theatres other than the ones owned by the members of OP-1. The Commission did not see any rational justification for prescribing such criteria which is exclusionary in nature.

It declared that the Competition Act condemns such decisions taken by the associations which limits/ restricts the supply of goods/ services and affects competition in the market. The Commission viewed that the collusion between the OPs without any logical basis was nothing but the manifestation of their anti-competitive conduct to benefit the members of OP-1 at the expense of other theatre owners and movie goers i.e., consumers.

It is found that the OP1 was the main culprit behind the cartel conduct and the members of OP2 succumbed to the restriction imposed by the OP1.  The Commission cleared that OP-2 is guilty of not distributing movies to the theatres of the members of the Informant and thus violating section 3(3)(b) read with section 3(1); of the act. However, OP3 was not found guilty because of its non-compliance with the arrangement between the Ops for limiting and restricting distribution, and boycotting release of films. 

The Commission ruled that the office bearers of the OP1 and OP2 are liable to penalty under section 48. During the period of contravention, they were actively involved in the affairs of their respective associations and as such they are responsible for the anti-competitive decision making by their respective associations, Kerala Cine Exhibitors Association  v. Kerala Film Exhibitors Federation, 2015 CCI 15,decided on 23rd June, 2015

 

Ed. Note: In this order the Commission did not find the OP3 guilty of cartelization even though OP3 was signatory party to the agreement, because OP3 did not comply with the decision taken in the agreement and its conducts did not show that it (OP3) was against the wide release of the movies. This brings a new development in the competition law that section 3 will not attract if a party to an anti-competitive agreement is not acting upon it.

 

 

Tribunals/Commissions/Regulatory Bodies

Competition Commission of India: The Competition Commission of India (CCI) in its suo moto cognizance found thirteen suppliers/manufacturers (opposite parties) of containers with disc required for 81 mm bomb have engaged in the practices of determination of purchase price of “CN Container” (the Product) and collusive bidding in contravention of the provisions of sections 3(3)(a) and 3(3)(d) read with section 3(1); of the Competition Act, 2002.

The CCI considering the remote possibilities of direct evidence in the case of cartel reiterate its earlier decisions that the existence of an anti-competitive practice or agreement can be inferred from the circumstantial evidence i.e. conduct of the colluding parties.  Such conduct may include a number of coincidences and indicia which, taken together and in absence of any plausible explanation, points towards the existence of a collusive agreement.

The Commission noted that quotation of identical price without any satisfactory justification on production cost gives apparent evidence to price collusion adopted by the opposite parties. The Commission was of the opinion that common ownership of a large number of opposite parties, through related directors, coupled with the fact that a number of opposite parties quoted same rates indicates to a conclusion that the opposite parties acted pursuant to an anti-competitive agreement/understanding to manipulate the bidding process in the present case. Price parallelism coupled with peculiar market conditions like few enterprises with same owners, stringently standardized product, predictable demand, etc., unequivocally establishes that the conduct of the Opposite Parties of quoting identical/ similar price bids was only due to collusive tactics adopted by them in violation of section 3(1); read with sections 3(3)(a) and section 3(3)(d) of the Act.

The Commission noted that, in the absence of any such an anti-competitive agreement, the bidders would have not only competed against each other (on price) but may have also undercut each other to secure the contract which would have resulted in lower prices for the consumers. Therefore, the consumers, i.e., the three ordinance factories, have also been deprived of the benefits that could have accrued to them on account of the competitive bidding process. The Commission in its order directed the opposite parties to cease and desist from the anti-competitive practices and imposed a penalty at the rate of 3% of the average turnover of the relevant financial years, In re: Sheth & Co.,2015 CCI 12, decided on 10/06/2015

Tribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): CCI has dismissed a complaint filed against Kent RO Systems, alleging unfair business practices with respect to sale of spare parts and services/maintenance of Kent RO water purifier systems. The Informant alleged that Kent RO Systems being a dominant player had through contracts limited the access of independent repairers and other multi-brand service providers to genuine spare parts required to effectively compete with the authorised dealers of the company. It was also alleged that by charging exorbitant price for its spare parts and after sales service, Kent RO Systems has charged a price which is unrelated to the “economic value” of the product, which in absence of the dominance that it currently enjoys in the relevant market could not have been otherwise charged. After perusal of documents, CCI observed that no case of contravention of the provisions of the Competition Act has been made out against Kent RO Systems in the matter. CCI observed that the allegations of the informant regarding non-availability of the spare parts of Kent RO water purifier systems in the market are proved false as the spare parts can be purchased online by the customers. While noting that the informant failed to adduce a single document or any pricing data to support the assertion that the prices charged by Kent RO Systems are “exorbitant” and “unusually high”, CCI dismissed the information. (Amitabh v. Kent RO Systems, 2015 CCI 4, decided on February 26, 2015)

Tribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): CCI has rejected an information filed by Muthoot Mercantile Ltd. alleging that 12 commercial banks including State Bank of India had entered into an anti-competitive arrangement to determine the price and control the gold loan business and formed a cartel for offering and marketing gold loan products. Other banks which were included are IDBI, Canara Bank, Indian Overseas Bank, Federal Bank, South Indian Bank, Central Bank of India, Syndicate Bank, Vijaya Bank, Dhanlaxmi Bank, State Bank of Travancore and Catholic Syrian Bank. Muthoot Mercantile Ltd., in its information had contended that all the 12 Banks were forming a cartel and launching a new gold loan product viz. agri-gold loan at the rate of four percent (4%) thereby causing adverse/detrimental effect on the informant and other similarly situated NBFCs dealing in gold loan. Informant also alleged that offering loans at the rate of 4% under the guise of agricultural loan against the pledge of gold, is abuse of Interest Subvention Scheme of the Government of India as even RBI had clarified that the benefit of Interest Subvention Scheme was not meant for agri-gold loans or gold loan. After perusing the record, CCI observed that there was no material on record which is indicative of any collusion or concerted practice on the part of the Banks which can be said to be in contravention of the provisions of Section 3 of the Act or can be termed as anti-competitive. While rejecting the contention of the informant, CCI observed that prima facie, no case of contravention of the provisions of either Section 3 or Section 4 of the Competition Act, 2002 has been made out against the banks and dismissed the information. (Muthoot Mercantile Ltd. v. State Bank of India, 2014 CCI 77, decided on December 30, 2014)

Tribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): CCI has rejected a complaint filed by Kalpataru Enterprises, a franchisee of Reebok India Co. alleging that Adidas AG, Reebok International Ltd and Reebok India Company, as a group, abused its dominant position in the relevant market of sale of premium sports goods in Noida. It was alleged in the complaint that the terms and conditions of the Franchisee Agreement signed between Kalpataru Enterprises and Adidas AG Group are not only unfair but also discriminatory vis-à-vis other franchisees as other Franchisee owners are receiving a higher rate of commission and assurance of a minimum guaranteed payment for operating the retail outlet was also given to other franchisees. It was averred that such discriminating practice of the Adidas AG Group had put some franchisees/retailers at a competitive disadvantage position vis-à-vis the others thus, causing an appreciable adverse effect on competition in the downstream market. It was further stated that the said acts of the Adidas AG Group amounted to imposition of discriminatory conditions which is in infringement of the provisions of Section 4(2) (a) (ii) of the Competition Act, 2002. After hearing the parties, CCI observed that though Adidas AG Group appears to be a dominant group in the relevant market, allegations of complainant seem to be baseless and not amounting to an abuse of dominant by the Adidas AG Group within the meaning of Section 4 of the Act. CCI said, “the Commission finds two fundamental flaws in the allegations made by the Informant. Firstly, the Agreement which was termed as unfair and arbitrary was entered into in 2003 when the alleged dominant group had not even come into existence. Secondly, even if the submission of the Informant regarding dominance of the Adidas AG Group is accepted post the formation of group in 2005, the conduct of the Adidas AG Group vis-à-vis the Informant remained same (as the Agreement  was said to be continued on same terms and conditions). Further, as per Informants own submissions, the agreement with M/s Neelkanth Traders was more favourable than the one with it which fact goes against the allegation of abuse by the Adidas AG Group.” “A manufacturer is not being obligated to follow a single template agreement throughout its existence. With passage of time and operations, the commercial arrangements may undergo a change,” CCI added. (Om Datt Sharma v. Adidas AG, Case No. 10 of 2014, decided on May 13, 2014)


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