Aftermath of SC’s verdict: Turning Point for the CCI?


On 20-5-2017, the Competition Commission of India commemorated its 8th anniversary. While still relatively young compared to its counterparts in other jurisdictions, the Commission has swiftly carved out a position for itself in the international competition law landscape. This is largely a result of the headline grabbing penalties that the Commission has imposed in several cartel cases and other matters involving anti-competitive conduct. With its enforcement prowess, the Commission has also significantly shaped and developed competition law jurisprudence in India. However, the recent ruling of the Supreme Court of India[1] may have slightly muddied the waters. The ruling marks the first decision of the Supreme Court on substantive issues on Competition Act, 2002 and directly impacts the established principles applied by the Commission in cases involving anti-competitive conduct, including cartels.

Briefly, this case involved allegations of cartelisation and anti-competitive conduct against members of a film and television artists’ trade union in the State of West Bengal (Coordination Committee). The Coordination Committee allegedly coerced TV channels to discontinue the telecast of “Mahabharat” dubbed in Bengali, since such telecast of dubbed serials was averse to the interests of the regional producers, artists and technicians, in the opinion of the Coordination Committee. Upholding the order of the Commission[2], the Supreme Court found the Coordination Committee to be in violation of Section 3(3)[3] of the Act. However, while arriving at its finding, the Supreme Court observed that the determination of “relevant market in which competition is effected” was the first step to examine the existence of anti-competitive agreement/cartels under Section 3 of the Act. A bare reading of the cartel provisions of the Act, however, suggests otherwise.  For instance, Sections 3(3) and 19(3) of the Act (which deal with cartels and factors for determining appreciable adverse effect on competition (AAEC)), use the term “market” as opposed to “relevant market”. On the contrary, the expression “relevant market” finds mention in Sections 4, 19(5) and 19(6) of the Act which deal with abuse of dominance and factors for determination of relevant market. It is arguable that if the legislature intended for a relevant market to be specifically delineated in cartel cases, it would have worded the provisions accordingly. In view of the above, the Supreme Court’s observation in the judgment, appears to be a departure from the principles of interpretation of statutes which mandate the courts to construe words in a statute based on their plain meaning unless such literal interpretation gives rise to absurdity or renders the legislation ineffective.[4]

Further, defining relevant market is a complex economic exercise and introducing a requirement to define a relevant market in cartel cases would increase the onus on the Commission as well as the informants, leading to prolonged proceedings. As a consequence and given that the determination of relevant market will perforce, induce an element of subjectivity in cartel cases, defendants would have enough room to challenge market definitions or propose alternative market definitions.

Further, the judgment has also expanded the concept of relevant market to include the “effected markets”. This concept of “effected markets” is not explicitly or implicitly present in the Act and goes even beyond the factors laid down in the provisions relating to assessment of relevant market in respect of abuse of dominance cases. Arguably, incorporation of an effects test in the determination of cartels or anti-competitive agreement would not only defeat the purpose of having a presumption of AAEC, but would also take away from the statutory threshold of likelihood of causing AAEC contemplated in Section 3(1)[5] of the Act (for the determination of anti-competitive agreement and cartels).

In view of the difficulties associated with the detection of cartels (which are typically hatched in secrecy), the standard of proof has over the years been eased to the standard of balance of probabilities/liaison of intention.[6] However, by introducing the concept of relevant market and “effected market”, the judgment seems to have magnified the burden of proof on the Commission. The judgment will also likely limit the Commission’s ability to detect and investigate hub and spoke cartels. The essence of hub and spoke cartels lies in the fact that the spoke operates in a market which is different from the market in which the hub (i.e. the market in which AAEC concerns are likely to arise) operates, thereby making the detection of the cartel more difficult. Hence, it may be onerous to prove the involvement of a spoke in a construct where assessment of relevant effected market is pivotal for proving collusion.

Lastly, the incorporation of effects doctrine in cartel cases may also potentially impact the robustness of the leniency regime in India. Leniency applications are a powerful tool to detect cartels. However, as a result of the judgment, parties to global cartels which have little or insignificant presence in India, may be deterred from filing for leniency in India in view of the increased burden of proof on the applicant to not only provide the relevant market but also the markets which would be effected by the alleged collusion. Simply stated, a leniency applicant may be subject to a greater onus while discharging its obligation of making a “true, full and vital” disclosure to the Commission, as required under the Act and the Leniency Regulations.[7] A logical corollary to this would be that global cartel members may simply abstain from applying for leniency and opt to rebut the allegations of collusion instead, if such situation arises.

The judgment has seemingly turned the tables on the Commission’s decisional practice and has introduced a great measure of subjectivity in cases involving allegations of cartelisation and anti-competitive conduct. The judgment is expected to have far-reaching consequences in relation to the ongoing as well as future cases before the Commission and the appellate authority. While it remains to be seen whether the Commission imbibes the principles laid down by the Supreme Court in its decisions going forward, the judgment will inevitably alter the jurisprudential fabric woven by the Commission thus far.

 

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 Senior Associate with the Competition Law Practice at Cyril Amarchand Mangaldas and can be contacted at anisha.chand@cyrilshroff.com.

 

[1] Competition Commission of India v. Coordination Committee of Artists and Technicians of W.B. Film and Television, Civil Appeal No. 6691 of 2014, decided on 7-3-2017 (SC).

[2] The Competition Appellate Tribunal had set aside the decision of the Commission.

[3] S. 3(3): Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which—

(a) directly or indirectly determines purchase or sale prices;

(b) limits or controls production, supply, markets, technical development, investment or provision of services;

(c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way;

(d) directly or indirectly results in bid rigging or collusive bidding,

shall be presumed to have an appreciable adverse effect on competition.

[4] On the other hand, the Commission has consistently maintained that in cartel cases there is no requirement to determine relevant market. Builders Assn. of India v. Cement Manufacturers’ Assn.,  2012 SCC OnLine CCI 43; Builders Assn. of India v. Cement Manufacturers’ Assn.,  2016 SCC OnLine CCI 46 and FICCI-Multiplex Assn. of India v. United Producers/Distributors Forum, 2011 SCC OnLine CCI 33.

[5] S. 3(1): No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.

[6] Suo motu case against LPG cylinder manufacturers, In re, 2012 SCC OnLine CCI 12.

[7] Competition Commission of India (Lesser Penalty) Regulations, 2009.

One comment

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    The SC has issued a clarificatory order that there is no need to define relevant market in Section 3(3) cases (MA No. 490/2017) in CA No. 6691/2014.
    In effect, the judgment could not be considered to be a ratio.

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