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.

Law School NewsOthers

A One Day English-Tamil-English Translation Workshop is to be organised by the Centre for Competition Law (CCL), Tamil Nadu National Law School (TNNLS) University, Tiruchirappalli on 28th July 2018. The workshop shall be on translation of Legal Documents from English to Tamil with Specific Reference to Competition Law. The workshop is restricted to 2nd, 3rd and 4th-year TNNLS students. Registration closes on July 21 (Saturday), 2018 (11:59 pm IST). Selection to the workshop will be based on a two stage process. The first stage involves application before the prescribed deadline and next stage will require the students to translate a page long selective content from the Competition Advocacy Booklet from English to Tamil, following which, the same will be scrutinised by the CCL members, TNNLS.
Topic: Translation of Legal Documents from English to Tamil with Specific Reference to Competition Law

Content Type: Classroom

Workshop Facilitators:

Hon’ble Justice Prabha Sridevan, (Retd.) Madras High Court;
Representative from the Law Department, Government of Tamil Nadu;
Professor Palaniarangasamy (Retd.), Tamil University, Thanjavur;
Two Representatives from the Competition Commission of India (CCI), New Delhi

Duration: 6 hoursTime/Venue: 10.00 am to 04.30 pm on Saturday July 28, 2018 at the Seminar Hall, UG Block, TNNLS

Target Audience: Those who need to learn and apply English-Tamil-English translation skills in your work.

For further details, please contact:  Mr. S. Mohammed Azaad, Workshop Coordinator & Assistant Professor of Law, +91 – 98404 81219

Mr. C.R. Shriram, Workshop Coordinator & Assistant Professor of Law, +91 – 97907 98081

For further details, click HERE.

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): CCI received information from 4 chess players who were subjected to disciplinary action by All India Chess Federation (AICF) for participation in a chess event not authorised by it. The case concerned several stipulations of AICF on chess players, organisation of chess tournaments, discretionary nomination of players, etc.

After a detailed investigation by the Director General, CCI conducted further inquiry in the matter and found AICF to enjoy dominant position in the markets for organization of professional chess tournaments/events in India and services of chess players in India. In its order under Section 27 of the Act, CCI observed that AICF’s restriction on chess players to participate in unauthorised events and attendant punitive consequences restricted the movement of chess players and placed them and potential organisers of chess tournaments in a disproportional disadvantage. Hence, such stipulation was held as an unreasonable restriction on chess players and denial of market access to organisers of chess events/tournaments, in contravention of the provisions of Section 4(1) read with Section 4(2)(b)(1) and Section 4(2)(c) of the Act. The restrictions on chess players was further held to be in the nature of exclusive distribution and refusal to deal, in contravention of Section 3(4)(c) and Section 3(4)(d) of the Act.

Accordingly, CCI directed that:

(a) AICF shall cease and desist from the conducts that is found anti-competitive;

(b) AICF shall lay down the process and parameters governing authorisation/sanctioning of chess tournaments. In doing so, AICF will ensure that they are necessary to serve the interest of the sport changes and shall be applied in a fair, transparent and equitable manner. Besides, AICF shall take all possible measure(s) to ensure that competition is not impeded while preserving the objective of development of chess in the country;

(c) AICF shall establish prejudice caused by a chess player before taking any disciplinary action against him. Needless to say, the disciplinary actions taken shall be proportional, fair and transparent. The disciplinary actions against the Informant and other similar players shall be reviewed by AICF on these lines;

(d) AICF shall file a report to the Commission on the compliance of the aforesaid directions from (a) to (c) within a period of 60 days from the receipt of this order.

A penalty of Rs 6.92 lakhs was imposed on AICF for indulging in anti-competitive conduct. [Hemant Sharma v. All India Chess Federation (AICF), Case No. 79 of 2011, order dated 12-7-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): CCI took up the case  suo motu under Section 19 of the Competition Act, 2002 (‘the Act’) based on the disclosure by Globecast India Private Limited and Globecast Asia Private Limited (collectively referred to as ‘Globecast’) under Section 46 of the Act read with the Competition Commission of India (Lesser Penalty) Regulations, 2009 (‘Lesser Penalty Regulations’). Essel Shyam Communication Limited (ESCL), now Planetcast Media Services Limited, subsequently also approached CCI as lesser penalty applicant during investigation.

