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]

Corp Comm LegalExperts Corner

Introduction 

It is very common in India, particularly for middle-class people to talk and crib about the rising prices of goods and services. It is not uncommon to find a huge divergence between the public perception about rising prices and the official data pertaining to the inflation rate. Is there a legal way to control prices?

The European Court of Justice (ECJ) in [1] United Brands Co. v. Commission of the European Communities highlighted that Article 82 of the European Commission Treaty (ECT) directly applies to conduct which is harmful to the consumers. Such conduct includes excessive and unfairly high prices. The ECJ also provided a cost-based test for dealing with cases related to excessive pricing. The test highlights a two-fold approach wherein the regulators have to identify the profit margin i.e. the different cost of production and prices applied and also the price of other competing products. 

The test laid down under the [2] United Brands case has been acknowledged in several other European cases such as[3] General Motors Continental NV v. Commission of the European Communities and[4] Terezakis v. Commission. On the contrary, the debate on excessive pricing is at a very nascent stage in India and has been limited to the pharmaceutical sector. Predominantly, the challenge before the Competition Commission is to maintain a balance between static and dynamic efficiencies, in order to avoid undermining of investment incentives, while ensuring that consumers’ interest is protected. In this article, we discuss whether a blanket restriction on excessive pricing based upon the two-stage test laid down in the United Brands[5] case is viable. 

Undeveloped Jurisprudence on “Excessive Pricing” in India

The Indian counterpart of Article 84 of ECT is Section 4 of the Competition Act, 2002, which prohibits the abuse of dominance by dominant firms. In [6] Flynn Pharma Ltd. v. Competition and Markets Authority, the Commission recognised the practical difficulties associated with delineating “excessive pricing”.[7] Factors such as the lack of substantial evidence on costs, availability of substitutes from competitors and the legitimate resistance in exceeding its jurisdiction by setting prices of goods/services have hindered competition authorities from examining and defining “excessive pricing” in depth. 

Quite recently, an “excessive pricing” allegation against the anti-cancer drug Trastuzumab was rejected in Biocon Ltd. v. F. Hoffmann-La Roche AG on the grounds that the initial increase in drug price was attributable to the huge costs incurred in research and development (R&D) and innovation. [8]

In the absence of a conclusive determination of the term “excessive” and what factors shall be computed to brand a certain price as “excessive” is a grey area. While there are several arguments against “excessive pricing” with respect to the hardship caused to the consumers, it must be noted that a blanket restriction on excessive pricing may not be viable or reasonable. 

 For example, “Excessive pricing” can be justified in the following circumstances.

1. When “Excessive Pricing” Triggers Competitive Behaviour

Anti-competitive behaviour stems from factors that limit the ability of firms to compete on an equal platform. Market forces in a free market determine the prices of products and ensure that the price level of like products are competitive. In most situations, when a firm decides to price its products at an unreasonable or an unfairly high price, the same would promote other firms to produce low priced substitutes in order to oust the higher priced products. Therefore, in turn, the excessive pricing by one firm shall trigger competitive behaviour for other firms and benefit the consumer in the long run.

2. When the Time Period for Close Substitutes to Enter the Market is Less

The pro-competitive behaviour of “excessive pricing” i.e. to encourage other firms to capitalise and provide low priced substitutes is contingent upon the time taken by the followers to enter the market. In situations, where the time taken by other firms to enter the market is substantial, “excessive pricing” may be regulated to limit hardship to the consumers. For instance, in pharma cases, the amount of expenditure on research and development required is immense and it limits the ability of other firms to enter the market expediently. 

 The UK Competition Appeal Tribunal in Napp Pharmaceuticals case [9] held that Napp was charging excessive prices as its prices and profit margins were substantially higher than its competitors. While the judgment made important observations on abuse of dominant position and excessive pricing, it can be criticised on the grounds that the competitors of Napp could capitalise and oust Napp from its dominant position. 

 However, the same situation does not hold true in all pharmaceutical cases—in many cases, there shall be no cheaper substitutes available and would require regulation. However, if the time period required for other firms to provide close substitutes is less, excessive pricing shall trigger competitive behaviour and must not be regulated. 

3. When the Entry Barriers are Not Strong

Similarly, in situations where there are very heavy entry barriers that allow a supplier to continuously charge excessive prices, the same shall warrant regulation. For instance, a firm develops a unique technology and secures Intellectual Property (IP) protection, in such cases, the strong entry barriers shall demand regulation of “excessive pricing”. However, in cases where it is comparatively easier for other firms to enter a market to develop cheaper substitutes, excessive pricing shall not require regulation. 

