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Acquisition approval by Competition Commission of India 


The Competition Commission of India (CCI) approves acquisition by HDFC Bank Limited (Acquirer) of shareholding in HDFC ERGO General Insurance Company Limited (Target) under Section 31(1) of the Competition Act, 2002.

The Proposed Combination involves acquisition of 4.99% of the outstanding equity share capital of the Target by the Acquirer from Housing Development Finance Corporation (HDFC).

Background of the Acquirer and Target

The Acquirer is a public listed banking company registered with the Reserve Bank of India which provides a wide range of banking services covering commercial and investment banking on the wholesale side and transactional / branch banking on the retail side. As a part of the retail banking segment, the Acquirer also engages in the distribution of life and general / non-life insurance products.

The Target is a joint venture between HDFC and ERGO International AG and is engaged in the business of general / non-life insurance in India and offers a complete range of general / non-life insurance products.


Competition Commission of India 

[Source: PIB]

[Dt. 25-10-2021]

Experts CornerThe Dialogue

The Government in June 2021 released the proposed amendments to Consumer Protection (E-Commerce) Rules, 2020 (hereinafter “proposed amendments”), with a view to regulate the e-commerce space more closely from a consumer protection perspective. The proposed amendments seek a substantial increase in compliances and liabilities, along with a broader scope of the term “e-commerce”. In addition to these, the proposed amendments are not in alignment with existing regulatory frameworks. One such significant overlap is with the competition law framework, and the role of the Competition Commission of India (hereinafter CCI).

 

E-commerce in India has been a beacon of competition, not just from the retailing perspective, but also various other services that have been made possible. It is a visible sign of a thriving platform economy, and has significantly changed the conduct, and content of commerce.

 

The burgeoning nature of the e-commerce market in India can be witnessed from multiple projections all of which point to an upward trajectory, and hover around an expectation of a $200 billion size by 2025[1]. This growth must also be seen in the context of Covid-19 in India, where platforms contributed to a sense of resilience and normalcy during the peak of the pandemic.

 

However, digital markets have brought with them plenty of issues concerning the jurisprudence of competition law, not just in India, but in various other countries. Matters related to non-price aspects of competition, unique selling practices of e-commerce platforms, and the ambiguous understanding of “level playing field”[2] between traditional and online businesses, have significantly challenged the Competition Commission of India’s (CCI) oversight. These new challenges have also been formally acknowledged by CCI[3], in its January 2020 report on e-commerce in India. With most of the issues yet to see completion of detailed investigation, any interim legislation may end up hampering this investigation.

 

Flash sales, as defined in the proposed amendment[4] (along with the proviso), aim to reduce the advantage that e-commerce platforms may give to certain sellers, or groups of sellers. But what must be considered is that flash sales, through discounts, and reduced prices, have the effect of greater benefit for consumers (one of the objectives of competition law), and greater competition (particularly, interbrand competition among products) across platforms. Further, while such flash sales also involve an element of special distribution arrangements, the CCI has not yet pronounced on the legality of such arrangements.  These arrangements may in fact, create an efficient supply chain. These issues are currently being explored by the CCI as part of its investigation into non-horizontal agreements under Section 3(4) of the Competition Act, 2002. This would be complemented with a better understanding of appreciable adverse effects on competition, under Section 19(3) of the Act; in terms of flash sales being perceived as an aggravating or mitigating factor, for competition.

 

While these involve a more traditional understanding of competition in India, contemporary developments around data and privacy, are newer determinants of competition[5]. The proposed amendment recognise this, when it says no e-commerce entity shall engage in abuse of dominant position[6], as per Section 4 of the Competition Act. However, the Consumer Protection Act might be a misplaced legislative framework to talk about dominance of e-commerce platforms, and rather, must be addressed on a case-to-case basis by the CCI. Competition within, and between e-commerce platforms is based on efficiencies in the supply chain, with data about consumer preferences shaping production planning and distribution channels. By reiterating the need to not engage in “abuse of dominance” in a consumer protection framework, it prematurely shapes the jurisdiction of Consumer Protection Authority (CPA) in matters of data collection, sharing, preferential selling, search indexes and rankings, and cross-selling; leading to possible jurisdictional overlaps with CCI and other regulators therefore, giving opportunity for forum shopping. Similarly, under Section 6(6)(a) of the proposed amendment (liabilities of platforms), platforms need to ensure that it does not use any information collected through its platform for unfair advantage of its related parties and associated enterprises. This is an issue under platform neutrality, with CCI now taking cognizance of a gamut of such instances[7].

 

Finally, under Rule 7(1)(b) of the proposed amendment, it has been mandatory for e-commerce platforms to identify, and highlight the “country of origin” of goods, while adding the need for providing filtering options, and suggesting domestic alternatives. This, even though well intentioned in its idea of promoting Make in India and encouraging small Indian manufacturers, may end up distorting the notion of level playing field. It may discriminate against imports, and overlook the complex process of value addition or assembly that may happen in the destination country.

 


Conflicts beyond the Competition Law


The proposed amendment reiterate many provisions listed in the FDI policy for e-commerce, such as mandatory registration, scope of related parties, country of origin, etc. However, while the FDI norms do not make a mention of platform liability[8], the proposed amendment clearly enunciate the need for one.

 

Going further, the proposed amendment have a jurisdictional overlap between the proposed Data Protection Authority (DPA) (under the Personal Data Protection Bill, 2019), and the Consumer Protection Authority. Section 5, clause 14(a) of the proposed amendment venture into aspects of data sharing and processing (based on consent), whose nuances can best be dealt with only a DPA, and an overarching data protection law.

 

Lastly, the overlap with competition law explored above, also brings the CPA in conflict with CCI, possibly contributing to more “forum shopping” and delaying strategies.

 


Conclusion


Post feedback to the draft Rules, the expectations would consist of a softer regulatory touch for e-commerce until more important legislations are passed, and of CCI developing greater expertise in digital markets. Any focus on consumer protection must be exclusive, and consumer-centric. This may draw from the EU’s the New Deal for Consumers[9], a legislation on consumer protection in e-commerce. It focuses on transparency in marketplaces and advertisements, terminability of online contracts, robust grievance redressal and compensation, and uniformity in quality.

 

As for the regulation of e-commerce as a whole, relying on consumer protection alone takes a parochial view of supply side dynamics. Another EU model might serve as a reference for e-commerce regulation in this regard, with the proposed Digital Services Act package[10]. While the Digital Services Act regulates all online intermediaries and places strict obligations for large players, the Digital Markets Act emphasises on limiting the economic power of the major players, or “gatekeepers”. Thus, with 2 distinct laws, the package aims to empower consumers, foster greater transparency and accountability, and create equitable competition.


 

[1] Invest India, Retail and E-Commerce, available HERE .

See also Saritha Rai, P.R. Sanjai, Bhuma Shrivastava, 2020, “Asia’s Richest Man Takes on Amazon in India’s Booming Online Market” HERE (posted on 11-11-2020).

[2] Chawdhry, Mohit, 2021. Levelling the Playing Field between Traditional and Digital Businesses, Report Issue 009, New Delhi: Esya Centre. Available HERE.

[3] Competition Commission of India, 2020, Market Study on E-Commerce in India: Key Findings and Observations, New Delhi: Competition Commission of India. Available HERE .

[4] Cl. 3(1)(e), Consumer Protection (E-Commerce) Rules, 2020.

[5] Competition Commission of India, 2020, Market Study on the Telecom Sector in India: Key Findings and Observations, New Delhi: Competition Commission of India. Available HERE .

[6] Cl. 5(17), Consumer Protection (E-Commerce) Rules, 2020.

[7] The Hindu BusinessLine, 2021, “Anti-Competitive Practices: NRAI Files Plaint against Zomato, Swiggy” HERE .

[8] Consolidated FDI Policy, 2020, Chapter 5.2.15.2 E-Commerce Activities, Department for Promotion of Industry and Internal Trade.

[9] European Commission, 2019. Factsheet: New Deal for Consumers. Available HERE .

[10] Allen and Overy, 2020, “The Digital Services Act Package is Here”. Click HERE.

Op EdsOP. ED.

Introduction

Every business owner would want to grow his/her company and make a profit. But there are many vulnerabilities to watch out for, like cartels. A cartel is a group of independent businesses that agree to engage in anti-competitive activities like fixing prices, allocating customers or markets, restricting production, or rigging bids. Cartels are harmful and illegal because they lead to higher prices, decreased product choice and less innovation. They can be big or small, with various degrees of formality and secrecy from a loose arrangement made over dinner to highly structured agreements with exclusive membership rules. In fact, you might be taking part in illegal behaviour and not even know it. Suppose Company X and Company Y are bidding for the same work. Company X agrees to drop its bid or raise its prices so the Company Y wins the contract. Or maybe a company and its competitor agree not to expand into each other’s markets, ensuring both sides remain profitable. Many business owners are not aware that these kinds of agreements are illegal under the Competition Act1 and can result in fines, jail time, or both.

Cartels in a specific type of oligopoly where entities that normally compete with one another reach agreements concerning fixing prices, setting mutually acceptable production targets, synchronising their marketing campaigns. Resultant in cooperating so as to one be more profitable compared to the competition scenario to no longer have to spend as much time and energy innovating which make it hard for new businesses to appear with the cartel making. These types of arrangements are made illegal in Section 3 of the Competition Act, 20022 under the head “anti-competitive agreements”. Economies of scale work in its favour and so examples include anything from infamous drug cartels to as strange as it may seem the Organisation of the Petroleum Exporting Countries (OPEC) in many countries such as the US cartels, violate so-called antitrust laws and are therefore illegal with notable exceptions such as OPEC which is protected by foreign trade laws despite congressional attempts to punish it all. The cons associated with cartels primarily revolve around potential legal consequences, yet in quite a few cases market participants decided to take their chances because in their opinion the pros outweigh them.

Now, these formal or informal arrangements for forming cartels should have an appreciable adverse effect then only it attracts the anti-competitive provision, the same has been enumerated in Section 19(3)3 read in conjunction with Section 3. The word “appreciable” has been defined in Law Lexicon as “capable of being estimated, weighed, judged of or recognised by the mind capable of being perceived or recognised by the senses, perceptible but not a synonym of substantial (Black’s Law Dictionary.)”. Therefore, agreements are considered illegal only if they result in unreasonable restrictions on competition. This is tested on the “rule of reason” analysis; an agreement has been defined only inclusively,4 and not exhaustively under Section 2(b) of the Act 4. According to the provisions of the Act, an agreement may be oral or in writing, and may or may not be enforceable by legal proceedings.5 Moreover, the basic requirement for establishing an arrangement is that the parties to it shall have communicated with one another in some way. In order to challenge the acts of any enterprise on the ground of causing appreciable adverse effect on competition it is sine qua non for the informant to establish that there existed an agreement between those enterprises. “Agreement” under Section 2(b) of the Competition Act, 2002 is modelled on the lines of Section 6(3) of the United Kingdom’s Restrictive Trade Practices Act, 1976 as follows:

  1. (b)“agreement” includes any arrangement or understanding or action in concert,—

(i) whether or not, such arrangement, understanding or action is formal or in writing; or

(ii) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings;

Section 2(b), while defining “agreement”, takes within its sweep “any arrangement” or “understanding” or “action in concert”, even if it was arrived at informally and even if not intended to be enforceable.6 If any of these elements are found to be in existence, it can be said that there was an agreement. “Arrangement” is the scheme in which all participants first decide to operate and then operate it based on acceptance of mutual obligations towards each other.7 The term “understanding” implies some sort of behavioural communication between two or more parties resulting in the adoption of a particular course of conduct by them.8 This is no less than an understanding within the definition of “agreement”. “Concerted practices” are a form of coordination between undertakings by which, without having reached the stage of a formal agreement, practical cooperation can be traced.9 Enterprises might use it intentionally with the objective of using it as a tool to abuse the mechanism which is in its first place provided for mitigating losses and to rationalise significant supply of medical infrastructure and other essential commodities during the pandemic.

Legally speaking the antitrust authorities are concerned with the unprecedented situation which may tempt businesses towards efforts which may be anti-competitive and violate these abovementioned provision related to two most likely areas of potential infringement which is an abuse of dominant position and price gouging.

Having an understanding of cartelisation, undoubtedly corona has affected the economy and the supply chain itself. Due to the disruption or disproportionate supply chains and production processes of companies that are significantly interrupted by the COVID-19 outbreak, the World Health Organisation (WHO) has declared it as a “global pandemic” dated 11-3-2020. Companies are trying to find solutions in order to minimise the impacts of the pandemic on their businesses including cooperating with each other. Meanwhile, customers have been facing price hikes particularly on pharmaceuticals, medical equipment and food. In the whole process now, we have to examine how different guidelines have allowed the cartelisation and to what extent.

Exemption under guideline issued by various national and international authorities

After taking into consideration the situation and the impacts of COVID-19 on the economy, the European Union (the EU) has released a detailed guideline stating that the European Commission shall provide guidance and legal certainty to pharmaceutical companies who may need to coordinate to meet the high demand in the sector.10 Additionally, the Commission has also released a communication specifically for the airline sector, clarifying that it will not actively intervene against necessary and temporary measures taken to address a shortage of supply.11

According to the guidelines issued by the EU in the year, 2020 during the corona pandemic which allowed cartelisation and exempted cartelisation for the time being. It stated that the current confinement measures have led to a decrease in air freight capacity and price increases. The pharmaceutical industry relies mainly on small volume shipments by air. The member States should consider actions to ensure air cargo capacity for transport of medicines, APIs, intermediates, and raw materials in line with the Commission guidelines. Member States should encourage cargo and express airlines to exceptionally reserve capacity for the supply of essential goods, in particular medical and emergency supplies, and to apply reasonable shipping rates for such supplies.

Similarly, maritime cargo services need to run smoothly and without unnecessary delays to ensure the continuity of supply chains. In order to effectively facilitate transport, inland vessels travelling to manufacturing sites after or before pick up must also be allowed to cross borders without delays. Secondly, the Norwegian Competition Authority, Konkurransetilsynet has granted a temporary exemption from competition laws to the transport sector.12 The exception makes it possible, in particular, to maintain the transportation of passengers and goods in Norway in order to secure the population access to necessary goods and services. The exception does not go further than what is strictly necessary. Agreements and practices covered by the exception must to the largest extent possible further the efficient use of resources and the interests of consumers.13

Thirdly, the Icelandic Competition Authority has opened up an information centre dedicated specifically to responding to queries regarding the current pandemic.14 Fourthly, similar actions have been taken by the Finnish Competition and Consumer Authority in granting exemptions to collaboration aimed at securing the supply of essential goods and services. It stated that companies may need to work together to ensure adequate supply or the equal distribution of products to all consumers. The FCCA will not intervene in measures that are necessary to ensure the sufficient availability of products.15

Lastly, European Competition Network (ECN) issued a joint statement on the application of competition law during the corona crisis where it is stated that in the current circumstance after considering all the extraordinary situation, ECN will not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply.16 Additionally, considering the current circumstances, such measures are unlikely to be problematical, since they would either not amount to a restriction of competition under Article 101 of TFEU17 and Article 53 of EEA18 or generate efficiencies that would most likely outweigh any such restriction.

Wherein, talking about the Indian stand on it, we have certain inbuilt safeguards which are provided by the antitrust legislation that if the acts undertaken by the enterprises do more harm than good. “Advisory to Businesses in Time of Covid-19” issued by the Competition Commission of India dated 19-4-2020, also specifies the same.19 When a price leader alters the price of his goods or services due to factors such as an increase in the cost of inputs, raw materials, or other related causes, most of the competitors will have no choice but to follow him, though the extent could vary. This cannot be said to be illegal because its behaviour is based on the sheer economic premise that any price increase taken by a small player ahead of the price leader would imply significant penalties in terms of loss of the customer.20

Also, there is a distinction between price cartelisation and a perfectly legitimate economic and business behaviour in responding to a situation in which a competitor is placed in a price leadership position. The doctrine of de minimis deals with the concept wherein agreements of enterprises with insignificant market shares have an insignificant effect on the market i.e. it is unlikely to cause an appreciable adverse effect on competition in the market, therefore capable of being used as a factor to militate against appreciable adverse effect on competition (AAEC).

Rule of severability applies, and nullity affects only the prohibited clauses in the agreement. A thing that is void is non est. The ECJ clarified the erga omnes nature of the nullity envisaged by Article 101(2), envisaging that the void agreement has no effect between the contracting parties, and thus cannot be set up against third parties.

In certain circumstances, it can be established that firms that are collaborating on some socially valuable activity may need to agree to do away with the competition to establish a cooperative relationship. Agreements are considered illegal only if they result in an unreasonable restriction on competition that is tested on the basis of “rule of reason” analysis. Where the agreement is formed to augment the supply of services against increasing demand in light of transporting essentials to those vulnerable affected by the pandemic, it qualifies the test of socially valuable activity. And this COVID-19 global pandemic has set such circumstances which make it the perfect example of creating a crisis cartel which the article will try to discuss in its next section in depth.

Crisis cartel

When facing an economic downturn, forming a crisis cartel could be a sound alternative to initiate cooperation with other operators to overcome shared challenges to survive in the economy. Crisis cartels are agreements or contracts entered into between two or more enterprises for a specific period which aimed at reducing overcapacity caused by exogenous factors. Over the years, several undertakings have attempted this, including by referring to the need in times of crisis to reduce overcapacity in a particular sector, or by referring to an imminent economic crisis that may force virtually all undertakings in the sector out of the market. These arrangements may end up being so-called “crisis cartels”, where a significant number of operators cooperate in order to find a common solution to their challenges in times of crisis and do it in a way that goes beyond what is lawful. Such agreements may, for example, have as their object to reduce overcapacity or agree on prices to prevent undertakings from going bankrupt or leaving the market.

