Legal RoundUpTribunals/Regulatory Bodies/Commissions Monthly Roundup

Authority for Advance Ruling (AAR)

Gujarat Authority for Advance Ruling| ‘Combined Wire Rope’ not a part of the fishing vessel, thus, not eligible for GST at 5 percent

In an application sought for advance ruling on the question that whether Goods and Services Tax (GST) rate of 5 percent under entry No. 252 of Schedule 1 of Notification No. 1/2017 of Central Tax Rate and a corresponding notification issued by Gujarat State and Notification No. 1/2017 of Income Tax Rate is applicable in the case of “Combined Wire Rope” used as a part of a Fishing Vessel, the two-member bench of Milind Kavatkar and Amit Kumar Mishra has ruled that the combine wire rope has no use in the fishing vessel, but it is used to tie the fishing net, thus, it is not covered under entry No. 252 of Schedule 1 of Notification No. L/20l7 of Central Tax (Rate) and is not eligible for GST at 5 percent.

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Maharashtra Appellate Authority for Advance Ruling | “One Stop Crises Centre” Scheme can be construed as subsidy, not subject to GST; Set aside MAAR ruling

In an appeal filed under Section 100 of the Central Goods and Services Tax Act, 2017 (‘CGST’) and the Maharashtra Goods and Services Tax Act, 2017 (‘MGST’) being aggrieved by the advance ruling passed by the Maharashtra Authority of Advance Ruling (MAAR), the two-member bench of Ashok Kumar Mehta and Rajeev Kumar Mital while setting aside the ruling passed by the MAAR, held that since the impugned activities undertaken by the appellant are not construed as “supply” in terms of section 7(1)(a) of the CGST Act, 2017 the reimbursement amount paid by the Maharashtra Government to the appellant for undertaking the activities specified under “One stop Crises Centre Scheme” floated by the Central Government, will not be subject to the levy of GST.

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What is the HSN code and GST rate for a Mechanical Sprayer? Gujarat Authority for Advance Ruling answers

In an application sought for advance ruling on the question that, what is the Harmonized System of Nomenclature (HSN) and Goods and Services Tax (GST) rate of Kirloskar power sprayer, the two-member bench Milind Kavatkar and Amit Kumar Mishra has ruled that the 8-digit HSN code of the applicant’s product is 8424 89 90 and the applicable GST rate would be l8 percent.

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Gujarat Authority for Advance Ruling| GST is not leviable on the amount representing employees’ portion of canteen and transportation charges

The two-member bench Milind Kavatkar and Amit Kumar Mishra has ruled that Goods and Service Tax (GST) is not leviable on the amount representing the employees portion of canteen and transportation charges, which is collected by the applicant and paid to the third party, and as the provision of services of transports and canteen facility to its employees is as per the contractual agreement between the employee and the employer in relation to the employment, thus such provision cannot be considered as supply of goods or services, and hence, cannot be subjected to GST.

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National Company Law Appellate Tribunal (NCLAT)

Whether Adjudicating Authority is competent to pass order under Section 66 of IBC during subsistence of moratorium under Section 14 of IBC? NCLAT answers

While deciding an issue as to whether the adjudicating authority is competent to pass an order under S. 66 of Insolvency and Bankruptcy Code, 2016 during the subsistence of moratorium under S. 14 of IBC, a 3-judge bench comprising of Ashok Bhushan, M. Satyanarayana Murthy*, JJ., and Barun Mitra (Technical Member), held that the moratorium issued under S. 14 of the IBC does not bar proceedings against the resolution professional for defrauding the creditors of its Corporate Debtor.

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Non-payment of full provident fund and gratuity violative of S. 30(2)(e) IBC; NCLAT directs Jet Airways to make payments

In a batch of appeals filed challenging order dated 22-06-2021 passed by the National Company Law Tribunal (NCLT), Mumbai approving the Resolution Plan submitted by ‘Jalan Fritesch Consortium’ with respect to the Corporate Debtor — ‘Jet Airways (India) Limited’ on various grounds primarily being non-payment of full provident fund, gratuity, leave encashment etc to the employees and workmen who are rightly entitled to it, a Division Bench of Ashok Bhushan J. (Chairperson) and Barun Mitra J. (Technical Member) held that non-payment of full provident fund amount to the workmen and employees and the gratuity payment till the insolvency commencement date amounts to noncompliance of provisions of Section 30(2)(e) of Insolvency and Bankruptcy Code, 2016 (IBC) finding no other parts of the resolution plan to be infirm in any manner. The Court further directed the Successful Resolution Applicant to make pending payments of provident fund and gratuity to the workmen and the employees.