CCI imposed penalty on Globecast, a subsidiary of the Orange Group (earlier France Telecom Group), a global service provider of broadcasting services and ESCL, a technology service provider in India since 1998 with specialisation in media broadcasting, for indulging in bid-rigging in tenders floated by sports broadcasters for procurement of  end-to-end broadcasting services i.e. ground segment services as well as satellite bandwidth services, for various sporting events during the period July 2011- May 2012 including Indian Premier League 2012 (IPL-2012).

On the basis of the evidence collected in the case, CCI found that ESCL and Globecast operated a cartel amongst them in the various sporting events held during the years 2011-12 including IPL-2012. While submitting bids for the tender floated by various broadcasters during the period July 2011-May 2012 for provision of end-to-end broadcasting services, they exchanged information and quoted bid prices as per the arrangements arrived at amongst them. As a result, they committed an infringement of the provisions of Section 3(3)(d) read with Section 3(1) of the Act during this period.

Considering contravention of provisions of the Act by Globecast and ESCL, an amount of INR 31.94 Crores and INR 1.33 Crores was computed as leviable penalty on ESCL and Globecast, 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, mitigating factors, etc. and decided to levy penalty at the rate of 1.5 times of their profit for the period July 2011–May 2012. Additionally, considering totality of facts and circumstances of the case, penalty leviable on individual officials of Globecast and ESCL was computed at the rate of 10 per cent of the average of their income for preceding three years.

Keeping in view the stage at which the lesser penalty application was filed, co-operation extended in conjunction with the value addition provided by the evidences furnished by the lesser penalty applicants in establishing the existence of cartel, CCI granted Globecast and its individuals 100 percent reduction in the penalty and 30 percent reduction in penalty to ESCL and its individuals. Pursuant to reduction, penalty imposed on ESCL was INR 22.36 Crores. No penalty was imposed on Globecast. [In re, Cartelisation by broadcasting service providers by rigging the bids submitted in response to the tenders floated by Sports Broadcasters, Suo Motu Case No. 02 of 2013, decided on 11-07-2018]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): The case primarily concerned access to upstream LPG terminalling infrastructure at Vishakhapatnam Port, which comprises several components viz. unloading arms at the jetty, blender, heat exchanger and cavern (storage facility). This infrastructure, being operated by SALPG, is used for handling imports of propane and butane and their blending into LPG.

East India Petroleum Pvt. Ltd. (EIPL) filed an information with CCI under Section 19(1)(a) of the Competition Act, 2002 alleging that while allowing it to use the blender, SALPG has been insisting on the mandatory use of cavern. This resulted in paying significant charges to SALPG. The OMCs were thus not finding the LPG terminalling services offered by EIPL economically viable and were constrained to avail the terminalling services offered by SALPG only. To address this, EIPL first proposed to use the blender of SALPG and thereafter, take the output directly to the cross-country pipeline, bypassing the cavern. Since this was not agreeable to SALPG which allowed bypass of the cavern to the extent of 25 percent only,  EIPL proposed to install its own blender and sought a tap-out and tap-in from the propane and butane lines to discharge blended LPG, bypassing the cavern. This was also not acceptable to SALPG. Another proposal seeking tap-out from the propane and butane lines at the jetty to EIPL own blender and construction of its own infrastructure between the blender and storage facility was also refused by SALPG. All this was alleged to be an abuse of dominant position by SALPG.

After a detailed investigation by the Director-General, CCI conducted a further inquiry into the matter and found SALPG enjoys a dominant position in the market for upstream terminalling services at Visakhapatnam Port. SALPG sought to justify its conduct on the grounds of safety as well as efficiency and business justification. However, after a detailed examination of claims made and hearing the parties, the Commission held the impugned conduct of SALPG to be in contravention of the provisions of Section 4 of the Act. Accordingly, CCI directed that:

  • (a) SALPG shall not insist mandatory use of its cavern and shall allow bypass of cavern for both pre-mixed and blended LPG, without any restrictions; and/or
  • (b) SALPG shall allow access to its competitors, potential as well as existing, to the terminalling infrastructure at Visakhapatnam Port, subject to compliance with all safety integrity and other requirements under applicable laws and regulations framed thereunder. Such an access should avoid additional cost burden on SALPG, and the entity seeking access shall bear the cost, if any, towards necessary changes to the existing infrastructure. Under this option also, SALPG shall not insist on the mandatory use of cavern and it shall allow bypass of the cavern, without any restriction. SALPG shall extend full cooperation for the study/audit undertaken by VPT in relation to the remedies ordered herein. Needless to say, SALPG shall not do anything raising rival’s cost.