In a judgment from 1984, the European Court of Justice held that an agreement of long duration between competitors concerning the supply of products constituted a violation of the prohibition of anti-competitive agreements. The Court held in this connection that competing producer undertakings were not allowed to enter into indefinite agreements on the reciprocal supply of unlimited quantities of products, although this could be allowed in certain circumstances if the object was to avoid emergencies in cases of force majeure. Hence, the judgment indicates that there may be a certain limited scope for action if the circumstances are so exceptional that it can be considered a real crisis.21

Additionally, Martijn Snoep, who is the Chairman of the board at Netherlands Authority for Consumers and Markets (ACM), has already declared that ACM will apply the competition rules in a more lenient manner during the corona crisis. Supermarkets, for instance, are allowed to inform each other about their stocks (exchange of sensitive competitive information, which is usually prohibited outside a crisis). Medicine wholesalers may also keep each other informed of the number of products that they sell. ACM has not yet been very explicit about the possibilities of forming crisis cartels, however, by looking at past precedent which is set for forming such crisis cartels can be beneficial in such troublesome times.22

In such exceptional circumstances the impact of a crisis on the incentive of firms to cartelise, firstly, will depend on the nature of the crisis, be it sectoral, national, or international. In each case, a crisis is taken here to refer to deterioration in economic performance indicators (such as demand) beyond that associated with a typical business cycle downturn. Second, in thinking through the impact of each type of crisis on the behaviour of cartel members it will be useful to identify how the crisis affects the business environment and, more importantly, the incentive to cartelise or to remain a cartel member. Fortunately, there is a well-established logic for thinking through such matters.

That even if a crisis-era policy towards cartels and cartel law enforcement has an established motive, or motives, that do not imply that the policy is necessarily “justified”. Evaluation of the relative merits of a specific policy proposal turns critically on the evaluation criteria and the alternative policy options considered. Concerning evaluation criteria, economists typically distinguish between so-called economic welfare criteria (consumer surplus and total welfare) and all other criteria, which are referred to as non-economic criteria.23

That given a non-economic objective and the willingness of policymakers to trade-off attaining this objective against the costs of doing so, then a crisis cartel is said to be justified if the associated contribution to the stated objective and the cost incurred as evaluated by the policymaker is the most beneficial option available.24

In case of Chinese Taipei, up to and including the east Asian financial crisis, the OECD Secretariat Paper for the 2006 Peer Review of Chinese Taipei’s competition law25 notes that  earlier the trend of policy was generally speaking towards restricting inter-firm rivalry. OECD in its review/report for the year 2008 stated that:

Policy attention to market competition has a long lineage, although the usual tendency was to suppress it. Rules against monopolisation and price-fixing can be found as far back as the code of the Tang dynasty. But central control has also been prominent. Cultural distrust of traders led readily to reliance on price controls and State regulation or ownership of resources and production. The private sector joined in anti-competitive restraints. Guilds were enforcing price-fixing agreements at the turn of the 20th century. As late as the mid-1980s, courts in Chinese Taipei were entertaining private competition suits in the form of complaints that competitors were cheating on cartel agreements. Meanwhile, the Government commonly intervened to protect the interests of enterprises.26

Even when a new fair trade law (FTL) was enacted in 1991, provisions exempting crisis cartels from prohibition on cartelisation were included.  Moreover, other exemptions that might plausibly be invoked in economic crisis were included such as “uniform specifications (to reduce costs, improve quality or increase efficiency), joint research and development, specialisation and rationalisation of operations, export cartels, import agreements, and agreements among SMEs to improve efficiency and strengthen competitiveness”.27

Competition during a severe crisis, such as coronavirus pandemic may show that only few companies survive in the market. It is often not favourable to competition in the medium to long term if straightaway there are hardly any parties remaining due to the competition during a crisis. The consumers may be faced with higher pricing or less freedom of choice, as well as a deduction in product or service availability or quality.  Therefore, temporary crisis cartel may prevent that unwanted scenario and can be helpful to the competition among companies and to the consumers in the medium to long term.

Similarly, in case of supermarkets28  by working together, it could provide a more consistent supply of food in the face of current demand increases for food supply. Sharing stock data and coordinating supply networks, distribution depots, delivery vans, which stores should remain open, and possibly personal exchanges are all part of this. For example, if one supermarket has a lot of fresh vegetables and the other does not, it would be good to coordinate the distribution of these items so that the customers may purchase them in both the stores. Moreover, medicine wholesalers also keep each other informed about the number of products that they sell.

In terms of cartel enforcement, Governments are responding to the following—

  1. Many law enforcement agencies have issued temporary guidelines defining when and where collaboration is permissible. Given that several industries have experienced supply constraints (for example, hand sanitiser), it is no surprise that many enforcement agencies’ efforts to date have been focused on tackling short-term capacity issues.

For example, companies may cooperate to “guarantee supply and equitable distribution of scarce products to all consumers”, according to a statement made by the European Competition Network. Temporary remedies are thought to be unlikely to impede competition in such instances, or if they do, they are likely to provide efficiency gains that will offset any potential harm.

  1. Other actions have been implemented in order to maintain crucial services. In Norway, a block exemption for airlines and other transportation businesses was established to ensure that citizens have access to goods and services they require. This exemption permits coordination agreements between all modes of transportation as long as cooperation ensures the preservation of “socially vital” infrastructure.
  2. Dealing with the problem of overcapacity, in the past, crisis cartels were not regarded any differently from ordinary cartels under EU competition law. Even in situations of long-term structural overcapacity—for example, as a result of a recession—the European Commission has maintained that the criteria for cartel exemptions under Article 101(3) TFEU are rarely met and that overcapacity should be resolved through market forces. This suggests that, in Europe, businesses with items that are seeing little or no demand as a result of the epidemic will be limited in their capacity to coordinate their actions under competition law. Outside of the EU, Brazil’s Administrative Council for Economic Defence (CADE) has approved the collaboration of food and beverage industry competitors in order to mitigate the pandemic’s impact and, in particular, to prevent small food stores from leaving the market. These measures, in particular, enable large food suppliers to collaborate on special terms, such as discounts for purchases that must be passed on to consumers (to encourage demand), and longer payment periods and loans for businesses. These measures, which follow OECD guidelines, do not allow for the coordination of commercial initiatives or the exchange of sensitive information but are a novelty in that they are aimed at dampening demand shocks to these businesses.

State aid

The rules on State aid form a crucial part of the relationship between State involvement in, or regulation of national markets and community competition law. The Treaty has specific provisions under Article 8729 to Article 8930 of Treaty on the Functioning of European Union to categories of vertical agreements and concerted practices for regulating State aid granted by the member States. The basic rationale behind these rules is that the level competitive playing field for undertakings throughout the community may be jeopardised by any grant of aid to undertakings by public authorities of member States.

As also provided by the commentaries on competition law31 which state that general justification for State aid is that it may contribute to the correction of market failures or market imperfections. State aid often produces important externalities (for example, employment aid, environmental aid, aid for research and development, or regional aid) which may sufficiently compensate the distortion of competition. These factors will have to be considered in the appreciation of the compatibility of aid with the common market.

Accordingly, the control of State aid is a particularly political and sensitive issue, with great potential for conflict between the aims of the community and the nationalistic concerns of member States. It follows that this is a task particularly suited to the Commission which should act in the general interests of the community and without nationalistic prejudice.

Article 87(2) specifically deals with mandatory exemptions by stating that three specific forms of aid shall be compatible with the common market.32 It is uncertain whether these types of aid are free from the duty of notification. The three forms of aid are first, the aid of a social character,33 secondly, granted to individual consumers and without discrimination as to the origin of the products; and lastly, aid to make good the damage caused by natural disasters or exceptional occurrences;34 and aid granted to certain areas of the Federal Republic of Germany in order to compensate for the economic disadvantages caused by the division of Germany.

The Commission has developed several sectoral policies in its application of the State aid rules, with certain sectors such as shipbuilding, steel, coal, the motor vehicle industry, the synthetic fibre industry, and transport being subject to specific rules.35 In other industries, the general State aid rules continue to apply and the position is less clear. However, the Commission introduced general guidelines on State aid for rescuing and restructuring firms and these have been revised recently.36

The basic principles remain the same, although the Commission’s approach is more restrictive in scope. Rescue aid must consist of financial assistance at normal commercial interest rates, be restricted to the amount necessary to keep a firm in business and to the time in which a feasible recovery plan can be devised, be justified on the grounds of serious social difficulties, and have no undue adverse effects on the industrial situation in the other member States.

Many national Governments including that of the Netherlands are complying with the demands made of State aid. The Commission has also announced that it will offer support and will accommodate measures taken by national Governments wherever possible, also by flexibly applying the State aid rules. The Commission’s measures that are relevant from a State aid perspective are set out in the temporary framework. The Commission introduced a similar temporary legal framework for State aid at the time of the economic crisis in 2008. Through the current measures, the Commission wishes to provide the member States with specific tools under Article 107(3)(b) of the Treaty on Functioning of the European Union37 to deal with serious economic disruptions.38 Those measures supplement rather than replace the current possibilities to provide State aid.

The EU has classified COVID-19 as an exceptional circumstance under the said article and has introduced a temporary framework, approving at least 30 State aid measures, which total to more than EUR 325 billion.39 The French President, Emmanuel Macron, has guaranteed that no French business will face bankruptcy, with unlimited State financial aid available. State aid measures are capable of achieving efficiency benefits by removing inefficient capacity from a market.40

Moreover, specifically concerning the situation of an outbreak of global pandemic COVID-19 in India, an article explains and deliberates by giving a sneak peek into the EU’s new block exemption regulation for liner shipping consortia and proceeds to trace the developments in competition law prevailing in Pakistan right from its inception which at present is nearly identical to EU’s Competition Law and concludes by favouring the State aid mechanism in India as far as the Indian competition regime is concerned with the help of a case study.41

Conclusion

Since the Government has not specifically come out with any exemptions with regard to certain sectors from the purview of antitrust laws, therefore it would be interesting to note how the antitrust watchdog would be handling any such collaboration between competitors such as healthcare providers for sharing technical knowhow, or supermarket dealers who might indulge in deciding prices of commodities in future, or food aggregators dealing with retailers in order to provide easy services, etc. These collaborations will be monitored closely in the light of antitrust regulations in the country which also have a close eye on the intentions of the enterprises while forming such cartels.

Although competition authorities continue to have zero tolerance for cartels and are on the lookout for price hikers taking advantage of the crisis, most of them recognise that the pandemic may necessitate collaboration between entities to ensure supply chain continuity and allow consumers to access critical products such as pharmaceuticals and food during the crisis.

As a result, certain competition authorities have adopted a more liberal approach to such collaboration. Even said, such an approach should not be viewed as a blank check by companies, who must still verify that they follow their jurisdiction’s competition law. In this regard, we recommend the entities to closely follow the statements and actions of the competent competition authorities in order not to face any inconveniences.

Also, it is critical to provide financial assistance to the affected industries and other struggling businesses through State aid in order to keep them afloat, the approach should be rational and balanced, based on an assessment of the businesses involved, the parties’ financial situations. Thus, a balance must be struck such that the regulatory exemptions are established to ensure long-term market competitiveness.


* Fourth-year law student, BA LLB (Hons.), National Academy of Legal Studies and Research (NALSAR) University of Law, Hyderabad. Author can be reached at yashvardhangaru@nalsar.ac.in.

** Second-year law student, BA LLB (Hons.) at Dr B. R. Ambedkar National Law University, Sonepat.

1 Competition Act, 2002. http://www.scconline.com/DocumentLink/C1YA2h2H.

2 Section 3 of Competition Act, 2002. http://www.scconline.com/DocumentLink/ia7u7CL0.

3 Section 19(3), Competition Act, 2002. http://www.scconline.com/DocumentLink/82e9O4p7.

4 Suresh Chandra Bose v. State of W.B., 1975 SCC OnLine Cal 131; Agreement, Black’s Law Dictionary (8th Edn. 2004).

4 Section 2(b), Competition Act, 2002. http://www.scconline.com/DocumentLink/0JcXWr2O.

5 Abir Roy, Competition Law in India: A Practical Guide 46 (Eastern Law House, 2nd Edn. 2016).

6 Builders  Assn. of India v. Cement Manufacturers’ Assn., 2012 SCC OnLine CCI 43.

7 Mileage Conference Group of the Tyre Manufacturers’ Conference Ltd.’s Agreement, In re, 1979 ECR 2435.

8 Director General (Supplies & Disposals) v. Puja Enterprises, 2013 SCC OnLine CCI 55.

9 Rajasthan Cylinders and Containers Ltd. v. Union of India, (2020) 16 SCC 615.

10Communication from the Commission Guidelines on the Optimal and Rational Supply of Medicines to Avoid Shortages during the COVID-19 Outbreak, Official Journal of the European Union, 2020/C 116 I/01.

11European Commission Guidelines: Facilitating AIR Cargo Operation during COVID-19 Outbreak, C(2020) 2010 final.

12Airlines given the Go-Ahead to Cooperate, Ministry of Trade, Industry and Fisheries, Press Release dated 18-3-2020.

13Transportation Sector is Granted Temporary Exception from the Competition Act, Konkurransetilsynet, Norwegian Competition Authority dated 19-3-2020.

14Application of Competition Rules and Competition Control during economic difficulties due to Covid-19, Icelandic Competition and Markets Authority, Samkeppniseftirlitið.

15The Finnish Competition and Consumer Authority (FCCA) will take into Account the Exceptional Circumstances Caused by the Coronavirus when Applying the Competition Act, Press Release dated 23-3-2020.

16 Antitrust: Joint Statement by the European Competition Network (ECN) on Application of Competition Law during the Corona Crisis, March 2020.

17 Treaty on the Functioning of the European Union, EU Law, Art. 101.

18 Agreement on the European Economic Area, EU Law, Art. 53.

19 Competition Commission of India, Advisory to Businesses in Time of Covid-19.

20Ministry of Corporate Affairs, High Level Committee on Competition Policy & Law 4.3.2 (Government of India, 2000).

21Compagnie Royale Asturienne des Mines SA v.  Commission of the European Communities, ECLI:EU:C:1984:130, C-29/83.

22 Murco Mijnlieff, ACM: Ensuring that Markets Work Well, also in 2021, rep. ACML.NL, Publication  date 14-1-2021.

23 OECD, Policy Roundtables, Crisis Cartels, 2011, pp. 22-23.

24 OECD, Policy Roundtables, Crisis Cartels, 2011, p. 25.

25 OECD Secretariat Paper for the 2006 Peer Review of Chinese Taipei’s Competition Law.

26 OECD, Annual Report, 2008, p. 130.

27 OECD, Annual Report, 2008, p. 134.

28 Covid-19: CMA Approach to Essential Business Cooperation, CMA Press Note dated 19-3-2020.

29 Treaty on the Functioning of European Union to categories of vertical agreements and concerted practices, European Commission Treaty, Art. 87, Regulation No. 2790/1999.

30 Treaty to categories of vertical agreements and concerted practices, European Commission Treaty, Art. 89, Regulation No. 2790/1999.

31 Bary J. Rodger & Angus MacCulloch, Competition Law and Policy in the European Community and United Kingdom, 2nd Edn., pp. 245-267.

32 Bendetti v. Munari, (Case 52/76), 1977 ECR 163.

33 EC Treaty, Art. 87(2)(a).

34 EC Treaty, Art. 87(2)(a).

35 Moritz Lorenz, An Introduction to EU Competition Law, Cambridge University Press, 2013.

36 Community Guidelines on State Aid for Rescuing and Restructuring firms in difficulty, OJ C288/02, 1999.

37 Treaty on the Functioning of the European Union, EU Law, Art. 107.

38 Richard Whsih & David Bailey, Competition Law, Oxford, 7th Edn., p. 53.

39 Paula Riedel, Thomas Wilson, Shane Cranley, EU State Aid and Covid-19, Kluwer Competition Law Blog, 24-3-2020.

40 Policy Roundtables: Crisis Cartels, OECD, 2011.

41 Amit Kapur, Mansoor Ali Shoket and Manas Kumar Chaudhuri, Current Legal Appraisals in Competition Law in Various Jurisdiction, Competition Law & Policy, Manupatra, Journal of Oct. 09-Dec. 09.

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Coram comprising Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi (Members) took suo motu cognizance of the matter regarding alleged prevention of entry of app-based taxi aggregator companies in the State of Goa.

Based on newspaper reports regarding alleged concerted action to prevent entry app-based taxi aggregator companies in the State of Goa, Commission took up the present matter suo motu against tourist taxi unions operating in the State of Goa.

Another significant issue in the matter was that the constant strikes by various taxi unions, tourists were getting affected in Goa.

What were the demands of the above-stated Unions?

  • Crackdown on Illegal Taxi
  • Cancellation of installation of speed governors.

Prima Facie Observation of the Commission

Taxi Unions conduct in not allowing any app-based service providers in the State of Goa was putting a restrain on services based on technology and limiting the competition, technical development as well as investment in provision of relevant services.

Another observation was that the reforms by the State Government in terms of bringing transparency and improvement in the delivery of services was also being prevented.

The above resulted in restriction to the choice of consumers which was in contravention of Section 3(3)(b) read with Section 3(1) of the Competition Act.