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Competition Commission of India (CCI)

“Fair market opportunity is the hallmark of competition”; CCI imposes hefty monetary penalty on MakeMyTrip, Goibibo and OYO for their anti-competitive practices and abuse of dominant position

In a significant development, the Commission while deliberating upon the alleged contravention of Sections 3 and 4 of the Competition Act by MakeMyTrip, Goibibo and OYO, was of the view that the commercial arrangement between OYO and MakeMyTrip and Goibibo which led to the delisting of FabHotels, Treebo and the independent hotels, which were availing the services of these franchisors, was anti-competitive and abuse of dominant position within the meaning of Section 3(4)(d) read with Section 3(1) of the Competition Act.

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Google faces penalty of Rs. 1337.76 crores for abusing its dominant position in multiple markets in the Android Mobile Device Ecosystem; Cease and Desist order issued

The Commission Bench comprising of Ashok Kumar Gupta (Chairperson), Sangeeta Verma and Bhagwant Singh Bishnoi (Members) in a significant 293-page ruling, imposed a heavy penalty on Google of Rs. 1337.76 crores for abusing its dominant position in multiple markets in the Android Mobile device ecosystem thereby contravening Sections 4(2)(a)(i), Section 4(2)(b)(ii), Section 4(2)(c), Section 4(2)(d) and Section 4(2)(e) of the Competition Act.

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Income Tax Appellate Tribunal (ITAT)

Why did ITAT decide to delete the addition of streedhan as ‘unexplained investment’ for the purposes of income assessment? Read to know

While deciding the instant appeal revolving around the addition of the assessee’s generational streedhan as unexplained investment for the purposes of income assessment, the Bench of Sandeep Gosain (Judicial Member) and Rathod Kamlesh Jayantbhai (Accountant Member), held that the AO ignored and failed to verify the factual position in the instant matter whereby which it was clear that the assessee lives with his parents and belongs to the high-status Rajput family where it is traditional to have jewellaries received from mother and wife in the form of streedhan. The Tribunal, keeping in mind the high status, family tradition, deduction on account of purity and the deduction towards streedhan, held that the excess jewellary found during search was nominal and the addition sustained by the CIT(A) deserves to be deleted on the grounds raised by the assessee.

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Central Information Commission

No information of the third parties can be sought via the RTI Act without their consent

In a second appeal filed by the appellant under Section 19 of the Right to Information Act, 2005 on the ground of arbitrary denial of information by the Chief Public Information Officer (CPIO), the Chief Information Officer, Amita Pandove has held the information sought by the appellant was rightly denied by the CPIO as it pertains to the third party who expressed their dissent from divulging the same to any other third party.

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Central Information Commission directs All India Chess Federation to furnish its expenditure in case against Competition Commission of India

Central Information Commission directs All India Chess Federation to furnish its expenditure in case against Competition Commission of India In the second appeal filed by the appellant under Section 19 of the Right to Information Act, 2005 (‘Act’) on the ground of unsatisfactory reply furnished by the Chief Public Information Officer (‘CPIO’), the Chief Information Officer, Amita Pandove has directed the CPIO, All India Chess Federation (‘AICF’), to provide relevant information regarding the expenses incurred by AICF, since it is a public authority and uses public money.

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News Broadcasting & Digital Standards Authority (NBDSA)

News 18 debate programme violative of the Code of Ethics & Broadcasting Standards and principles under the Specific Guidelines Covering Reportage; News Broadcasting & Digital Standards Authority imposes fine of Rs. 50,000/- on the broadcaster

In a complaint regarding a debate programme aired on News18 India on 6.4.2022, wherein the anchor Aman Chopra referred to the Muslim students as “Hijabi Gang”, “Hijabwali Gazwa Gang” and made a false allegation that they had resorted to rioting, A.K Sikri (Chairperson) held that the impugned programme was violative of the principles relating to impartiality, neutrality, fairness and good taste & decency under the Specific Guidelines Covering Reportage, apart from the Code of Ethics & Broadcasting Standards.

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Securities and Exchange Board of India (SEBI)

SEBI imposes a penalty of Rs. 2.25 crores on Bombay Dyeing and Rs. 11 crores on Wadia Group for misrepresenting financial statements

The Bombay Dyeing and Manufacturing Company Ltd. (‘BDMCL’) and some of its promoters (Nusli Wadia, Ness Wadia and Jehangir Wadia) has been barred from the securities market for 2 years for violating the provisions of SEBI (Prevention of Fraudulent and Unfair Trade Practices) (‘PFUTP’) Regulations, 2003 by misrepresenting the financial statement of BDMCL originating from year 2011 until 2019.