4. Lack of Consumer Awareness with Respect to Lower-Priced Substitutes

The lack of awareness of customers with respect to the available substitutes should not account for lack of substitutes thereby warranting regulation of “excessive pricing”. In such cases, the advocacy division of the Competition Commission of India must indulge in awareness initiatives to ensure that asymmetry of information does not cause hardship to the customers. 

5. Excessive Pricing Can Also be a Matter of Price Strategy 

Excessive strategy is directly correlated to the pricing strategy of firms and the rationale behind suppliers knowingly charging an excessive rate. In certain situations, dominant entities base the pricing strategies on the higher cost of providing or merely lack of close substitutes. However, certain products bank on exclusivity and may be deliberately charged higher as a matter of strategy to create exclusivity of product and target a different base.

Conclusion

“Excessive Pricing” should be regulated in sectors such as the pharmaceutical sector as there are strong entry barriers that restrict the ability of other firms to enter the market with cheaper substitutes. The essential nature of the product warrants regulation to restrict hardship caused to the customers. However, there should not be a blanket application of such regulations due to the points highlighted above.  Another reason for not regulating “excessive pricing” is the lack of substantial evidence on costs and availability of substitutes from competitors. In cases wherein there is not sufficient evidence to show an unreasonable profit margin, regulating “excessive pricing” becomes extremely difficult. Moreover, “excessive pricing” does not have anti-competitive effects unless the time taken for cheaper substitutes to oust the product is substantial.


*Bhumesh Verma is Managing Partner at Corp Comm Legal and can be contacted at bhumesh.verma@corpcommlegal.in.

**Abhishar Vidyarthi is a Student Researcher with a final year student, (BA LLB), Maharashtra National Law University, Mumbai).

[1] 1978 ECR 207.
[2] 1978 ECR 207.
[3] 1976 ECR 1367.
[4] 2008 ECR II-11.
[5] 1978 ECR 207.
[6] 2018 CAT 12.
[7] 2019 CAT 9.
[8] 2017 SCC OnLine CCI 21.
[9] No CA98/2/2001.

Case BriefsSupreme Court

Supreme Court: A Bench comprising of A.K. Sikri and Ashok Bhushan, JJ. dismissed an appeal filed against the judgment of Bombay High Court whereby it held that Competition Commission of India had no jurisdiction to pass order in the instant matter as the issues were covered by Indian Telegraph Act, 1885 and Telecom Regulatory Authority Act, 1997 and the appropriate forum was the Telecom Dispute Settlement and Appellate Tribunal (TDSAT).

In the present matter, the Court was faced with determining the width and scope of the powers of the CCI under the Competition Act, 2002 pertaining to telecom sector vis-a-vis the scope of the powers of TRAI under the TRAI Act, 1997.

Factual Matrix

On 21-10-2013, Reliance Jio Infocomm Ltd. was granted a licence under Section 4 of the Telegraph Act by the Department of Telecom (DoT) for providing telecommunication services in all 22 circles in India. Soon thereafter, RJIL executed interconnection agreements with existing telecom operators including Airtel, Idea and Vodafone. RJIL  requested these companies to augment Point of Interconnection (POIs) for access as the capacity already provided to it was causing huge POI congestion, resulting in call failures on its network. According to RJIL, these companies intentionally ignored the aforesaid request.

Subsequently, in November 2016, RJIL filed information under Section 19 of the Competition Act before the CCI, As per RJIL, the respondent service providers, along with Cellular Operators Association of India, formed a cartel and acted in an anti-competitive manner which is prohibited by the Act. The CCI passed order dated 21-4-2017 under Section 26(1) as per which it came to a prima facie conclusion that case for investigation was made out and directed the Director-General to cause investigation in the case. Aggrieved thereby, respondents filed writ petitions before the High Court which quashed the order of CCI on the ground that CCI lacked jurisdiction to entertain such complaints/information filed under Section 19 as such matter falls within the exclusive jurisdiction of another regulatory authority, namely, TRAI.

Challenging this order passed by the High Court, the appellants were before the Supreme Court.