In view of the above observations, DG was directed to conduct an investigation and submit a report.

What was in the DG’s report?

DG found the conduct of taxi unions to be in violation of Sections 3(1) and 3(3)(b) of the Competition Act.

DG noted that there are no fare meters and organised groups of taxi operators in Goa control the rates as well as the routes. Further, it was observed that the taxi operators in North and South Goa use different rate charts and tourists in Goa have to pay more than thousands of rupees even for short distance travel.

During investigation, certain violent incidents were reported alleging manhandling of Zoomcar users and their vehicles damaged by local taxi union operators.

Commission’s Observation on perusing DG Report

Coram noted that no material was placed in regard to conduct of OPs indulging in strikes except few YouTube videos, Facebook Blogs and news clippings and such material remained uncorroborated and unauthenticated.

DG failed to examine the reasons mentioned by the OPs for resorting to strikes, which included increase in fees for permits, backdoor entry of app-based taxi aggregators and installation of speed governors in taxis. OP-4 had pointed out certain other issues such as:

proposed Mopa Airport, Speed Governors, Harassment of taxi drivers at the airport, frequent requests to the Government of Goa for putting up taxi fare rates at all tourist destinations, to stop private cars operating as illegal taxies, and to stop private cars being given on rent for self-driving’

Restriction on entry of OLA and UBER

Authorised representative of Uber stated that Uber did not even apply for any license for starting app-based taxi services in the State of Goa.

With regard to OLA, DG failed to examine the reasons behind its exit from the State of Goa, though it was noted that Shekhar Dutta, Senior Director, ANI Technologies (OLA), had stated that they had received threats from Taxi Owners Associations (without naming any specific OPs) and the association members vandalized the assets and did gherao of their office premises without elaborating any details of such incident in precise manner.

“…meeting with head of political executive in a joint representation, raising grievances cannot be said to violate the provisions of Competition Act.”

Though nothing on record was placed to show that the OPs gave any joint representation to the State Government.

Concluding the matter, Coram observed that State of Goa took a policy decision and issued guidelines titled as “Guidelines for Taxi Operator/ Radio Taxis/ Rent A Car and Taxi App Aggregators in the State of Goa” as per which app-based taxi aggregators were permitted to operate and were allowed to have range bound dynamic pricing which was on lines of the business model of OLA & Uber.

“despite the opposition of OPs, the State of Goa does not appear to have acceded to or conceded to the demands of the OPs and the policy allowing entry of app based taxi aggregators was eventually notified.”

Hence no case of contravention of Sections 3(1) read with 3(3) of the Competition Act was made out. [Alleged anti-competitive conduct of taxi unions in the State of Goa, In re., Suo Motu Case No. 2 of 2018, decided on 22-06-2021]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi (Members) ordered an investigation by the Director-General against Google in view of prima facie contravention of provisions of Competition Act.

Informants filed the instant case under Section 19(1)(a) of the Competition Act against Google LLC, Google India Private Limited, Xiaomi Technology India Pvt. Ltd. & TCL India Holdings Pvt. Ltd. alleging contravention of various provisions of Sections 3 and 4 of the Act. OPs to be referred to as ‘Google’.

Informants stated that they were the consumers of Android-based smartphones, television devices and alleged that Google was guilty of anti-competitive practices which violate Section 4 with Section 32 of the Act.

It was alleged that Google imposed several restrictions, as summarized below, upon smart TV and smart mobile device OEMs by virtue of the agreements entered into with them which tantamount to abuse of its dominant position by Google, in terms of various provisions of Section 4 of the Act.

Analysis

It was noted that Google enters into two agreements with Android TV licensees i.e. Television App Distribution Agreement (TADA) and Android Compatibility Commitment (ACC).

Google makes AOSP available to any third parties under an open-source license, however, the Android Open Source Project license does not grant OEMs, the right to distribute Google’s proprietary apps such as Play Store, YouTube, etc. referred to as Google Applications in TADA. The AOSP license further does not grant Original Equipment Manufacturers (OEMs), the right to use the Android logo and other Android-related trademarks. In order to obtain those rights, Google requires OEMs to sign an optional, non-exclusive agreement, i.e. TADA. Further, TADA requires the OEMs to be in compliance with a valid and effective ACC.

Commission prima facie opined that by making pre-installation of Google’s proprietary apps conditional upon signing of ACC for all android devices manufactured/distributed/marketed by device manufacturers, Google has reduced the ability and incentive of device manufacturers to develop and sell devices operating on alternative versions of Android and thereby limited technical or scientific development relating to goods or services to the prejudice of consumers in contravention of Section 4(2)(b) of the Act.

ACC prevents OEMs from manufacturing/ distributing/ selling any other device which operates on a competing forked Android operating system.

Therefore, the dominance of Google in the relevant markets and pronounced network effects, by virtue of the stated restriction, developers of such forked Android operating system are denied market access resulting in violation of Section 4(2)(c) of the Act.

Further, Commission prima facie opined that obligations which appear to be applicable across all the devices manufactured by OEMs are akin to making a conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts and thus, violative of provisions of Section 4(2)(d) of the Act.

In relation to the mandatory preinstallation of all the Google Applications under TADA, it is observed that the device manufacturers who sign this agreement cannot pick and choose from the Google Applications for preinstallation. In essence, this entails compulsory tying of ‘must have’ Google apps, which is in contravention of Section 4(2)(a)(i) of the Act.

Elaborating more on the above aspect, Commission stated that Google prima facie leveraged dominance in Play Store in contravention of Section 4(2)(e) of the Act.

Commission directed the Director-General (‘DG’) to cause an investigation to be made into the matter under the provisions of Section 26(1) of the Act and the same to be completed within a period of 60 days.

As per the Coram, a case was made out for directing an investigation by the DG.[Kshitiz Arya v. Google LLC, 2021 SCC OnLine CCI 33, decided on 22-06-2021]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi, Members held that Amateur Baseball Federation of India contravened the provisions of Section 4 of the Competition Act, 2002.

Confederation of Professional Baseball Softball Clubs (Informant) filed the present information against Amateur Baseball Federation of India (OP) alleging contravention of the provisions of Section 4 of the Competition Act.

Background

Informant had received fourteen club registration requests for ‘Club National 2021’. Subsequently, it came to the knowledge of the Informant, that a letter dated 07-01-2021 was sent by ABFI to the Presidents/ Secretaries of State Baseball Associations throughout the country prohibiting the State Associations from dealing with bodies and leagues not recognised by it and threatening with disciplinary action if any of the players took part in the leagues and tournaments not recognised by it.

In view of the above letter, clubs started withdrawing their participation. Hence, the informant cancelled the event leading to severe financial distress for the organization.

Informant brought to the attention of the Commission; another communication issued by ABFI to its State Associations whereby OP announced to conduct the 34th Senior National Baseball Championship. Informant alleged that the motive of OP in organizing the said event was to sabotage the event of the informant by starting it just one day prior to the beginning of the Club Nationals 2021.

Further in the letter, it was added that no team will be allowed to leave the station before the closing ceremony of the championship and also informed that men and women players will be selected during the said championship by Selection Committee for participation in forthcoming international events.

Informant alleged that it had been denied access to utilize the services of players and caused obstructions in its engagements with the State Baseball Associations which was a blatant misuse of the regulatory power of OP and a clear contravention of the provisions of Section 4(2)(c) of the Act.

OP abused its dominance as it placed restrictions on players participating in tournaments/private professional leagues not recognized by ABFI and the same was a violation of Sections 4(2)(a)(i) and 4(2)(b)(i) of the Act.

Analysis

Commission stated that since ABFI is stated to be registered under the Haryana Registration and Regulation of Societies Act, 2012 and as such qualifies to be a ‘person’ as defined in Section 2(l) of the Act being an association of persons.

Coram noted that in view of the admitted position of ABFI in the baseball ecosystem coupled with linkages/affiliation with continental and international organizations, it is axiomatic that ABFI plays a decisive role in the governance of this sport discipline in the country.

Therefore, Commission prima facie opined that ABFI is in a dominant position in the market for organization of baseball leagues/events/tournaments in India.

Commission further added that ABFI by issuing the above-mentioned communication to its affiliated State Baseball Association requested them no to entertain unrecognized bodies and further by requesting them not to allow their respective State players to participate in any of the tournaments organized by such unrecognized bodies, has violated the provisions of Section 4(2)(c) of the Act as it resulted in denial of market access to other federations.

OP had further warned of strict action against the players who participate in the tournaments organised by bodies which are not ‘recognised’ by ABFI. Such conduct imposed an unfair condition upon the players and thereby falls foul of the provisions of Section 4(2)(a)(i) of the Act besides stultifying the very objective of promoting the cause of baseball in India, which a National Sports Federation is obligated to discharge. 

Hence, ABFI violated the provisions of Section 4 of the Competition Act, therefore, the matter warrants investigation.

Though the Informant has alleged contravention of the provisions of Section 4 of the Act only, yet looking at the decisions taken and communicated by ABFI, the Commission is of the opinion that the impugned conduct may also be examined by the DG within the framework of Section 3 of the Act.[Confederation of Professional Baseball Softball Clubs v. Amateur Baseball Federation of India, 2021 SCC OnLine CCI 30, decided on 3-06-2021]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi, Members found no cartelization in respect to the skyrocketing prices by the airlines during the Jat Agitation.

Informant had alleged that Jet Airways, Spice Jet and Indigo had contravened the provisions of Section 3 of the Competition Act.

Informant’s Submissions

During the month of February 2016 when Jat Agitation was going on, domestic airlines had skyrocketed their rates particularly between the Delhi-Chandigarh and Delhi-Amritsar routes.

From the above instance, it was noted that the aviation industry had been exploiting the passengers during such conditions as the same was observed during the Chennai Floods and Nepal Earthquake.

Preliminary Conference

Commission on noting the allegations and submission by the Informant held a preliminary conference and made a reference to the Director-General of Civil Aviation in terms of Section 21 A of the Act, later the Commission sought certain information from 5 airlines.

What did the Commission note?

Commission noted that with the use of algorithms, there exists a high possibility of collusion with or without the need of human intervention or coordination between competitors.

Therefore, Commission opined that there was a need for investigation of the algorithms used by airlines, so as to determine whether the fares set by the airlines during the alleged period were an outcome of collusion or not?

 Hence, on 9-11-2018 an order was passed to cause an investigation to be made.

 DG in its investigation report concluded that no contravention of Section 3(3) read with Section 3(1) of the Act was found against the conduct of Spice Jet, Air India, Go Air and Indigo during the period of ‘Jat’ Agitation, but in regard to Jet Airways, DG excluded the same from its purview of investigation since the airline was grounded in April 2019 and due to grounding of Jet Airways and un-availability of any employee/personnel, the Resolution Professional could not provide any price data, booking dates, capacity of flight, number of passengers flown and the number of price buckets used by Jet Airways during the period of ‘Jat’ Agitation.

After the objections and suggestions were filed, parties were directed to appear for a final hearing on the investigation report on 23-02-2021.

On the fixed date of hearing, Commission noted that neither the informant nor its counsel appeared before the Commission.

Further, Commission considered the matter in its ordinary meeting and decided to pass an appropriate order.

What did the investigation try to ascertain?

It was ascertained whether the increase in air-ticket prices during the period of Jat Agitation was the result of an agreement between the OPs?

Whether the price data suggested any uniformity in prices indicative of price parallelism?

DG found no contravention of Section 3(3) read with Section 3(1) of the Act against the conduct of Spice Jet, Air India, Go Air and Indigo during the period of Jat Agitation.

Analysis and Decision

Commission noted that the existence of an ‘agreement’ is sine qua non before ascertaining whether the same is anti-competitive or not in terms of the scheme of Section 3 of the Act.

Definition of ‘agreement’ as given in Section 2(b) of the Act requires inter alia any arrangement or understanding or action in concert whether or not formal or in writing or intended to be enforceable by legal proceedings.

The establishment of ‘agreement’ would require some explicit or tacit arrangement amongst the parties wherefrom a concert between them can be deciphered. This may include, amongst others, exchange of information in the form of communications/ e-mails or in any other form of communication amongst the competitors, whether – explicit or tacit, oral or in writing, formal or informal including through parallel conduct which cannot be otherwise explained etc.

 In the instant matter, no such emails were found which could show any exchange of information among the airlines establishing any form of collusion during or after the period of Jat Agitation.

The investigation did not reveal any price parallelism or identical pricing of tickets by the airlines.

Further, elaborating more, Commission noted that widespread usage of algorithms in price determination by individual firms could pose possible anti-competitive effects by making it easier for firms to achieve and sustain collusion without any formal agreement or human interaction.

Based on DG’s investigation, Commission noted that airlines were using different software’s for the pricing of tickets in different fare bucket.

No evidence on record was found to establish a cartel amongst the airlines during the period of Jat Agitation.

Hence, no case of contravention of the provisions of Section 3(1) of the Competition Act was made out against the airlines. [Shikha Roy v. Jet Airways (India) Ltd., 2021 SCC OnLine CCI 31, decided on 3-06-2021]


Advocates before the Court:

For SpiceJet Limited: Mr. Abhishek Sharma, Advocate along with Mr. Shashi Shekhar, Executive (Legal) of OP-2

For InterGlobe Aviation Limited: Mr. Raj Shekhar Rao, Senior Advocate with Mr. Sagardeep Rathi, Mr. Pranjal Prateek and Mr. Ebaad Nawaaj Khan, Advocates

For Go Airlines (India) Limited: Mr. Vihang Virkar and Mr. Karun Jhangiani, Advocates along with Mr. Prashant Shinde, Senior General Manager (Legal) of OP-4

For Air India Limited: Mr. Pratik Majumdar, DGM of OP-5

Case Briefs

Competition Commission of South Africa in a statement prohibited the transaction proposed by ECP Africa intended to acquire Burger King (South Africa) and Grand Foods Meat Plant (Pty) Ltd (grand Foods) from Grand Parade Investments.

What would be the impact of the merger?

Commission found that the merger would lead to a significant reduction in the shareholding of historically disadvantaged persons in the target firm, from more than 68% to 0% as a result of the merger.

The said merger would not have resulted in a substantial prevention or lessening of competition.

Commission stated that the acquiring firms do not have ownership by historically disadvantaged persons (HDPs). As a direct result of the proposed merger, the merged entity will have no ownership by the HDPs and workers.

No Public Interest

Therefore, Commission was concerned that the proposed merger would have a substantial negative effect on the promotion of greater spread of ownership, in particular to increase the levels of ownership by historically disadvantaged persons in firms in the market as contemplated in Section 12A(3)(e) of the Competition Act.

Concluding the statement, Commission stated that the proposed transaction raised significant public interest concerns and has a substantial negative effect on the promotion of a greater spread of ownership.


Competition Commission of South Africa

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI):  “Cartelisation in the Airlines Industry”? Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi, Members, addressed a very significant matter and analysed a detailed report of the Director-General pertaining to the same.

Cartelization: Domestic Airlines

The present matter revolved around the allegation with regard to cartelization amongst various domestic airlines operating in India in contravention of Section 3(1) of the Competition Act read with Section 3(3).

The above concern arose on receiving a letter from Lok Sabha Secretariat with a request to examine whether there was any evidence of cartelization in the airlines sector.

Data Analysis

Conduct of airlines was analysed with the help of data pertaining to four major routes, which indicated that airlines maintained some degree of stability in their market shares in both lean and peak seasons during the examined period.

Similar cost structure was observed to facilitate the collusion on price to be charged in contrast to a differentiated cost structure, where low-cost firms usually compete with high cost firms on prices to capture greater market share.

A significant observation was that despite differences in various other fares, the end fares charges by airlines for tickets were almost similar.

Anti-Competitive Conduct

Commission prima facie opined that the airlines viz. Jet Airways (including Jet lite), Indigo, Spice Jet, Go Air and Air India exhibited characteristics of anti-competitive conduct which was in contravention of Sections 3(1) read with 3(3) of Competition Act.

In view of the above Commission had passed an Order dated 26-03-2015 directing DG to cause investigation.

DG found that that the market shares and market positions of different airlines have not remained stable during 2010- 2016.

On analysing further in terms of airfare determination, DG concluded that there was no contravention of Sections 3(1) read with 3(3) of Competition Act.

Role of software/algorithm deployed by the airlines

It was observed by the DG that airlines use softwares for the purpose of revenue management which includes determination of prices.

Use of software by Air India is the least when compared to the other competing airlines in as much as its fare is determined manually by its route controllers a few months before the date of departure.

Route controllers also access external websites like Make My Trip, Clear My Trip, etc. to know the current market situation across the routes and take a final call on pricing of the ticket.

Elaborating more on the above-stated aspects, DG added to its observation that the softwares used by the airlines were noted to be guided by algorithms (formulae) in-built in the software, configured by the software company, on the basis of inputs provided by the revenue management team of each airline to the software developer.

The role of the software is limited to the extent of helping the revenue management team to arrive at a price that will optimize revenue. However, the algorithm as well as the final price of the ticket are determined by the personnel working in the revenue management team of each airline.

Hence, the DG stated that the revenue management team also called route analysts have the final say in fixing the prices. They take into account certain events like IPL matches, some international conferences, cultural events, etc.

Fare Buckets and Route Analysts

An algorithm configured by software allocates the total number of tickets to different fare buckets immediately on opening of the flight. The route analyst after taking into consideration the competitive airfares determine the price for each bucket.

Further, airlines keep on changing the price/inventory allocated to fare buckets due to change in demand and competitive price, which may happen multiple times a day. When a sale happens, the flight fare moves from a lower bucket to a higher bucket.

