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.

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): A Four member bench comprising of Sudhir Mital, Chairperson and Augustine Peter, UC Nahta, members and GP Mitta, J., directed for a matter to be closed under Section 26(2) of the Competition Act, 2002 due to the dispute falling under the arena of a consumer forum.

The issue raised in the present matter was filed under Section 19(1) (a) of the Competition Act, 2002 against Shoppers Stop Limited (OP) alleged to have contravened Section 3 of the said Act. The Informant had shopped for an amount of Rs 6,495 from the OP for which he had received two discount coupons worth Rs 500. The informant on his next purchase wished to get his coupons redeemed but was denied on the ground that for redemption there is a requirement of minimum shopping for Rs 4000/ to be done, in regard to the stated fact, the Informant submitted that he was not aware about this condition and due to being a senior citizen he was unable to read the same at the back of the coupon.

Further, the commission on giving due consideration to the submissions of the Informant, clarified by referring to the case of Sanjeev Pandey v. Mahindra & Mahindra, Case No. 17 of 2012 that the CCI is primarily aimed to curb the anti-competitive practices and consumer protection Act, 1985 protects the interests of individual consumers against the unfair practices.

Hence, in the present matter, the dispute is a consumer dispute and no prima facie case is being made out against the OP, therefore, the case has been ordered to be closed under Section 26(2) of the Act. [Rajendra Agarwal v. Shoppers Stop Limited,2018 SCC OnLine CCI 62, order dated 30-07-2018]

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]

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

The Commission observed that the informant did not place on record any agreement entered into between the OPs and the drivers imposing exclusivity restrictions on drivers in contravention of Section 3(4) read with Section 3(1). Regarding dominance, the Commission was of the opinion that high market share was not in itself an indicator of dominant position. As for the allegation of collective dominance, the Commission observed that Section 4 does not contemplate in its fold the concept of collective dominance. The Commission held that the dominance of either Ola or Uber was not made out. The Commission showed some concern over the fact of common ownership (common investors like SoftBank) and held that policy needs to be framed in that regard, as such overlapping interest may result in the reduction of firms’ incentive to compete. However, on this point too, the Commission held that as per the law as it stood on the day, the OPs could not have been said to contravene the provisions of the Competition Act, 2002. Holding that investigation under the Act could not be held solely based on conjectures and apprehensions, the Commission closed the matter under Section 26(2) of the Act. [Meru Travel Solutions (P) Ltd. v. ANI Technologies (P) Ltd.,2018 SCC OnLine CCI 46, dated 20-06-2018]

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

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

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

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

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

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

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

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

 

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

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