The Supreme Court considered the matter on following points:

(a) Jurisdiction of CCI

After noting salient features of Competition Act and TRAI Act, the Court concluded that as TRAI is constituted as an expert regulatory body which specifically governs the telecom sector, the aforesaid aspects of the disputes were to be decided by TRAI in the first instance. These were jurisdictional aspects. The High Court was right in concluding that the concepts of “subscriber”, “test period”, “reasonable demand”, etc, arising out of TRAI Act and the policy so declared, are the matters within the jurisdiction of TDSAT under the TRAI Act. Only when the jurisdictional facts in the present matter were determined by the TRAI against the respondents, the next question would arise as to whether it was a result of any concerted agreement between the respondents. It would be at that stage the CCI can go into the question as to whether violation of the provisions of TRAI Act amounts to ‘abuse of dominance’ or ‘anti-competitive agreements’.

(b) Whether TRAI has the exclusive jurisdiction to deal with matters involving anti-competitive practices to the exclusion of CCI altogether?

The function that is assigned to CCI is distinct from the function of TRAI. It is within the exhaustive domain of CCI to find out as to whether a particular agreement will have an appreciable adverse effect on competition within the relevant market in India. Such functions not only come within the domain of CCI, but TRAI is not at all equipped to deal with the same.

The Court, thus, did not agree with the appellants that CCI could have dealt with this matter without availing the inquiry by TRAI. It also did not agree with the respondents that insofar as the telecom sector is concerned, the jurisdiction of the CCI under the Competition Act is totally ousted.

In incidental issues, the Court decided that the petitions field by other companies before the Bombay High court were maintainable. When such jurisdictional issues arise, the writ petition would clearly be maintainable. In view of the above discussion, the Court dismissed the appeal while upholding the decision of the High Court. [CCI v. Bharti Airtel Ltd., 2018 SCC OnLine SC 2678, decided on 05-12-2018]

Op EdsOP. ED.

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

Extraterritorial jurisdiction: To infinity and beyond

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

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

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

Penalising the guilt: The is and the ought

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

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

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

Appeals of CCI orders: Hear Hear

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

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

Case closed or not

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

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

Lag due to the lack: Recommendation for way ahead

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

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

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

————-

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

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

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

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

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

[5]  Competition Act, 2002, S. 27.

[6]  Competition Act, 2002, S. 47.

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

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

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

[10]  (2005) 2 SCC 145.

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

[12]  (2010) 7 SCC 751.

[13]  (1998) 4 SCC 90.

[14]  CCI, (n. 8)

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

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

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

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

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

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

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

Cabinet DecisionsLegislation Updates

The Union Cabinet has given its approval for rightsizing the Competition Commission of India (CCI) from 1 Chairperson and 6 Members (totalling seven) to 1 Chairperson and 3 members (totalling 4) by not filling the existing vacancies of 2 members and 1 more additional vacancy, which is expected in September, 2018 when one of the present incumbents will complete his term.

Benefits:

The proposal is expected to result in reduction of 3 posts of members of the Commission in pursuance of the Governments objective of “Minimum Government – Maximum Governance”.

As part of the Governments objective of easing the mergers and amalgamation process in the country, the Ministry had revised de minimis levels in 2017, which have been made applicable for all forms of combinations and the methodology for computing assets and turnover of the target involved in such combinations, has been spelt out. This has led to reduction in the notices that enterprises are mandated to submit to the Commission, while entering into combinations, thereby reducing the load on the Commission.

The faster turnaround in hearings is expected to result in speedier approvals, thereby stimulating the business processes of corporates and resulting in greater employment opportunities in the country.

Background:

Section 8(1) of the Competition Act, 2002 (the Act) provides that the Commission shall consist of a Chairperson and not less than 2 and not more than 6 members. Presently, the Chairperson and 4 members are in position.

An initial limit of 1 Chairperson and not more than 10 members was provided in the Act, keeping in view the requirement of creating a Principal Bench, other Additional Bench or Mergers Bench, comprising at least 2 members each, in places as notified by the Central Government. In the Competition (Amendment) Act, 2007 (39 of 2007), Section 22 of the Act was amended removing the provision for creation of Benches. In the same Amendment Act, while the Competition Appellate Tribunal (CAT) comprising one Chairperson and 2 members was created, the size of the Commission itself was not commensurately reduced and was kept at 1 Chairperson and not less than 2 but not more than 6 members.

The Commission has been functioning as a collegium right from its inception. In several major jurisdictions such as in Japan, USA and U.K. Competition Authorities are of a similar size.

[Press Release no. 1527701]

Cabinet

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

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