Data analysis showed that there was no sacrosanct rule for shifting from one bucket to another. However, it was noted that competitive pricing and availability of unsold inventory become the guiding factor for the route analysts to determine the prices at any given point in time.

Nothing amounted to or displayed a pattern towards a wilful concerted action on the part of the airlines.

DG noticed that ticket prices for a relevant route are opened one year in advance for the purpose of booking and the earlier a ticket is booked, lower the fare is and vice-versa. 

Airlines follow the system of dynamic pricing where the same product (economy class seat) is sold at different prices to customers depending on their date of booking.

Conclusive Report of DG

DG on analysis with respect to daily bucket wise movement of price, relationship between price and capacity did not find any evidence suggestive of meeting of minds, no contravention of Section 3(1) and 3(3) of the Competition Act was found.

Commission’s Observation

Bench observed that in order to determine as to whether there was any kind of understanding or arrangement between the airlines in contravention of provisions of the Act, the DG had analysed the market share of five airlines on four sectors during the reference period, as well as their airfare and its determination practices in order to detect any sign of stability or parallelism, or any possibility of communication between the airlines to fix prices, etc., if any.

Commission did not find a pattern of stability or parallelism between the airlines.

Further, the Bench noted that parallel conduct is actionable under the Act only when the adaptation to the market conditions is not done independently and is attributable to information exchanged between the competitors or through some other collusive conduct, the object of which is to influence the market.

Nothing amounting to the above was found.

Commission opined that although softwares for the purpose of revenue management are used, but manual intervention plays a pivotal role in the final determination of the prices.

Revenue management personnel play key role in determination of airfares whereas softwares are merely used to facilitate their decision making.

Hence, nothing on record was found to establish a cartel amongst airlines during the period April 2012-March 2014.[Alleged Cartelization in the Airlines Industry, In re., 2021 SCC OnLine CCI 3, decided on 22-02-2021]

Op EdsOP. ED.

I. Introduction

The Parliament of India enacted the Competition Act, 2002 (“Act”) with the objective of preventing practices that have an adverse effect on competition. The Competition Commission of India (“Commission”) aims to promote and sustain competition in the market, protect consumer interests while ensuring freedom of trade and “level playing field” for all participants.[1] The benefits of a sound competition policy are numerous to the economy of a country as noted on various occasions and therefore, the Commission is obligated to “eliminate” all anti-competitive activities.[2] One such activity is the formation of a cartel as defined in Section 2(c) of the Act and it is presumed that cartels have an appreciable adverse effect on competition. A cartel attempts to control the production, sale, or prices of a product to obtain a monopoly in a particular industry with an objective that is generally not in the public interest.[3] Cartels are recognised as harmful to consumer interests and the economies of scale across jurisdictions and therefore, a primary objective is to root out cartels, penalise the participants and deter such anti-competitive activities. The severity of the effects of cartels is illustrated by Section 27 of the Act, which imposes a higher penalty on cartel participants entering into an anti-competitive agreement as compared to other parties to another anti-competitive agreement. However, unearthing and successfully proving a cartel is a herculean task and authorities have struggled to find conclusive evidence in various cases. Initially, to make a case of cartelisation under the Indian competition regime the Commission required direct and coherent evidence of a cartel formation and an unequivocal establishment of an agreement.[4] The informant or the authority alleging an infringement of the Act had to provide evidence that cartel participants met, decided to take concerted action and implemented such an action.5 However, with the realisation and acceptance of the inherent secrecy behind the formation of cartels and its direct impact on investigation, the standard of proof has been diluted over the years. The paper seeks to highlight the current position of the standard of proof and the powers of the investigative wing of the Commission. These powers will be contrasted with the inquisitorial committees of developed jurisdictions to analyse the scope of investigative power and the standard to proof for a cartel to effectively catch and penalise those who intend to cause disruptions in the competitive forces in the market.

II. Standard of proof

The standard of proof for cartels have not been specified by any legislative enactment and is determined through judicial decisions. Since cartelisation is considered a civil offence, the informant or authority does not need to prove the existence of a cartel and anti-competitive activities “beyond a reasonable doubt” standard. The Commission has held that the “balance of probabilities” and “liaison of intention” test must be employed to determine cartelisation and this can be established through indirect or circumstantial evidence.6 This is in light of the fact that obtaining documented evidence in such cases is a particularly challenging task owing to the very nature of cartels. Agreements between cartel are undocumented and well-hidden under the radar and therefore, the “agreement” as defined under the Act is wide enough to bring into its scope any informal arrangement.7 The Commission has held that while it is necessary to prove an existence of an agreement, it is not mandatory to prove an explicit agreement between parties and the same can be inferred from the intention or actions of the parties.8 This implies that circumstantial evidence can be used to establish the existence of an agreement suggesting concerted action.9 It has been held that the Commission may inquire into cases of anti-competitive agreements based on indirect and circumstantial evidence which establish facts concerning the conduct of parties which cannot be explained “but for” some sort of anti-competitive agreement or concerted action under the existing framework.10 The Commission has even penalised cartels based on circumstantial evidence alone, thereby, adding to the jurisprudence of competition law and diluting the standard of proof for a cartel from the earlier position. Currently, the “parallelism plus” approach is employed by the authorities to ascertain the existence of cartels. This implies that there must be some parallel behaviour between the participants in the market and some plus factors that point towards collusive actions by a cartel.

Relying on European Court of Justice (“ECJ”), the Commission accepted that mere parallel behaviour was insufficient by itself to prove concerted practice.11 However, it was a strong evidence of concerted behaviour if the actions led to competition conditions which were unresponsive to normal conditions of the market having regard to the nature of product, size of undertaking and volume of the market.12 This approach can be explained by discussing several case laws to provide an insight into how circumstantial evidence are evaluated to establish the existence of an agreement and concerted action.

In MDD Medical Systems India (P) Ltd. v CCI, the Competition Appellate Tribunal was adjudicating an appeal against the decision of the Commission.13 In this case the appellants were alleged to have indulged in the activity of bid rigging and cartelisation. The major issue before the Appellate Tribunal was the correctness of decision of the Commission where the present appellants were found guilty under Sections 3(1) and 3(3) of the Act. The informant had filed a complaint alleging manipulation in the tender process floated by the Union of India. The Tribunal held that the appellants were innocent and that there was no price parallelism. Further, it observed that in order to prove that the appellants had continued to engage in cartelisation activities, independent evidence needs to be produced. The Commission had presupposed the existence of a cartel based on an earlier decision where the same parties had formed a cartel, the Tribunal noted that this approach was erroneous and on the basis of this it cannot be concluded that cartelisation activities continued. The Tribunal acquitted the appellants due to lack of evidence stating that the DG’s report relied on mere circumstances and transactions between the accused companies from which the existence of a cartel could not be inferred. In another case, Excel Crop Care Ltd. v. CCI, it was found that there were four (and only) APT manufacturers in the market and the prices quoted by them for tenders floated by Food Corporation of India (FCI) were identical, they jointly boycotted tenders at times and they were unable to justify this trend.14 Taking a holistic view of the matter, the Court noted that price parallelism in the market was indisputable and had been going on for years despite the fact that the manufacturers had different cost of production, geographical location and profit margins.15 While different prices are quotes for different tenders, the prices quoted by the manufacturers in respect of a particular tender are identical.16 Further, the manufacturers decided to collectively boycott a tender without providing a satisfactory explanation.17 The lack of interest and hundred per cent abstention for the tender, common entry in visitor’s register by the manufacturers for bidding and the past history of quoting identical prices was sufficient to concluded that the boycott was a concerted action resulting out of an understanding between the parties and hence, violative of Section 3(3)(d) of the Act.18

In Cement Cartel case, apart from establishment of price parallelism the Commission considered “plus factors” such as decrease in capacity utilisation, change in price after meetings of Cement Manufacturers’ Associations which also provided an opportunity for discussions and information exchange, dispatch parallelism, inter alia.19 The manufacturers were unable to give a plausible explanation for the trend of the industry and were earning abnormal profits. They also failed to give a consistent answer regarding the discussions in the trade association meetings. The circumstantial evidence was considered sufficient to meet the standard of proof.20 However, it has been alleged that this case creates very low evidentiary standards to prove a cartel and also highlights inconsistency in appraising evidence when contrasted with the Tyre Cartel case.21 Similar to the Cement Cartel case22, in Tyre Cartel case23 it was noted that plant capacity was higher than what was being produced however, the manufacturers refused to cut prices and there existed an active trade association. Apart from price parallelism, the Commission looked at “plus factors” to further assess the evidence. However, the conclusion drastically differed from the cement cartel decision. The Commission emphasised that due to the fairly transparent market structure of the tyre industry the price parallelism was dictated by economic necessity and independent strategic choices rather than concerted action. A detailed analysis was conducted into the cost of production, the unpredictability of demand and supply due to an ancillary retreading tyre market was noted along with substantial curtailing buying power in the industry. The court held that in the absence of a more “specific pattern” between parties, the evidence was inconclusive, and the manufacturers were exonerated. While the facts may contain some similar factors in the two cases, it is important to keep in mind that appraisal of evidence in such cases is a highly technical and complex exercise. It is intrinsically dependent on the nature of product and industry, factors affecting demand and supply and the involvement of trade association to an extent and therefore, while inconsistency ought to be maintained in appraising evidence, due consideration should be given to the background of every case.

III. Investigative powers

For a comprehensive understanding of the requirements of making a case against cartel it is imperative to understand how the Commission is empowered to conduct investigation. The Director General (“DG”) is responsible to investigate any contravention of the Act when directed to do so under Section 26(1) by the Commission. The DG has to act within the language of the Commission’s order. The Delhi High Court’s Division Bench, in 2019, held that the DG can investigate beyond what the Commission has directed it to do as it is his duty to thoroughly examine everything related to the subject-matter of the case.24 It can also look at other violations if required while investigating violations alleged in the original complaint. However, this does not mean that the DG has unfettered powers as it limited by the language in the Commission’s order. In Excel Crop case25, the DG could investigate if there was violation under Section 4 of the Act even though it was not alleged in the complaint, because the Commission’s order was broad enough to permit further examination. Hence, the DG’s powers should be within the language of the order of the Commission. In order to prove the presumption that there exists a cartel, the Commission looks at the evidence gathered from the investigation and also at other plus factors such as market share, cost of sales, conduct of the companies involved, etc. The Commission, while giving an order, relies on the report by the DG. This report contains what the DG found as a result of investigation and various other plus factors which constitute as circumstantial evidence. Such factors include parallelism in price changes, comparison with other players in the concerned market, factors of demand and supply inter alia. Cartels are agreements made in secret and do not have the tendency to be either written or too vocal. Therefore, it usually becomes difficult to find direct evidence that points towards existence of a cartel. Any kind of documented evidence exposing a cartel would be considered as direct evidence and due to lack of such evidence, the Commission heavily relies on circumstantial evidence. However, the problem with solely relying circumstantial evidence is that it can be risky and give the accused members of the presumed cartel a higher chance to escape unscathed.

At this injunction, it may be interesting to note how circumstantial evidence is treated under competition law vis-à-vis criminal law. Universally, direct evidence has more credibility than circumstantial evidence. In a court of law, what value the direct evidence holds cannot be replaced by the latter. In the criminal law of India, at present, circumstantial evidence is admissible.26 However, the cumulative effect of the evidence gathered should be such that must be pointing towards the guilt of the accused. Now the court in criminal law cases even provides for highest forms of punishments solely on the basis of circumstantial evidence.27 It is practically not possible for there to be direct evidence present for all matters. In the cases of competition law, especially when we look at alleged cases of cartels, pure and direct evidence is not always possible to be found as transactions between firms are not visible even during investigations. Earlier, Commission would always strive to find direct evidence to prove the existence of a cartel. Now, it also relies on circumstantial evidence to declare the presence of a cartel. There can be parallel drawn between the reliance on circumstantial evidence in competition law and reliance on it in the criminal law. The Judge in a criminal case, while considering the whole link of tied circumstances, sees if there is any fact or point which indicates otherwise or which breaks the link. However, if all gathered information is against the accused, the Judge affirms the conviction.28 Criminal law is also concerned with public safety and interest which the Judge also keeps in mind while ruling. Similarly, the Commission has noted that if there are circumstantial evidences which point towards a cartel and is anti-competitive for the market, the Commission will order penalty as seen in  Cement Cartel case.29 In its article, in 2006, the Organisation for Economic Co-operation and Development (OECD), opinionated that since in the cases of cartels direct evidence is not available, the authority should rely on the cumulative effect of the circumstantial evidence instead of looking at each circumstance in isolation.30 In Suo Motu case against LPG Cylinder Manufacturers, In re, the Commission while holding that there was a cartel, relied on the collusive personality of the market and the fact that price was identical despite different the manufacturers having different cost of production and location.31

To investigate anti-competitive activities and find evidence, the Commission has resorted to methods like leniency regulations and dawn raids inter alia.

  1. Dawn raids. — Dawn raids are unannounced search and seizure activities that the DG is empowered to conduct as upheld by the Supreme Court of India.32 Under Section 41(3) of the Act, the DG has been vested with the same powers as the Inspector under Section 240-A of the Companies Act, 1956. A warrant could be obtained from the Chief Magistrate to conduct raids.33 However, it is observed that in the Companies Act, 2013, Section 220 states that the Code of Criminal Procedure’s (“CrPC”) provisions have to be followed to get a warrant. Following this, the Act should now be amended as well in accordance with the present Companies Act however, it has not happened. The DG has utilised this vested power to raid Glencore, Africa’s Export Trading Group in 2019 on receiving Intel about cartelisation in the market of pulses.34 There have been dawn raids conducted even with regard to the “beer cartel case” and offices of companies Carlsberg, United Breweries and Anheuser-Busch InBev have been raided.35 Through this raid, exchange of electronic mails was discovered which showed discussions with relation of price fixations.36 This was a direct evidence which in normal investigation is not possible to found. In Dry Battery Cartel case, the DG had conducted a raid and got access to incriminating documents and e-mails and could establish the case of cartelisation.37 The Competition (Amendment) Bill, 2012 was proposed to strengthen dawn raids. It stated that raids could be conducted if a firm was not coordinating with the investigation and allowed the officers to admit to the trial all kinds of documentation (physical as well as electronic) found during the raid. The amendment proposed that the search and seizure procedure should be in accordance to the CrPC and aimed to ease the strict requirement of the judicial warrant by empowering the Commission Chairman to authorise DG to conduct raids itself. The current procedure of obtaining the warrant results in prolonged delay which in turn allows the firms to clear any incriminating evidence and the element of a dawn raid i.e. sudden barging in the firm and searching for evidence is lost.39 However, the Bill was criticised for not having any remedy in case of arbitrary raids by the DG and the wide powers conferred to the Commission. As such the Bill was not passed however, there is a need to increase and make efficient use of dawn raids as it positively impacts the chances of extracting direct and incriminating evidence against cartels.
  2. Leniency regulations. — Through the leniency regulations, a person who has information approaches the Commission and hands over the details and evidence of the existence of the cartel. The leniency programme is mentioned under the Act and has to be followed as per the Competition Commission of India (Lesser Penalty) Regulations, 2009.40 Under these provisions the applicant, the one who informs about the existence of a cartel is entitled to a lesser penalty if required conditions are fulfilled. For example, the applicant will have to provide all relevant details the applicant knew about the alleged cartel as required by the Commission and not manipulate or conceal any vital information or documents. The applicant has to genuinely and expeditiously cooperate with the Commission. The regulations were recently amended in 2017 in order to change the meaning of applicant under the provisions, the number of applicants and so on.41 However, it is imperative to note that leniency is a discretionary relief. The programme does provide for confidentiality however, the Commission needs to inculcate confidence in the leniency programme to encourage cartel participants to approach the Commission and provide vital information. Through such regulations, it becomes easier to get direct and substantial evidence against the firms involved.

IV. Position in the EU/USA

The competition law in the European Union is governed by Articles 101 and 102 of the Treaty on the Functioning of the European Union (“TFEU”). Article 101(1) of TFEU prohibits any form of horizontal agreements between parties. The key legislation that provides the framework for competition law enforced in EU today is Council Regulation (EC) No. 1/2003 of December 2002 (Regulation 1/2003). However, Regulation 1/2003 does not provide that standard of proof which the European Commission (“EC”) requires if the Article 101 of TFEU is violated. The Regulation 1/2003 provides wide powers to the EC to investigate and gather evidence, but obtaining direct evidence is not always feasible as the modus operandi adopted by the cartels is often complex.42 The EC has often held that the evidence produced should be “sufficiently precise and coherent” to prove violation.43 In the Wood Pulp judgment, the ECJ noted the relationship between conscious parallelism and concert practice.44 The Court observed that parallel behaviour can furnish circumstantial evidence of collusion, however it can only be considered explicit collusion if behaviour cannot be explained by competition conditions of the market. The European Courts have avoided discussions on a precise standard of proof.46 The courts have constantly opined that the evidence should be “firm”, “precise”, “consistent”, “solid”, etc. However, what amounts as “sufficiently precise and coherent” is not quantifiable and can only be decided on a case-to-case basis.