A penalty of INR 19.07 crore has also been imposed on SALPG for indulging into the anticompetitive conduct. [East India Petroleum Pvt. Ltd. (EIPL) v. South Asia LPG Company Pvt. Ltd. (SALPG), Case No. 76/2011, order dated 11-07-2018]

Hot Off The PressNews

Supplementing the Government of India’s vision for e-Governance and Digital India Programme, the Competition Commission of India (CCI) launched an Online Guidance System for determining notifiability of merger & acquisitions (combinations) in terms of the Competition Act, 2002. The Guidance System has been named as “Do It Yourself (DIY): A notifiability check for mergers & acquisitions under the Competition Act, 2002”.

The online guidance system has been launched as part of CCI’s outreach initiatives and measures to simplify compliance requirements regarding combinations. The interactive online application has been developed based on relevant provisions of the Competition Act, 2002, relevant regulations issued thereunder and exemption notifications issued by the Ministry of Corporate Affairs. This application envisages a staged process to guide the stakeholders in determining whether a merger/acquisition is notifiable to CCI.

DIY toolkit is accessible at https://efilingcci.gov.in/DIY

Ministry of Corporate Affairs

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Disposing of an interim application under Section 33 of the Competition Act, 2002 (‘the Act’) by the informant Indian National Shipowners’ Association (‘INSA’ or ‘Informant’) against Oil and Natural Gas Corporation Limited (‘ONGC’ or ‘Opposite Party’) the Commission reiterated the conditions that have to be satisfied before interim relief can be granted under this section. The main clause which was alleged to be one-sided and unfair in this case was Clause 14.2 of the Special Contract Conditions (hereinafter, referred to as ‘SCC’), giving unilateral right of termination without assigning any reason.

The Commission had, vide its order dated 12.06.2018 passed under Section 26(1) of the Act, held the Opposite Party to be prima facie dominant in the relevant market. The Commission was of the view that the stipulation of Clause 14.2 of the SCC was one-sided as it gives an unfettered right to a dominant party to use it in its favour without giving any reciprocal right to the other party and this was prima facie in contravention of the provisions of Section 4(2)(a)(i) of the Act. Further, the manner in which the termination notices were sent and then consequently withdrawn by the Opposite Party on receiving a reduced offer from the members of the Informant, indicated the imperious approach adopted by the Opposite Party. Accordingly, the Commission directed the DG to carry out a detailed investigation.

In this Application, Commission noted that the principles for deciding the interim relief application under Section 33 of the Act were laid down by the Supreme Court in CCI v. SAIL(2010) 10 SCC 744, wherein it was held that while recording a reasoned order under Section 33 of the Act, the Commission shall, inter alia, ensure fulfilment of the following conditions:

a) record its satisfaction (which has to be of much higher degree than formation of a prima facie view under Section 26(1) of the Act) in clear terms that an act in contravention of the stated provisions has been committed and continues to be committed or is about to be committed;

b) it is necessary to issue order of restraint; and

c) from the record before the Commission, there is every likelihood that the party to the lis would suffer irreparable and irretrievable damage, or there is definite apprehension that it would have adverse effect on competition in the market.

The Commission found that all these conditions were satisfied in this case. However, by extending the undertaking by ONGC to not to invoke Clause 14.2 of SCC till further order the Commission denied to grant the interim relief. [In re, Indian National Shipowners’ Association v. Oil and Natural Gas Corporation Limited, Case No. 01 of 2018 order dated 15.06.2018]

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 (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, 2018 SCC OnLine CCI 5, order decided on 19-04-2018]

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]