The US competition law is governed by Section 1 of the Sherman Antitrust Act, 1890.47 In United States, cartel laws can be enforced criminally by the Federal Government and civilly by Federal Government, State Government and private parties. Criminal cases under Section 1 of the Sherman Antitrust Act must prove criminal violation “beyond reasonable doubt”, whereas the civil cases must meet the standard of “preponderance of evidence”. The courts consider the economic evidence and “plus factors” like parallel conduct, etc. The proof of parallel conduct should also be accompanied with conscious commitment. To commence a criminal trial, sufficient evidence is needed, but for proving the guilt of cartelisation, the evidence with the prosecutor that meets the highest standard set for proof. Even in the Sherman Antitrust Act, the term “agreement” includes informal type of agreement. However, the Department of Justice (“DOJ”) has to have direct evidence to prove the agreement in criminal cases. Whereas, in the civil cases of cartels, use of circumstantial evidence is permitted; the Supreme Court held that even such evidence should prove that there was enactment in concert with that intent and was not done independently.48 The Court has also held that restraints such as agreements of bid rigging, fixation of prices among the players are to be considered per se illegal.49 In criminal trials, the DOJ has wide powers during investigation along with the Federal Bureau of Investigation (“FBI”).50 The FBI is the wing conducting dawn raids while the DOJ has investigative tools like subpoenas and leniency programmes.51 For attaining warrant, DOJ has to get it from the FBI. In civil cases, civil subpoenas are issued by the State of Federal Agency itself to get documents and other testimonies.52

V. Conclusion

Since its inception, the Commission has been able to equip itself with much better investigative tools to prove the existence of cartels in the market and is constantly evolving to meet new challenges in the dynamic economy. With regard to the standard of proof of cartelisation, the Commission has come a long way from requiring direct evidence to placing greater reliance on circumstantial evidence. It is now close to the evidentiary standards required by the developed EC and in civil cartel cases in the USA. However, when it comes to the effectiveness of investigative tools, the Commission has ways to go to reach the level of swiftness and sophistication as shown by more developed jurisdictions. It is imperative to adopt innovative methods to detect cartels and to better utilise existing investigative techniques. It may be noted in EU, the EC does not require a judicial warrant to conduct dawn raids but can authorise the investigation itself to avoid delay and minimise the risk of alleged cartel participants to destroy evidence.53 Additionally, in India, the leniency programme provides an application to present information in hypothetical terms wherein, a detailed list of evidence is provided to be disclosed at a later date.54 This protects the identity of the applicant and instils confidence in the programme to encourage whistleblowing. These methods can be adopted within the Indian framework to improve the claws of the Commission in its war against cartels. Betterment of investigative tools and structural improvement in the investigation wings of the Commission will greatly assist in strictly enforcing competition law and deterring anti-competitive activities. Further, the Commission should strive at bringing about consistency in appraisal of evidence to send clear indications to the market about what can constitute as factors pointing towards cartelisation while giving due regard to the subjective nature of every case.

It is the responsibility of the Commission to find the balance. It has certainly done a commendable job in analysing in great details the DG’s report in cases and effectively determining cartel formations. Following the path taken by EU, India aims to deter cartels through imposition of increasingly high fines against cartel participants and competition advocacy.55 The competition law jurisprudence in India is still in developing stages but has shown great tenacity in detecting and penalising cartels. Hence, the Commission must be adequately staffed, sufficiently empowered and abled to protect the interest of the consumers and that of the nation from the detrimental effect of anti-competitive activities.


4th year BBA LLB (Hons.) students at Jindal Global Law School, O.P. Jindal Global University, Sonipat.

†† 4th year BBA LLB (Hons.) students at Jindal Global Law School, O.P. Jindal Global University, Sonipat.

†† 4th year BBA LLB (Hons.) students at Jindal Global Law School, O.P. Jindal Global University, Sonipat.

[1] The Competition Act, 2002, Statement of Objects and Reasons.

[2] S. 18, The Competition Act, 2002; Competition Commission of India v. SAIL, (2010) 10 SCC 744.

[3] Union of India v. Hindustan Development Corporation., (1993) 3 SCC 499.

[4] Neeraj Malhotra v. Deustche Post Bank Home Finance Ltd., 2010 SCC OnLine CCI 28 : (2011) 106 SCL 62.

5 Sugar Mills, In re 2011 SCC OnLine CCI 105.

6 Cyril Shroff and Nisha Kaur Uberoi, India’s New Competition Regime Steadily Gaining Ground, 9 Competition L. Int’l 75 (2013).

7 Cyril Shroff and Nisha Kaur Uberoi, Cartel Enforcement in India: Standard and Burden of Proof, CPI Antitrust Chronicle 1 (2013).

8 All India Tyre Dealers’ Federation v. Tyre Manufacturers, 2012 SCC OnLine CCI 65.

9 Ibid.

10 Ibid.

11 Imperial Chemical Industries v. Commission of European Communities, 1972 ECR 619.

12 Ibid.

13 2013 SCC OnLine Comp AT 75.

14 (2017) 8 SCC 47.

15 Ibid.

16 Ibid.

17 Ibid.

18 Ibid.

19 Builders Assn. of India v. Cement Manufacturers’ Assn., 2016 SCC OnLine CCI 46.

20 Ibid.

21 Shroff, supra note 6; Mausam, Deterring Cartel in India: A Half (Un)Done Job?, 7 Indian JL & Just. 167 (2016).

22 Builders Assn. of India v. Cement Manufacturers’ Assn., 2016 SCC OnLine CCI 46.

23  2012 SCC OnLine CCI 65.

24 CCI v. Grasim Industries Ltd., 2019 SCC OnLine Del 10017.

25 (2017) 8 SCC 47.

26 Sushil Sharma v. State (NCT of Delhi), (2014) 4 SCC 317.

27 State of Chhattisgarh v. Ram Sona, 2020 SCC OnLine Chh 9.

28 Chandru v. State, (2019) 15 SCC 666

29 Builders Assn. of India v. Cement Manufacturers’ Assn., 2016 SCC OnLine CCI 46.

30 Organisation for Economic Cooperation and Development, Prosecuting Cartels without Direct Evidence (February 2006).

31 2012 SCC OnLine CCI 12.

32 CCI v. JCB India Ltd., 2019 SCC OnLine SC 625.

33 The Competition Act, 2002, No. 12, Acts of Parliament, 2003, S. 41.

34 Reuters, Indian Antitrust Watchdog Raids Glencore Business, Others Over Pulse Prices – Sources, The Economic Times (17-3-2019), <https://economictimes.indiatimes.com/news/economy/agriculture/indian-antitrustwatchdog-raids-glencore-business-others-over-pulse-prices-sources/articleshow/68450549.cms?from=mdr>.

35 Aditya Kalra and Aditi Shah, Exclusive: Carlsberg, United Breweries plead leniency in India Beer Cartel Probe – Sources, Reuters (13-12-2018, 7.10 p.m.), <https://www.reuters.com/article/india-regulator-brewers/exclusivecarlsberg-united-breweries-plead-leniency-in-india-beer-cartel-probe-sources-idINKBN1OC1QQ>.

36  Ibid.

37 Cartelisation in Respect of Zinc Carbon Dry Cell Batteries Market in India v. Eveready Industries Ltd., 2018 SCC OnLine CCI 5.

39 Avirup Bose, Circumstantial Evidence and Dawn Raids: A New Era of Antitrust Investigation in India (4-4-2013) Competition Law Reports, April 2013.

40 Competition Commission of India (Lesser Penalty) Regulations, 2009.

41 Competition Commission of India (Lesser Penalty) Amendment Regulations, 2017.

42 Nisha Kaur Oberoi, Investigation of Cartels: A Comparative Assessment of the Approaches Adopted by the Indian and EU Competition Regulators, 2015 NLS Bus L Rev 57 at 64.

43 Compagnie Royale Asturienne des Mines SA and Rheinzink GmbH v. Commission of the European Communities, 1984 ECR 1679.

44 Case C-89/85, Ahlström Osakeyhtiö  v. Commission.

46 S. 1, Sherman Antitrust Act, 15 USC §§ 1-7 (1890).

47 S. 1, Sherman Antitrust Act, 15 USC §§ 1-7 (1890).

48 Monsanto v. Spray-Rite Service Corpn., 1984 SCC OnLine US SC 56: 79 L Ed 2d 775: 465 US 752 (1984).

49 Cuts International and National Law University, Jodhpur, Study of Cartel Case Laws in Select Jurisdictions: Learnings for the Competition Commission of India, Competition Commission of India (25-4-2008).

50 Ibid.

51 Ibid.

52 Ibid.

53  See Arts. 20 and 21 of the European Union Council Regulation.

54 Nisha Kaur Oberoi, supra note 42

55 Ariel Ezrachi and Jiøi Kindl, Criminalization of Cartel Activity – A Desirable Goal for India’s Competition Regime? 23 No.1 Natl. Law School India Rev. 9 (2011).

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): The Coram comprising of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi (Members), considered whether Bar Council of India is an ‘enterprise’ under Section 2(h) of the Competition Act.

Informant filed the present information under Section 19(1)(a) of the Competition Act, 2002 alleging contravention of the provisions of Section 4 of the Act by Bar Council of India (BCI/OP 1).

Informant worked as an executive engineer and planned to voluntarily retire to pursue legal education. He submitted that he appeared for LLB (3 years) entrance examination in the State of Andhra Pradesh and secured 1st rank in the examination.

Informant stated that BCI enjoys the dominant position in controlling legal education as well as legal practice in India.

Colourable Exercise of Power

Informant alleged that BCI has allegedly imposed maximum age restrictions upon the new entrants to enter into the legal education and thus, created indirect barriers to the new entrants in the profession of legal service.

The impugned Clause 28 has been incorporated by the BCI in contravention of Section 4 of the Act by ‘misusing its dominant position’. By having done so, the BCI has also allegedly indulged in colourable exercise of power.

With the above practice, the members of BCI conspired to reduce the competition to its electors and created indirect barriers in the profession of legal service.

Therefore, in view of the above, informant sought that the said clause be declared illegal and void ab initio and maximum penalty shall be imposed for violation of Section 4 of the Competition Act and in indulging in colourable exercise of power.

Analysis and Decision

Bench on perusal of the facts and circumstances of the case stated that it is imperative to examine the status of BCI as an enterprise within the contours of the provisions of Section 2(h) of the Competition Act before proceeding further with regard to the allegation raised.

Whether the Bar Council of India is an ‘enterprise’ under Section 2(h) of the Competition Act?

Term ‘enterprise’ has been defined under Section 2(h) of the Competition Act, as a person or a department of the Government, engaged in any activity relating to the provision of any kind of services.

Commission on going through the objective and functions of the BCI, noted that BCI appears to carry out functions which are regulatory in nature in respect of the legal profession, hence cannot be said to be an ‘enterprise’ within the meaning of Section 2(h) of the Competition Act, 2002.

In Case No. 39 of 2014, In Re: Dilip Modwil and Insurance Regulatory and Development Authority (IRDA), decided on 12-09-2014, Commission had observed that any entity can qualify within the definition of the term ‘enterprise’ if it is engaged in any activity which is relatable to the economic and commercial activities specified therein. It was further observed that regulatory functions discharged by a body are not per se amenable to the jurisdiction of the Commission.

Therefore, in view of the above discussion, Coram opined that no prima facie case under the provisions of Section 4 of the Competition Act was found and no case for grant of relief as sought under Section 33 of the Act arose. [Thupili Raveendra Babu v. BCI, 2021 SCC OnLine CCI 1, decided on 20-01-2021]

Op EdsOP. ED.

If competition law is about one thing above all, it is the detection and punishment of hardcore cartels.”[3]

Introduction: A Brief Overview

As per Section 2(c) of the Competition Act, 2002 (“the Act”) a “cartel” is as “an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price, or, trade in goods or provision of services”. The Act treats any cartel, a due sub-set of horizontal agreements under Section 3(3) with a strict presumption of causing Appreciable Adverse Effect on Competition (“AAEC”). Thus, in other words, the per se rule of illegality is applied which finds an explicit mention in the Raghavan Committee Report[4]. Albeit the Competition Commission of India (“CCI”) may consider both the pro-competitive and anti-competitive effects of the cartel, the rule of current law is that cartel carries a stronger presumption of illegality which can only be rebutted on the satisfaction of the CCI, by means of factors enumerated under Section 19(3). However, the balanced view as portrayed is shattered by bare perusal of the current Indian competition law regime, which leaves little or no room for subjective evaluation of the pro-competitive effects of a given cartel.

Thus, it is quite intriguing to explore the dynamic nature of subject-matter of cartel and in the current article the authors shall particularly focus on the need for differential treatment to be meted to the Small and Medium Enterprises (“SMEs”) cartels in India, by also drawing comparison from the international counterparts.

Indian Competition Regime: The Status Quo

Having a well-established jurisprudence on competition and antitrust, the Act as well as judicial precedents have made no qualms about its applicability to business entities irrespective of their financial stature, size or reputation. Giants in their respective businesses like Amazon, Facebook and Google have often been parties before the CCI justifying their business ventures. While analysing vertical agreements, the size of a business entity has been of extreme relevance, however, notably the same does not apply in the case of horizontal agreements. While an entity with 1% market share may be exempted from liability with respect to entering into a vertical agreement, the same does not stand true when it comes to horizontal agreements.

The primal reason for this difference of treatment is the rule which is made applicable by the CCI for horizontal agreements. While vertical agreements are subjected to the rule of reason (based on the standard of “balance of probabilities” proof test), horizontal agreements as mentioned above are subjected to the per se rule. As per rule of reason, every vertical agreement has to be evaluated on the basis of factors mentioned under Section 19(3) of the Act to see whether the agreement is causing an appreciable adverse effect on competition. If the CCI concludes that the said agreement is contributing efficiencies to the relevant market and is pro-competitive in nature, the parties of the agreement escape any kind of liability. In most cases, size of the parties involved and the market share that they have, play a major role as smaller the size, the lesser chance of it adversely affecting the competition. In fact, SMEs forming a vertical agreement to counter the dominance of major players in the market often improve the competition in any country as it breaks the monopolistic structure prevailing in the relevant market. While, on the other hand, due to the per se rule it is presumed that a horizontal agreement, irrespective of the size of the parties involved, has an AAEC. While it may be argued that it merely is a presumption which can always be rebutted, the CCI has refused to analyse the effects of such a cartel in helping the market, holding it illegal on the basis of it being a horizontal agreement itself.

It was held by the CCI in South Eastern Railway West Bengal v. Hindustan Composites Ltd.[5] that,

  1. A bare reading of the provisions of Section 3(1) of the Act shows that these provisions not only proscribe the agreements which cause AAEC but the same also forbid the agreements which are likely to cause AAEC. Hence, the plea that there is no contravention of the provisions of the Act in the present matter because allegedly no AAEC has been caused as a result of the alleged cartel between the parties, is misdirected and untenable in the face of clear legislative intent whereby even the conduct which can potentially cause AAEC, is prohibited.

In this case, the opposite parties had argued that the relevant market was in the form of monopsony (where there was a single buyer and multiple sellers), hence, even if an agreement existed between the sellers, it did not cause any AAEC and hence, could be overlooked.

Critique of the Indian Application of Law

While the rationale given by the CCI is appreciated, the CCI has unfortunately avoided to appreciate scenarios where SMEs cartelising and entering into horizontal agreements against dominant entities may actually end up helping the market just like vertical agreements.

Hypothetically, in a scenario where a telecom company has 75% of relevant market share, its smaller competitors coming together and forming a horizontal agreement and reducing its market share is not only beneficial from a competition point of view but also arguably avoids creating a monopolistic structure. Granted that irrespective of market share, one entity may or may not be abusive of its position as that needs to be evaluated via factors mentioned in Section 19, however, a large market share does guarantee the entity a “market leader” position in the market where the leader is bound to be the one who sets the course of how business is to be run in that market. The smaller competitors via sharing of resources may end this stronghold and offer services which are better than the dominant entity and hence, as an end result end up being beneficial for the consumers which is the ultimate objective of the Act. The major arguments which have been made against dominant entities in a situation like this is an unlimited source of revenue, which leads to predatory pricing and ousting competitors from the market. The smaller rival companies by coming together can ensure that they can match the prices of the dominant entity and stay in business and hence offer more options to the consumers.

A very pertinent example over here is the telecom industry itself. Post the introduction of Reliance Jio and its deep pockets into the telecom market, smaller players in the market were directly ousted as they were unable to match the prices and services offered by Jio. Moreover, even entities having a sizeable share previously like Idea and Vodafone were forced to come together as a single entity just so they could stay in the market. Reliance Jio as per September, 2020 now has 52.3% of the overall market share.

Considering the above arguments, the SMEs entering into horizontal agreements may sound attractive, however it comes with its own perils as well as the parties may get used to CCI and State coming to its rescue in such scenarios and find new ways to bypass the system. The CCI thus may alternatively limit the duration of such agreements to “short-term agreements only” to balance things out. While the doctrine of parens patriae is usually used to refer to the State’s power to intervene against an abusive parent with respect to family law, applying the same principle, i.e. the CCI intervening in matters where the smaller players are competing against a hugely dominant entity in the same relevant market, the CCI by allowing them to enter into such short-term horizontal agreements to sustain in the market and offer better services to the consumers is certainly an idea that needs to be explored. The CCI by actually analysing the competitive effects of the horizontal agreement in question without outrightly rejecting it might be a good start. The CCI has even failed to observe so far that in a case of a cartel, smaller entities are often forced to follow the market leader to sustain them in the market. In such a scenario, whether the smaller entities that barely have any share in the market deserve to be held liable for partaking in such an agreement is a question that needs to be looked upon.

Plugging the Loopholes: International Law Scenario

On the basis of the aforementioned arguments, SMEs cartels may prove to be instrumental in preserving and promoting competition in the market. Moreover, the grant of exemption/immunity to SMEs cartels has been employed by various other anti-trust regimes.

Germany

The most pertinent example that can be cited is Germany. Albeit German anti-trust law namely the Act against Restraints of Competition[6] (“the German Act”) comes down heavily on the cartelisation and related anti-competitive practices; the Act carves out a few exemptions particularly with respect to SMEs. By virtue of a combined reading of Section 2 and 3 of the German Act, SMEs cartels are exempted provided these cartels point towards rationalisation of economic activities and thereby propel the production or distribution of goods or advance the technical or economic progress without hampering the consumer welfare. Thus, to gain shelter under this exemption, the SMEs cartels should affirmatively be involved in fostering the competition.

Japan and Australia

Likewise, due to the lack of parity between the bigger players and the smaller players in the market, there is a need to shield the smaller parties due to their underlying advantage to foster the competitive and economic spirit in the market. Further, the Japanese and Australian anti-trust legislations endeavour to provide exemption or sort for the small players who may be involved in concerted activities for means of survival in the market.

The Japanese Act namely Anti-Monopoly Act [7](“the Japanese Act”), under Chapter IV, enunciates the exemption to co-operative unions or federations governed under the specified Acts mentioned, one of them being, Small and Medium-Sized Enterprise Cooperatives Act[8]. Additionally, these unions must positively fulfil the criteria under Act such as equal voting rights to the members, mutual support to the prevailing SMEs, inter alia. Thus, this legislation highlights the merits of co-operative unions or federations formed by the SMEs which counter the competitive forces by the larger enterprises. However, this collaboration between SMEs shall be subject to the condition that these collaborations do not result in hampering the competition or such other restrictive effects on the competitive elements of the market.

Moreover, in Australia, there is a statutory requirement under the Competition and Consumer Act, 2010[9] for notification and approval from the Australian Competition and Consumer Commission (“ACCC”) regarding the agreement for collective bargaining between SMEs. Therefore, SMEs cartels are not deemed as anti-competitive instead as a pre-requisite feature; the ACCC has been granted with an element of subjectivity for assessing the cartel.

India: Turning Over a New Leaf

Even in India, the report of Raghavan Committee Report [10]recognised the significance of small and medium scale industries in developing the market and referred to the practice adopted in Germany under the aforementioned German Act[11]. The Raghavan Committee Report recommended introducing similar practice to bridge the yawning gap between the small sectors and their larger counterparts to improve the market economy in India. However, the Raghavan Committee Report was quick to point out that such an exemption should not indulge in making the small market players complacent by providing the exemption rather these exemptions should be moulded to propel healthy competition. Further the Supreme Court in Rajasthan Cylinders and Containers Ltd. v. Union of India[12] has implied modification of the traditional approach of determining the AAEC under the Act. It states that the AAEC may not always be presumed for cartels as there is a possibility of parallel behaviour between the players due to the market conditions, inter alia. Therefore, the Supreme Court gave a hint towards the need to bring in subjective assessment as per the prevailing facts and circumstances at that given point. Besides the CCI in Neeraj Malhotra v. Deustche Post Bank Home Finance Ltd. (Deustche Bank)[13] has signified the dilution of per se rule under Section 3(3) of the Act.

Further, the aforementioned international provisions give a very case-specific characteristic for the determination of anti-competitive or pro-competitive nature of agreements between SMEs. It cannot be objectively determined but there is rather a need for subjective evaluation by the anti-trust regulators. Thus, the natural consequence becomes to introduce rule of reason as opposed to per se rule in such cases. These co-operation agreements/cartels can be formed for myriad reasons ranging from sharing transport costs, advertisement costs, research, inter alia, which essentially improve the efficiency of the SMEs and thereby move towards creating an equilibrium with the larger players of the market. Moreover, another point to be noticed is that though the exemptions for SMEs cartels are provided, these exemptions assert an explicit embargo against agreements regarding price, rebates or such related factors and thus, shield the competitive forces of the market.

Conclusion and Recommendations/Suggestions

The International Monetary Fund (“IMF”) in 2019 donned India with the tag of the “World’s fastest growing major economy.” Overtaking France and England, it also became the world’s fifth largest economy[14] as per 2019 IMF reports. Shedding its License Raj tag, it also has grown leaps and bounds in the “ease of doing business” ranking and is perched at a high 63 from a total of 190 economies all around the world. This, along with monumental policy changes, have inspired a slew of investments and acquisitions in India.

While the hugely popular Walmart group has acquired a majority stake in a popular e-commerce platform like Flipkart, other bigwigs like Amazon have made no qualms about investing billions of dollars in India. With the likes of even Google planning to invest billions in India, it is only a matter of time, that the world’s largest business entities turn their head towards India as their new business market. Even in terms of Indian companies, a giant in its own right, i.e. Reliance is being invested in by social media tycoons, i.e. Facebook.

While this certainly bodes well for the country, a word of caution has to be spread with respect to it killing competition in India. India’s Trade Minister, Piyush Goyal minced no words on Amazon’s investments in India and expressed similar concerns. “How can a marketplace make such a big loss, unless they are indulging in predatory pricing or some unfair trade practices? These are the real questions that need answers”[15], he said, with reference to Amazon facing losses but still managing to remain a dominant entity in its market.

The authors also share a similar concern throughout the article and argue that in short term, the giants in the market may appear to be the messiahs of the common public with dirt-cheap prices and services. But in the longer run, they would only oust the start-ups and the SMEs with their seemingly unlimited wealth and disproportionate bargaining power. To counter such scenarios, if the CCI were to merely adopt the more lenient rule of reason to analyse and judge the effects of small-time cartels rather than the sharp per se rule, this scenario would arguably balance the scales. Moreover, the Act may be amended itself with it providing immunity to SMEs from a Section 3(3) violation, albeit for a limited period of time. While defining what qualifies as an SME or to what degree such protection can be given to these entities, or what should be the duration of such protection, are questions that need a humungous amount of analysis and careful consideration and inspiration may be taken from countries like Germany, Japan and Australia.

Additionally, the authors also recommend an independent economic and market study body, which may be formulated under the Central Government with its duties especially being identifying market areas and sectors where a special approach must be taken to safeguard the competition. Any modifications made to any rule may only be limited to sectors where there’s an extreme and an absolute necessity for the government to intervene so as to preserve the interests of the consumers. It has to be noted that the government has treaded on this path before while granting immunity to “Vessel Sharing Agreements” from Section 3 proceedings as it was argued that apart from increasing the efficiency of services, Vessel Sharing Agreements also resulted in greater participation by small and medium shipping companies leading to increased competition in the industry[16]. A similar action or rule based on extensive market-based research will go a long way in promoting practices of healthy competition while safeguarding the interests of the consumer in the long run.


[1] Student, 5th Year BA.LLB, ILS Law College, Pune

[2] Student, 5th Year BA.LLB, Symbiosis Law School, Pune

[3] Richard Whish and David Bailey, Competition Law, 514 (6th edn., 2008).

[4] http://www.scconline.com/DocumentLink/6LY74mL5

[5] 2020 SCC OnLine CCI 28.

[6] http://www.gesetze-im-internet.de/englisch_gwb/englisch_gwb.html#p0018

[7] https://www.jftc.go.jp/en/legislation_gls/amended_ama09/amended_ama15_01.html

[8] http://www.cas.go.jp/jp/seisaku/hourei/data/smeca.pdf

[9] https://www.legislation.gov.au/Details/C2020C00264

[10] http://www.scconline.com/DocumentLink/6LY74mL5

[11] http://www.gesetze-im-internet.de/englisch_gwb/englisch_gwb.html#p0018

[12] 2018 SCC OnLine SC 1718.

[13] 2010 SCC OnLine CCI 28.

[14] https://theprint.in/economy/india-is-now-the-worlds-5th-largest-economy-according-to-imf/369335/

[15]https://www.livemint.com/news/india/amazon-s-1-billion-investment-in-india-no-big-favour-says-piyush-goyal-11579175086129.html

[16]https://cbcl.nliu.ac.in/competition-law/exemption-to-vessel-sharing-agreements-from-the-competition-act-in-india-another-indian-provision-full-of-ambiguities/

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): The coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi, Members expressed that activities under which Delhi Metro Rail Corporation is engaged in are economic activities and are not sovereign functions, therefore OP will be covered within the definition of ‘enterprise’.

Factual Matrix

Instant information was filed by the informant under Section 19(1)(a) of the Competition Act against Delhi Metro Rail Corporation Limited (DMRC) (OP) alleging abuse of dominant position in contravention of Section 4 of the Competition Act.

Informant a sole proprietorship firm was run by the Proprietor. OP had invited bids for licensing of parking rights at Kashmere Gate, Kanhaiya Nagar and Shastri Nagar Metro Stations. After qualifying the technical bid and financial bid for the Contract, a Letter of Acceptance was issued by OP reminding the obligations of the Informant as per the terms of the Contract.

Allegation

It was alleged that illegal parking agents who operated nearby parking area with the help of corrupt officials of New Delhi Municipal Council (NDMC) and local Kashmere Gate Police Station, SHO were causing problems by way of complaints, threats and actions restricting the usage of 3183.47 square metres of proposed parking area of OP, by the informant.

Adding to the above allegations, it has also been stated that NDMC has been causing problems by imposing garbage fine on the Informant whereas it is workers of Municipal Corporation of Delhi who intensely dump the garbage near the unfenced parking area of the Informant and the garbage spreads due to various reasons.

OP also violated the basic conditions of the Contract by imposing a locking period clause so that the informant cannot find a way out of the Contract and suffer huge losses.

OP’s acts caused grave mental, physical and monetary harassment to the Informant which are likely cause pressure-related diseases leading up to death/suicide.

Analysis and Decision

Firstly, the Commission examined as to whether OP falls within the purview of the Act for the purposes of Section 4 i.e. Whether OP is an ‘enterprise’ within the meaning of Section 2(h) of the Competition Act?

Bench noted that from the information available in the public domain OP has been providing Mass Rapid Transport System (MRTS) in the National Capital Region (NCR) and is engaged in the development, maintenance and management of modern metro system for mass urban transportation.

Activities as stated above in which the OP is engaged will come under the ambit of economic activities and are not sovereign functions, therefore, OP is covered within the definition of ‘enterprise’ in terms of Section 2(h) of the Act.

Further, the Commission delineated the relevant market and the same to be taken as ‘Delhi’. Hence the relevant market defined by the Commission in the instant case was ‘procurement of services for provision of parking lot management in Delhi’.

Whether OP was a dominant procurer of parking lot management services in the aforesaid relevant market data of parking lots?

To answer the above question, data with regard to the owned but outsourced for management to third parties by Delhi Municipal Corporations (North, South, East), New Delhi Municipal Council and Delhi Cantonment Board was compiled and compared with OP.

Commission opined that OP didn’t have the ability to operate independently in the said relevant market. OP was not found to be the dominant procurer of parking lot management services in Delhi or even North Delhi area where the three stations operated by OP were located.

In light of the above analysis, Commission found no case of contravention of provisions of Section 4 of the Competition Act against the OP. [Dhiraj Gupta v. DMRC, 2020 SCC OnLine CCI 48, decided on 26-08-2020]

Case BriefsSupreme Court

Supreme Court: In a plea seeking inquiry into the alleged anti-competitive practices of Ola and Uber of entering into price-fixing agreement, the 3-judge bench of RF Nariman*, KM Joseph, Krishna Murari, JJ has refused to interfere with the concurrent finding of CCI and NCLAT that Ola and Uber do not facilitate cartelization or anti-competitive practices between drivers, who are independent individuals, who act independently of each other, so as to attract the application of section 3 of the Competition Act, 2002.

Why was an inquiry sought?

An informant sought that the Competition Commission of India initiate an inquiry, under section 26(2) of the Competition Act, 2002, into the alleged anti-competitive conduct of ANI Technologies Pvt. Ltd. [Ola], and Uber India Systems Pvt. Ltd., Uber B.V. and Uber Technologies Inc. [Uber], alleging that they entered into price-fixing agreements in contravention of section 3(1) read with section 3(3)(a) of the Act, and engaged in resale price maintenance in contravention of section 3(1) 1 read with section 3(4)(e) of the Act. According to the Informant, Uber and Ola provide radio taxi services and essentially operate as platforms through mobile applications which allow riders and drivers, that is, two sides of the platform, to interact. Due to algorithmic pricing, neither are riders able to negotiate fares with individual drivers for rides that are booked through the apps, nor are the drivers able to offer any discounts. Thus, the pricing algorithm takes away the freedom of riders and drivers to choose the best price on the basis of competition, as both have to accept the price set by the pricing algorithm.

Further, despite the fact that the drivers are independent entities who are not employees or agents of Ola or Uber, the driver is bound to accept the trip fare reflected in the app at the end of the trip, without having any discretion insofar as the same is concerned. The drivers receive their share of the fare only after the deduction of a commission by Ola and Uber for the services offered to the rider.

What did the counsels say?

Senior Advocate Abhishek Manu Singhvi, appearing on behalf of Uber, walked the Court through the concurrent findings of fact of the CCI and the NCLAT and said that every driver of a taxi cab, who uses the Ola or Uber app, can have several such apps including both Ola, Uber and the apps of some of their competitors, and can take private rides de hors these apps as well.

Advocate Rajshekhar Rao, appearing for Ola, agreed with Dr. Singhvi’s submissions on merit but questioned the locus standi of the informant, an “independent practitioner of law”. He, thus, prayed before the Supreme Court that “in such cases heavy costs should be imposed to deter such persons from approaching the CCI with frivolous and/or mala fide information, filed at the behest of competitors.”

Additional Solicitor General Balbir Singh, appearing on behalf of the CCI, however, stated that though he would support the CCI’s Order closing the case, he would also support the right of the Appellant to approach the CCI with information.

What did the Supreme Court say?

Informant’s locus standi

A reading of the provisions of Competition Act, 2002 and the Competition Commission of India (General) Regulations, 2009 shows that “any person” may provide information to the CCI, which may then act upon it in accordance with the provisions of the Act. The definition of “person” in section 2(l) of the Act is an inclusive one and is extremely wide, including individuals of all kinds and every artificial juridical person.

Section 19(1) of the Act originally provided for the “receipt of a complaint” from any person, consumer or their association, or trade association. This expression was then substituted with the expression “receipt of any information in such manner and” by the 2007 Amendment. This substitution is not without significance.

A complaint could be filed only from a person who was aggrieved by a particular action, information may be received from any person, obviously whether such person is or is not personally affected. This is for the reason that the proceedings under the Act are proceedings in rem which affect the public interest. That the CCI may inquire into any alleged contravention of the provisions of the Act on its own motion, is also laid down in section 19(1) of the Act.

“Even while exercising suo motu powers, the CCI may receive information from any person and not merely from a person who is aggrieved by the conduct that is alleged to have occurred. This also follows from a reading of section 35 of the Act, in which the earlier expression “complainant or defendant” has been substituted by the expression, “person or an enterprise,” setting out that the informant may appear either in person, or through one or more agents, before the CCI to present the information that he has gathered.”

However, Section 45 of the Act is a deterrent against persons who provide information to the CCI, mala fide or recklessly, inasmuch as false statements and omissions of material facts are punishable with a penalty which may extend to the hefty amount of rupees one crore, with the CCI being empowered to pass other such orders as it deems fit.

“This, and the judicious use of heavy costs being imposed when the information supplied is either frivolous or mala fide, can keep in check what is described as the growing tendency of persons being “set up” by rivals in the trade.”

The 2009 Regulations also do not require the informant to state how he is personally aggrieved by the contravention of the Act, but only requires a statement of facts and details of the alleged contravention to be set out in the information filed. Also, regulation 25 shows that public interest must be foremost in the consideration of the CCI when an application is made to it in writing that a person or enterprise has substantial interest in the outcome of the proceedings, and such person may therefore be allowed to take part in the proceedings. Further,

“CCI must maintain confidentiality of the identity of an informant on a request made to it in writing, so that such informant be free from harassment by persons involved in contravening the Act.”

“Person aggrieved”

Since the CCI and the NCLAT deal with practices which have an adverse effect on competition in derogation of the interest of consumers, the Act vests powers in the CCI and enables it to act in rem, in public interest. Hence, a “person aggrieved” must, in the context of the Act, be understood widely and not be constructed narrowly.

Further, it is not without significance that the expressions used in sections 53B and 53T of the Act are “any person”, thereby signifying that all persons who bring to the CCI information of practices that are contrary to the provisions of the Act, could be said to be aggrieved by an adverse order of the CCI in case it refuses to act upon the information supplied. By way of contrast, section 53N(3) speaks of making payment to an applicant as compensation for the loss or damage caused to the applicant as a result of any contravention of the provisions of Chapter II of the Act, having been committed by an enterprise. By this sub-section, clearly, therefore, “any person” who makes an application for compensation, under sub-section (1) of section 53N of the Act, would refer only to persons who have suffered loss or damage, thereby, qualifying the expression “any person” as being a person who has suffered loss or damage.

It was, hence, noticed,

“when the CCI performs inquisitorial, as opposed to adjudicatory functions, the doors of approaching the CCI and the appellate authority, i.e., the NCLAT, must be kept wide open in public interest, so as to subserve the high public purpose of the Act.”

[Samir Agrawal v. Competition Commission on India, 2020 SCC OnLine SC 1024, decided on 15.12.2020]

Cyril Amarchand MangaldasExperts Corner

On 20-5-2020, in a significant competition law-related development, a Single Judge Bench of the High Court of Delhi (Delhi HC) passed a judgment[1] dismissing a petition filed by Monsanto[2] against the Competition Commission of India’s (CCI) investigation order. In the present matter, Monsanto approached the Delhi HC challenging the jurisdiction of CCI to investigate their licensing policies under Section 4 of the Competition Act, 2002 (Competition Act). It was argued that the issues arising out of their licensing arrangements should be subjected to the Controller of Patents (Controller) under the Patents Act, 1970 (Patents Act), and CCI does not have jurisdiction in this regard. However, the Delhi HC rejected the objections of the petitioners and upheld the jurisdiction of CCI to probe into such abusive conduct, despite the presence of a specific statutory regulator.

The judgment highlights certain overlapping and controversial issues between the Competition Act and the Patents Act, which have now been harmoniously settled by the Delhi HC. While dealing with the objections of the petitioners, the Delhi HC also clarified certain observations made by the Supreme Court of India (Supreme Court) in CCI v. Bharti Airtel Ltd.[3] (Bharti Airtel judgment.) In doing so, it particularly emphasised that the Bharti Airtel judgment is not an authority for extending the proposition that whenever there is a statutory regulator, the complaint must be first brought before the regulator and examination of a complaint by CCI is contingent upon the findings of such regulator.

Brief Facts

The genesis of the dispute is an information filed by certain cotton seed manufacturing companies[4] before CCI. Monsanto was the first company to develop and commercialise Bt cotton technology and registered its second generation of Bt cotton technology under the Patents Act. Monsanto had licensed this technology to its Indian joint venture company — MMBL, which sub-licensed it to various seed manufacturers in India (including the informants) on payment of certain non-refundable and a recurring royalty/fees (trait fee).

The informants inter alia alleged that MMLB and certain Monsanto group companies charged unreasonably high trait fee, imposed unfair terms and conditions through sub-licensing agreements, engaged in refusal to deal, etc., which resulted in denial of market access for the informants. CCI prima facie found merit in the informants’ allegations and accordingly passed an order under Section 26(1) of the Competition Act, thereby directing an investigation into the matter. Consequently,  Monsanto approached the Delhi HC challenging CCIs investigation order.

Key Issues for Determination

The Delhi HC delineated the following issues for consideration: (i) whether there was any irreconcilable conflict between the Competition Act and the Patents Act, and whether both the enactments could be construed harmoniously; (ii) whether Section 3(5) of the Competition Act excludes the applicability of the Competition Act in respect of any agreement, which relates to restraining infringement of any patent rights; and (iii) whether Bharti Airtel judgment[5] confers primacy to statutory regulators over CCI.

Irreconcilable Conflict between the Competition Act and the Patents Act

The Delhi HC relied on the Telefonaktiebolaget L.M. Ericsson v. CCI[6] (Telefonaktiebolaget L.M. Ericsson judgment) and the relevant provisions of both the enactments to observe that there was no irreconcilable conflict between the Competition Act and the Patents Act.

It was noted that the provisions of the Competition Act (i.e. Sections 62, 21 and 21-A) clearly indicate that the intention of the Central Legislature was not to repeal any other statute by enacting the Competition Act, rather it was to ensure that the provisions of the Competition Act are implemented in addition to the provisions of other statutes. Further, the remedies available under the Patents Act and the Competition Act are materially different from each other. It was also observed that in certain cases, it may be open for a prospective licensee to approach the Controller for grant of a compulsory licence, however, the same would not be inconsistent with CCI passing an appropriate order under Section 27 of the Competition Act.

Accordingly, it was held that the jurisdiction of CCI to entertain complaints regarding abuse of patent rights could not be excluded.

Whether Section 3(5) of the Competition Act is a Blanket Exemption

With respect to the allegation reimposition of unreasonable conditions on the informants (through sub-licensing agreements), the petitioners contended that they were well within their rights to impose such conditions by virtue of Section 3(5)(i) of the Competition Act.

Section 3(5)(i) of the Competition Act provides that Section 3 (which deals with anti-competitive agreements) would not restrict the rights of any person to restraint any infringement of, or to impose reasonable conditions, as necessary for protecting any of his rights which have been or may be conferred upon him under, inter alia, the Patents Act.

The petitioners submitted that Section 3(5)(i) of the Competition Act has two limbs. The first, which provides a blanket exclusion in respect of rights to restraint infringement of intellectual property rights (IPR); and the second, which relates to imposition of reasonable conditions, that may be necessary for protecting the IPR. It was emphasised that the term “reasonable” under Section 3(5)(i) is a qualifier only for conditions relating to patent protection and not patent infringement. Accordingly, the petitioners submitted that CCI lacks jurisdiction to examine the alleged anti-competitive clauses of the sub-licensing agreement, as these were designed to restrain the cotton seed manufacturers (including the informants) from infringing their patents [re] Bt cotton technology.

The Delhi HC found the petitioners’ contentions bereft of any merit. It observed that while a patent holder is well within its rights to enter into an agreement restraining infringement of its patent rights, however, these rights are not unqualified. The words “or to impose reasonable conditions” under Section 3(5)(i) are placed between two commas and thus, must be interpreted as being placed in parenthesis that explains and qualifies the safe harbor of Section 3(5) of the Competition Act. The exclusionary provision to restrain infringement cannot be read to mean a right to include unreasonable conditions that far exceed those that are necessary, for the aforesaid purpose.

Therefore, the question whether an agreement is limited to restraining infringement of patents (and includes reasonable conditions), is required to be determined by CCI. Section 3(5) of the Competition Act does not mean that a patentee would be free to include onerous conditions under the guise of protecting its rights.

Whether Bharti Airtel Judgment Confers Primacy to Sectoral Regulators over CCI

Lastly, relying on the Bharti Airtel judgment[7], the petitioners contended that since issues in the present matter relate to patents, it would be essential for the specialised regulator in this case, the Controller to first determine whether the agreements (sub-licences) entered into by MMBL are an abuse of its rights under the Patents Act before CCI could investigate it.

In this regard, the Delhi HC clarified that the position taken by the Supreme Court in Bharti Airtel judgment[8], in favour of Telecom Regulatory Authority of India (TRAI), would not be applicable in the present case for the following reasons:

First, the Bharti Airtel judgment[9] did not confer primacy to sectoral regulators over matters that fell within the expertise and domain of CCI. Unlike the present matter, where the complaint filed before CCI pertains to anti-competitive conduct by the petitioners, the dispute in Bharti Airtel (which was sought to be placed before CCI) related to non-provision of points of interconnections (PoI) i.e. a technical telecom issue. The PoI issue clearly required a technical evaluation and therefore, the examination by CCI was deferred till the technical aspects (basis which the complaints were filed before CCI) were determined by TRAI.

Second, the Bharti Airtel judgment[10] pertained to the role and functions of TRAI which is materially different from that of the Controller. The TRAIs scope of regulation is pervasive in nature as it is entrusted with the formation and implementation of regulations. Therefore, the issue of non-provision of PoIs fell squarely within the scope of TRAIs regulatory powers. On the contrary, a Controller does not regulate the exercise of patent rights in such a pervasive manner. The principal function of the Controller is to examine the application of grant of patents and whether an applicant is entitled to such grant of patent rights. Although, the Controller also exercises other powers and performs other functions (including issuance of compulsory licences), the nature of role performed by the Controller cannot be equated to that of TRAI.

Therefore, the Delhi HC held that CCI has jurisdiction to investigate the abusive conduct of Monsanto.

Key Takeaways

Given the conundrum around the applicability of Bharti Airtel judgment[11] (as discussed above), the Delhi HC provided the much-needed clarity in relation to the jurisdiction of CCI in cases involving statutory regulators. The judgment reaffirms that CCI is entrusted with the function to deal with anti-competitive conduct (as set out under the Competition Act) and to that extent, CCI can assume jurisdiction even in matters involving a specialised statutory body. This observation of the Delhi HC will go a long way in restricting the abuse of legal process, where the parties attempt to escape CCIs investigation by raising frivolous jurisdictional issues.

In this judgment, the Delhi HC has taken the opportunity to re-emphasise that there is no irreconcilable repugnancy between the Patents Act and the Competition Act. Interestingly, it also construed Section 3(5) of the Competition Act in true spirit by clarifying that Section 3(5) of the Competition Act is not a blanket restriction, and therefore unreasonable conditions could not be imposed by an IPR holder under the garb of protecting its rights.

While the Delhi HC has established a progressive precedent through this judgment, it will be interesting to see how it plays out for 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.  Ruchi Verma, Associate, can be contacted at ruchi.verma@cyrilshroff.com and Nandini Pahari, Associate with the Competition Law Practice at Cyril Amarchand Mangaldas.

[1] Monsanto Holdings (P) Ltd. v. CCI, 2020 SCC OnLine Del 598.

[2] Monsanto Holdings Pvt. Ltd. (MHPL), Monsanto Company, and Mahyco Monsanto Biotech (India) Ltd. (MMBL); collectively referred to as “Monsanto”.

[3] (2019) 2 SCC 521.

[4] Nuziveedu Seeds Ltd. (NSL), Prabhat Agri Biotech Ltd. (PABL), Pravardhan Seeds Private Ltd. (PSPL) (collectively referred to as the “informants”).

[5] (2019) 2 SCC 521.

[6] 2016 SCC OnLine Del 1951.

[7] Supra (Note-5).

[8] Supra (Note-5).

[9] Supra (Note-5).

[10] Supra (Note-5).

[11] Supra (Note-5).

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): While deciding the instant matter which revolved around violation of Section 3 (3) of the Competition Act, 2002 in the tenders floated by the various divisions/ zones of the Indian Railways (including the Informants) and other procuring entities for procuring of different types of Composite Brake Blocks (CBBs), during the period 2009 to 2017, the Coram comprising of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma, Bhagwant Singh Bishnoi, (Members) accepted the complaint registered by the Railway zones against various manufacturing companies for indulging in cartelization (price-fixing) in the Composite Brake Blocks (CBB) market in India, at least from 2009 till 2017, by means of directly or indirectly determining prices, allocating markets, co-ordinating bid response and manipulating the bidding process, which had an “appreciable adverse effect on competition” (AAEC) within India.

Various railway divisions from different zones of the country had given out tenders for procurements of certain Brake blocks and Composite Brake Blocks (CBB), for which vendors were approved by Research Design and Standards Organisation (‘RDSO’). It was alleged that identical/ higher bids were quoted by the Opposite Parties in the instant matter, in tenders floated by various Railway Zones and identical reductions in quoted rates were offered by them in the subsequent negotiations.The Commission, on noting the allegations made against the companies, ordered the Director General to conduct the investigation on the matter. The DG found that 8 of the 10 Opposite Parties had formed a cartel in order to manipulate the rates of the tenders and the other 2 OPs had not been a part of the cartel but did get involve in manipulative practices to exchange bid related information. Thus it was concluded by the DG that the Opposite Parties were found to be in violation of Section 3 of the Competition Act, 2002.

The counsels for OP 1-10 submitted their claims against the report of DG. The main grounds of their respective defenses were – being co-operative in submitting the evidence; no economic injury caused to the railways; ceased participation from the cartel; the company being unaware of its employees engaging in such cartel like behaviour and upon knowing so, withdrawing the employee from such deal; indirect involvement in the business; no opportunity provided to the company for cross-examination of employees found engaging in such behaviour etc. No objections/ suggestions to the investigation report of the DG were made by the Informant Parties (the Railway Zones).

The Commission noted two main issues after hearing the claims of the counsels. The first was whether the Opposite Parties had acted in a manner which is in contravention of the provisions of Section 3 (3) of the Act and the second issue was of the liability of the individuals/ persons/ officials of the Opposite Parties, in terms of Sections 48 (1) or (2) of the Competition Act. The answer to the first question was found in the affirmative by the Commission and hence, it found OP -1 to OP-10 had violated Section 3 (3) (a), Section 3(3) (c) and Section 3 (3) (d) read with Section 3 (1) of the Competition Act, 2002. Commission further ordered the OPs, in term of Section 27 (a) of the 2002 Act, to direct to their officials found to be in contravention of Section 48 (2) of the 2002 Act to desist from indulging in such practices in the future. However, the Commission did not impose any monetary penalty n these companies as it found many of them to be Micro Small and Medium Enterprises (MSMEs) and noting how adverse the monetary situation has been during COVID-19, the Commission, in the interest of justice, refrained from imposing any monetary penalty in the peculiar circumstances of the case. However it did caution these companies to refrain from indulging in such malpractices and any such future behaviour would be constituting recidivism with attendant consequences. [South Eastern Railway West Bengal v. Hindustan Composites Ltd., 2020 SCC OnLine CCI 28 , decided on 10-07-2020]

Business LawOp EdsOP. ED.

Facebook is investing $5.7 billion or INR 43,574 crore to get close to 10% equity in Jio Platforms Limited.  In its press release[1], the social media giant expressed its intention to connect Jio’s e-commerce platform, JioMart, to small businesses and shops via “the power of WhatsApp” in order to make online shopping a seamless mobile experience. The Jio-Facebook deal announced last week promises to push India’s digital transformation to new heights. However, out of a number of regulatory approvals, Competition Commission of India’s (CCI) approval is the most crucial one. To consummate a deal that crosses the thresholds mentioned under Section 5 of the Competition Act, 2002, CCI’s approval is mandatory. Section 6 sub-section (2) read with Regulation 5 of the Combination Regulations[2] evidences a suspensory regime i.e. the approval must be obtained prior to closing of the deal in the country.

 The deal, as ambitious as it sounds, can run into anti-trust issues. Firstly, the multi-billion-dollar investment into Jio will have to be notified to and approved by India’s competition regulator. For that to happen, CCI will have to take a forward-looking approach and check that the proposed combination does not have potential to cause appreciable adverse effect on the competition in the market. To safeguard the investment from the protectionist approaches of Indian regulators is a crucial factor in consummating the deal and, subsequently, carrying it forward smoothly. Despite the criticism to protectionist regulatory regime, CCI tends to adopt a liberal approach[3]. In the approved RIL-Brookfield tower infrastructure deal, the two were found to be vertical participants and CCI went ahead to analyse if there were any vertical overlap. With RIL’s acquisition of stake in Saudi AramCo at hold, it needs to be more careful with the investment and regulatory concerns with the activities of its digital arm, Jio.

 The strategic investment for acquiring the minority stake is not simply a passive investment. The filing of notice as per Regulation 4 of the Combination Regulations in itself is indicative of the fact that the transaction is not in the ordinary course of business and is backed with an intent of strategic investment to bring in change in control. Thus, the responsibility of CCI is to peruse not only the potential adverse effects on competition but also the potential concerns it may give rise to. It would be interesting to see whether the acquisition of minority stake in India’s leading telecom arm would grant any control to Facebook. Let us look at the possible anti-trust issues that the deal poses:

Dominance: Boon or a bane?

Both Jio and Facebook seem to be dominant players in their respective markets. The  Telecom Regulatory Authority of India’s data points to the fact that Jio has the highest market share in terms of user base and revenue sharing in the telecom market as it holds 32% share in the 1.15-billion-user Indian mobile services market, taking its total user base to 369.93 million, surpassing its competitors Bharti Airtel and Vodafone-Idea. It must also be noted that, unlike others, all Jio connections are 4G based, thus, having a strong base of smartphone users.

Now, Facebook primarily operates via three platforms: facebook.com, Instagram and WhatsApp. All of them seem to be dominant players in the market they operate in. We are only concerned with WhatsApp. Its relevant market seems to be smartphone-based social media messaging platform. WhatsApp has more than 400 million[4] confirmed users in India, while around 600 million[5] people have access to internet[6] in the country. Other competitors to WhatsApp in India are hike, WeChat, Telegram, which only have a fraction of the users as WhatsApp.

Jio plans to revolutionise JioMart by combining it with WhatsApp to integrate small and medium scale ‘kirana’ businesses to cater to the demand. This would firstly strengthen the position of mom-pop shops in the local market by sewing them into the digital framework and secondly would attempt to penetrate into another market by using the dominance of WhatsApp.

More so, WhatsApp could possibly allow JioMart to operate on its messaging platform. If done so, and in the manner that WhatsApp comes with pre-embedded JioMart platform, it could lead to abuse of dominance under Section 4(2)(d) as installing WhatsApp would be the main contract and pre-embedded JioMart would be the unconnected supplementary obligation. This would also mean that the users would not be allowed to embed any other e-commerce portal on WhatsApp messenger, which would again seem to be causing disruption in the competition in the market and unfair to consumers as it would leave no choice to them but accept the imposed deal.

Another advantage post the deal would be of control over consumer data. As of now, RIL Chief has said that there is no agreement for transferring of consumer data between the parties; however, this does not erode the possibility of entering into such agreements in the near future. While control over data has been used by Competition Regulators in examining the e-commerce and digital platforms’ anti-competitive conduct (viz. Amazon-Flipkart case[7], Sonam Sharma v. Apple Inc. USA[8]), this factor in the present case must be dealt with utmost seriousness and conviction to ensure survival of healthy competition in the e-commerce market, especially at a time when Facebook has been imposed with $5 billion fine over data privacy violation[9].

Appreciable Adverse Effect on Competition: Is it too soon?

Where the strategic investment is with the intent to enter into a different segment using the control in respective markets to enter into an entirely different product market, the parameters to check the potential adverse effect on the competition must be comprehensive. In re, Google LLC[10], CCI observed that there is a need to not only delineate primary relevant market but also associated markets to relevant markets that have been affected by the conduct of the parties involved. Section 20 sub-section (4) lists the factors that CCI must consider to conclude if there is any appreciable adverse effect on the competition because of the proposed combination.

The essence of this checklist is to look for horizontal or vertical overlap in the activities post acquisition. While there seems to be no horizontal overlap, there definitely could be a case of vertical integration. Jio provides internet to smartphone, smartphones use internet to operate WhatsApp and now WhatsApp would integrate JioMart. It is not only vertical integration but use of dominant position in one market to enter into a new market, and thus would be likely to effect adversely the natural competition in the ‘phygital’ commerce market (as has been recently termed).

The analysis must be based not only on the market share of the deal participants both pre and post-acquisition but must also mindfully address the data sharing aspect of the deal, considering these data mammoths’ conduct in the recent past. The US Court imposing record $5 billion fine on Facebook for privacy violations is in itself a warning for the Indian regulators to intervene in this far reaching deal especially, to protect the Indian start-up movement that is also an important wing of the Digital India flight. The deal no doubt has potential of creating business and commercial barriers for local tech start-ups. The primary purpose of the merger control regime is to foresee adverse effects and to live up to this objective, CCI must take cognizance of the interrelatedness of this deal.

One can at the same not ignore the importance of balance between the commercial interest and the consumer welfare interests. Though the weighing scale can never be equal for both, what is important for CCI as a regulator of omnipotent economic concerns is that it shouldn’t step on the commercial prospects deal participants like such to ensure distributive justice.

The deal will undoubtedly push the CCI’s merger control jurisprudence into a comprehensive one and shall be significant in laying down a vigilant yet compendious framework for future deals. While we are still speculating about the nature of the deal, JioMart has started testing WhatsApp for grocery orders in pursuance of the proposed deal. “The customer initiates the interaction on WhatsApp, checks out the grocery order on JioMart webpage, gets connected with a retail store on WhatsApp and then customer picks up the order from Kirana and pays in cash,” said the news report[11].


*Prateek and Samanvi are pursuing Master of Laws (LL.M.) in Corporate and Commercial Law from Nalsar University of Law, Hyderabad

[1] Press release by Facebook (21.02.2020), https://about.fb.com/news/2020/04/facebook-invests-in-jio/

[2] Competition Commission of India (Procedure in regard to the transactions of business relating to combinations) Regulations, 2011 

[3] CCI has cleared over 600 combinations, and has not blocked even a single one. Only eight were subject to detailed Phase II enquiry, India: Merger Control (4th Edn.), AZB Partners, https://www.azbpartners.com/bank/india-merger-control-4th-edition/,

[4] Manish Singh, WhatsApp reaches 400 million users in India, Tech Crunch, (26.07.2020), https://techcrunch.com/2019/07/26/whatsapp-india-users-400-million/

[5] Sanika Diwanji, Number of internet users in India from 2015 to 2018 with a forecast until 2023, Statista, (31.03.2020), https://www.statista.com/statistics/255146/number-of-internet-users-in-india/

[6] PTI, Internet users in India to reach 627 million in 2019, Economic Times, (06.03.2019)

[7] Delhi Vyapar Mahasangh v. Flipkart Internet Private Limited

[8] 2013 SCC OnLine CCI 25

[9] AFP, Cambridge Analytica: US Court Approves Record $5 Billion Fine of Facebook Over Privacy, NDTV (25.04.2020)

[10] Umar Javeed v. Google LLC, Case No. 39 of 2018, dated 16-4-2019

[11] Reliance Begins Using Whatsapp for Grocery Deliveries Through JioMart, Business Standard, (27.04.2020)

Op EdsOP. ED.

Introduction

Post liberalisation in 1991, Indian economic policies had to undergo drastic changes to adapt to the global practices and national agenda. In 2002, the Competition Act[1] was enacted to replace the Monopolies and Restrictive Trade Practices Act, 1969[2], as it was considered insufficient to control anti-competition practises and nurture competition. The Competition Act, focused mainly on abuse of dominance, anti-competition agreements, competition advocacy and regulation of combinations. The Act had been implanted with efficiency, however, with the change in the market trends a need was felt to further analyse the Act in light of the current situations. The Government therefore constituted the Competition Law Review Committee in 2018[3], to study the current market trends and examine whether the Competition Act is in sync with the market practises. The Committee’s mandate was: to suggest any changes in the current regime taking into account the market trends, best international practises, other governmental policies and regulatory mechanisms which overlap the Competition Act, and any other related competition issues. The Competition (Amendment) Bill, 2020 [4] was then drafted based on the recommendations of the Committee.

The Bill aims to bring major changes to the current system. The key takeaways can be classified in the following categories.

Structural Changes 

Taking into account the Supreme Court’s decision in Brahm Dutt v. Union of India[5] and the Delhi High Court’s decision in Mahindra Electric Mobility Ltd.  v. CCI[6], the Committee acknowledged that the functions performed by the Competition Commission of India (CCI) is multifarious and therefore to establish a regulatory body in lines with other regulatory bodies in the country, the Bill introduced the establishment of a governing body[7], consisting of part time members and ex officio members. The objective behind the introduction of governing body is twofold, firstly to reduce the burden on the CCI, as the governing body will be responsible to carry out all the quasi-legislative function and policy decision, and secondly with the introduction of part time members and ex officio members, will bring in external perspective and will strengthen the democratic legitimacy and accountability of the CCI.

The Bill aims to merge the office of Director General (DG) constituted under Section 16 of the Competition Act, as an investigation branch of the CCI. Earlier the DG was not answerable to the CCI, but to the Central Government, however this classification was merely de jure. The Committee while recommending such change took into accounted practices adopted by European Union, China, United States and Brazil, and the Supreme Court’s decision in CCI v. Steel Authority of India Ltd.[8]

Changes in the functioning of the CCI

The Bill introduces provisions recognising the settlement or consent orders, in case of antitrust proceedings. The Bill proposes the introduction of certain provision which permit an investigated party to offer a settlement[9] or voluntary undertake certain commitments[10] in relation to an anti-competitive vertical agreement or abuse of dominance proceeding. The Bill under these provisions envision the mechanism to be adopted to permit such settlement or commitment mechanism. The objective of adoption of such orders was to enable the CCI resolve antitrust cases faster, which would in turn help the businesses to avoid long investigation procedure and uncertainty. This procedural change is a sign of relief to the corporate field.

Changes in provisions relating to combinations

The definition of control under the Act had not defined the minimum standards required to establish such control, therefore the CCI had used the yardstick of the ability to exercise ‘decisive influence’ and ‘material influence’. The Bill proposes to statutorily recognise the standards of ‘material influence’[11]. The introduction of such standards serves twin purpose, firstly, it would bring certainty and consistency in the decisions and secondly, it will ensure that a larger number of transactions are scrutinised while an investment friendly economy is maintained.

The Bill introduces many changes with regards to the regulations of combinations. Some of these are, the principal act prescribed certain specific grounds which would constitute combination and the parties involved in such a transaction would be under an obligation to notify CCI before the execution of any such agreement. The Bill introduces the power of the central government in consultation with CCI to identify any other ground which would constitute combination[12], further the Bill also states that the power would also include the power to delist any ground which would otherwise constitute combination[13]. It is a welcome change as it increase the jurisdictional threshold of CCI, such an amendment would help include a number of digital transactions which were currently out of the scope of scrutiny of CCI, as it did not had any residuary power under the act. 

The Bill purposes to statutorily recognise the Green Channel Process. The rationale behind introduction of such process is to enable fast-paced regulatory approvals for vast majority of mergers and acquisition that may have no major concerns regarding appreciable adverse effects on competition. The aim is to move towards disclosure based regime with strict consequences for not providing accurate or complete information. The power of green channel will also extend to approve resolutions arrived at in an insolvency resolution process under the Insolvency and Bankruptcy Code. Further to ensure time bound assessment of combination a mandatory 30days timeline is also included in the act[14]. The Bill also reduces the time within which the CCI has to issue its preliminary opinion on whether a combination would cause adverse effect on competition, from thirty working days to twenty calendar days[15]. Such timelines would help ease the burden on the parties involved in the transactions.

Inclusion of Technology and New Age Markets

The Bill purposes to expand the scope of the act to include within its scope the digital markets, in order to achieve the said goal the Bill makes a numbers of changes in the existing system. Some of the changes are, express inclusion of hub and spoke arrangement[16], and buyer’s cartel.  The Committee recognised the tactics used by the companies to escape scrutiny under the act and also took into account the orders issued by the CCI in  Hyundai Motors case[17] and Uber case[18], and recommended that the element of ‘knowledge’ or ‘intention’ should not be considered under such agreements.

The Bill seeks to widen the scope of section 3, the principal act restricted the scope of section to horizontal or vertical agreement leading to adverse effect on competition. The Bill intents to include other agreements too, taking into account the decision in Ramakant Kini v. Dr. L.H. Hiranandani Hospital[19] and to expand the scope of the provision to include agreement entered in the digital market. The Bills expressly includes the ‘control over data’ or ‘specialised assets’ under the list of conditions which constitute dominance of a company in the market[20]. The rationale behind such inclusion was to expand the scope of the section to online businesses collecting customer data through user feedback loops, which would have the company have a more targeted approach. 

Changes in the Enforcement Functions

The principal Act did not grant any punitive powers to the DG or the CCI, therefore the institution was toothless in case of noncompliance of the orders. The Bill intends to introduce wide range of powers to the DG as well as the CCI. The Bill introduces provision[21] under which any person who (a) fails to produce any documents, information or record, (b) did not appear before the DG or fail to answer any question by the DG, (c) or sign the note of cross-examination, shall be punishable with imprisonment of term extending up to six months or fine up to one crore rupees. The Bill introduces the maximum cap of penalty as the 10% of income of the individual in the preceding three years, in case of formation of cartels[22].

The Bill intends to adopt practises prevailing in countries like UK, US, Singapore and Brazil, where the cartel under investigation has disclosed some relevant information of some other existing cartel will be liable to lesser punishment[23]. The power to compound offences is introduced in the Bill[24].

Shortcomings in the proposed amendment

  1. The Committee recommended that the governing body should only have the power to perform quasi-legislative functions and policy decision and not the adjudicatory functions, however the Bill does not clearly demarcates such powers. Further the Bill is silent on the procedure of election of the part time member and ex officio members, which raises serious concerns of independence of such members.
  2. The Committee while recommending the adoption of the integrated agency model did not take into account the impact it would have on the system of check and balance established by separating the investigative and adjudicatory branches of an organisation. Such merger is against the principle enunciated by the Supreme Court in Excel Crop Care Ltd. v. CCI[25], wherein the Court accorded greater independence to the office of the DG. The Court held that although the base for any investigation is the allegation made in a complaint, however if any new facts are revealed the office of DG is empowered to include such facts in its report. Furthermore the Bill does not take into account protective measures suggested by the Committee in order to maintain the due process, such as the DG in order to maintain functional autonomy, should directly report to the Chairperson of CCI, the parties should have adequate right to representation and examine evidence, and there should be strong appellate forum. 
  3. The Bill is silent on a number of aspects of the settlement or commitment order, such as whether such order would have a precedential value i.e. whether such an order would have to be taken into account while deciding similar pending cases and whether the right to compensation would survive such order.
  4. The Bill merely introduces the concept of compounding of offences by the NCLAT, but it does not provide for the procedure to be adopted by the NCLAT. Furthermore, the Committee recommended that a Bench of NCLAT should be dedicated to hear appeals under the Act, however the recommendation was not incorporated under the Act. Such an action would have an adverse impact on the effective implementation of the Act. Since COMPAT established under the Act is scrapped, the rate of disposal of appeals have decreased considerably. And if the recommendation is not incorporated in the Act, it will hamper the national initiatives like Make in India. 
  5. The power to review which was initially granted to the CCI, was repealed by the 2007 amendment. However later in Google Inc. v. CCI[26] the Court held that such power of review is inherent in nature. While there have been other contrary judgements, the Committee should have recommended the introduction of the power to review, however no such recommendation was made.

Conclusion

The introduction of the amendment Bill is a welcome step, as the country is at a very critical juncture where it is imperative for the Government to properly assess each recommendation before implementing the same. The Government in order to reap maximum benefit of the huge market, it must maintain a balance between robust administration and market friendly regime. The Bill is currently open for suggestion by the interested stakeholders, but a brief analysis of the proposed amendment reveals that the Government is motivated to implement a regime where the interest of all the stakeholders are taken into account. 


*4th year student, MNLU Nagpur. The author can be contacted at jhs.shivamtripathi@gmail.com

[1] Competition Act, 2002

[2] Monopolies and Restrictive Trade Practices Act, 1969

[3] Government of India, MCA, ‘Government constitutes Competition Law Review Committee to review the Competition Act’ (30 September 2018) <https://pib.gov.in/newsite/PrintRelease.aspx?relid=183835> accessed on 11 March 2020.

[4] Draft Competition (Amendment) Act, 2002 <http://feedapp.mca.gov.in/pdf/Draft-Competition-Amendment-Bill-2020.pdf> accessed on 09 March 2020.

[5](2005) 2 SCC 431

[6] (2019) SCC Online Del 8032

[7] Under Section 8

[8] (2010) 10 SCC 744, para 8. 

[9] Under Section 48-A

[10] Under Section 48-B.

[11] Under Explanation of clause (a), Section 5. 

[12] Under proviso to Section 5.

[13] Under second proviso to Section 5.

[14] Under Section 6(2).

[15] Under Section 29(1-A).

[16] Under Section 3(3).

[17] Fx Enterprise Solutions India Pvt. Ltd. v. Hyundai Motor India Ltd., 2017 SCC OnLine CCI 26 

[18] Samir Agrawal v. ANI Technologies Pvt. Ltd., 2018 SCC OnLine CCI 86 

[19] Ramakant Kini v. Dr. L.H. Hiranandani Hospital, 2014 SCC OnLine CCI 17  

[20] Under Section 19(4)

[21] Under Section 41(8).

[22] Under Sections 27 and 48.

[23] Under Section 46(3).

[24] Under Section 59-A

[25] (2017) 8 SCC 47

[26] 2015 SCC Online Del 8992

COVID 19Hot Off The PressNews

Upon requests for urgent listing of cases having been made telephonically to Registrar of this Appellate Tribunal from various persons, who were unable to physically file the same on account of complete lockdown declared by Government with effect from 25th March, 2020.

In view of the above, Bench comprising of Justice Bansi Lal Bhat (Actg. Chairperson) and Justice Anant Bijay Singh] Member (Judicial) and Dr Ashok Kumar Mishra] Member (Technical) takes suo moto cognizance of the unprecedented situation arising out of spread of COVID19 virus declared a pandemic.

Having regard to the hardships being faced by various stakeholders as also the legal fraternity, which go beyond filing of Appeals/ cases, which has already been taken care of by the Hon’ble Apex Court by extending the period of limitation with effect from 15th March, 2020 till further order/s in terms of order dated 23rd March, 2020 in Suo Motu Writ Petition (Civil) No(s).03/2020, inasmuch as certain steps required to be taken by various Authorities under Insolvency and Bankruptcy Code, 2016 or to comply with various provisions and to adhere to the prescribed timelines for taking the ‘Resolution Process’ to its logical conclusion in order to obviate and mitigate such hardships, this Appellate Tribunal in exercise of powers conferred by Rule 11 of National Company Law Appellate Tribunal Rules, 2016 r/w the decision of this Appellate Tribunal rendered in “Quinn Logistics India Pvt. Ltd. v. Mack Soft Tech Pvt. Ltd. in Company Appeal (AT) (Insolvency) No.185 of 2018” decided on 8th May, 2018 do hereby order as follows: –

(1) That the period of lockdown ordered by the Central Government and the State Governments including the period as may be extended either in whole or part of the country, where the registered office of the Corporate Debtor may be located, shall be excluded for the purpose of counting of the period for ‘Resolution Process under Section 12 of the Insolvency and Bankruptcy Code, 2016, in all cases where ‘Corporate Insolvency Resolution Process’ has been initiated and pending before any Bench of the National Company Law Tribunal or in Appeal before this Appellate Tribunal.

(2) It is further ordered that any interim order/ stay order passed by this Appellate Tribunal in anyone or the other Appeal under Insolvency and Bankruptcy Code, 2016 shall continue till next date of hearing, which may be notified later.

The above order is to be circulated to all all benches of NCLT, New Delhi.

In Re Competition Act, 2002, this Appellate Tribunal do hereby order as follows: –

(1) That interim direction / stay order passed in all competition Appeals shall continue until further order.

(2) In the event of expiry of period of Fixed Deposits, the concerned bank shall renew the same for further period of six months.

In Re National Company Law Appellate Tribunal Rules, 2016 do hereby order as follows: –

(1) It is ordered that any interim order/ stay order passed by this Appellate Tribunal in anyone or the other Appeal under the Companies Act, 2013 shall continue till next date of hearing, which may be notified later.

[Suo Moto – Company Appeal (AT) (Insolvency) No. 01 of 2020, Order dt. 30-03-2020]

Legislation UpdatesNotifications

In exercise of the powers conferred by clause (a) of section 54 of the Competition Act, 2002 (12 of 2003), the Central Government hereby exempts a Banking Company in respect of which the Central Government has issued a notification under Section 45 of the Banking Regulation Act, 1949 (10 of 49), from the application of the provisions of Sections 5 and 6 of the Competition Act, 2002, in public interest for a period of five years from the date of publication of this notification in the Official Gazette.

Note:

Section 5 of Competition Act, 2002 talks about “Combination”.

Section 6 of Competition Act talks about “Regulation of Combinations”.


Ministry of Corporate Affairs

[Notification dt. 11-03-2020]