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Maharashtra Real Estate Regulatory Authority (MRERA)

Maharashtra RERA| Saif Ali Khan to get possession of his office unit in Indian Newspaper Society within a period of 15 days, with interest for delayed possession

In a complaint filed for seeking directions to the respondent to handover the possession and to pay interest/ compensation for the delayed possession as per the provisions of section 18 of the Real Estate (Regulation & Development) Act, 2016 (‘RERA’), Mahesh Pathak (Member) has directed the respondent to handover possession of the said units to Saif Ali Khan-complainant within a period of 15 days from the date of this order and directed to pay interest for the delayed possession to Saif Ali Khan from 1.02.2018 till 12.02.2021. Further, the respondent is entitled to claim the benefit of “moratorium period” as mentioned in the Notifications issued by the Authority. Moreover, it directed Saif Ali Khan to pay interest for the delayed payment from the date of default till the actual date of payment at the rate prescribed under RERA i.e. Marginal Cost Lending Rate (MCLR) of SBI plus 2%.

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District Consumer Dispute Redressal Commission

Why Uber India was held liable for the cab driver whose negligence caused the complainant to miss her flight to Chennai?

In a significant decision delivered in August over a complaint alleging deficiency of service on part of Uber India Systems, the Bench of R.P. Nagre (President-in-Charge), G.M. Kapse and S.A. Petkar (Members) held that Uber India is liable for providing deficient services on behalf of the cab driver in the instant case, whose negligence caused the complainant to miss her flight to Chennai. It was further held that Uber India’s liability was caused as the driver was acting as an agent of the Company while receiving the consideration i.e., the cab fare.

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*Kriti Kumar, Editorial Assistant has put this roundup together.

OP. ED.Practical Lawyer Archives

Introduction

Since the launch of online food delivery startups, a revolution has started in the food industry. The consumers now have the option to choose and order from a variety of food options from different restaurants. The rapid expansion of this industry led to the rise of successful startups like Zomato, Swiggy, etc. With the kind of success witnessed by these startups particularly Swiggy and Zomato, it raises concern about their pricing strategies and whether these strategies are maintaining the adequate competition in this market.

The major source of revenue for these FSAs comes from advertisements, commissions from the restaurants, delivery services, etc. These platforms are majorly engaged in a race to attract larger consumers and therefore provide massive discounts on their platforms often by the use of subscriptions (like Zomato Gold).1 On the other hand, they also charge high commissions from the restaurants in the range of 25-30%.2 These platforms have also started opening up their own cloud kitchens (a type of online restaurants) like Swiggy’s Bowl Company and Zomato’s Hyperpure.3 They are also looking for other avenues to further expand their consumer base.

While these FSAs are indulging in a variety of strategies to become a dominant force in the food delivery market, these strategies came up with their own problems. The excessive discounts, high commission rates from restaurants coupled with other issues raised important problems of competition law. Various allegations have been levelled against them by the stakeholders like NRAI (National Restaurant Association of India).

The allegations against these FSAs ranges from data masking, breaching platform neutrality, deep discounting policy, high commissions, bundling of different services (making a mandatory condition that the restaurants have to use the delivery service of the platforms).4 Moreover, there are also allegations that these platforms mandate restaurants to offer discounts on their platforms on the threat of delisting.5 The popularity of these platforms have increased manifold during the pandemic and given the network effect, it became compulsive for the restaurants to list with these platforms even at such harsh conditions. The tussle between the NRAI and FSAs also led to the “logout campaign” in the past where many restaurants were delisted from these platforms.6

It has been argued by the opponents that these pricing strategies of preferential listing, deep discounts, cloud kitchens, data masking, etc. can come under the clause of “abuse of dominance” under Section 4 of the Competition Act, 20027 (the Act) and the Competition Commission of India (CCI) must take appropriate actions against these platforms under Section 19(1) of the Act8. Recently, the CCI has also ordered a probe into the practices of these FSAs by finding a prima facie case against them.9

However, I believe that these allegations, though substantial may fail when it comes to proving “dominance” under the competition law if one adopts an ELP perspective to this problem. Given the law as it exists, it might be very difficult to prove the “abuse of dominance” under the Competition Act10. The paper is an attempt to prove that under the current legal structure these FSAs might easily escape these allegations and there is also a need to bring a change in the law to deal with the challenges raised by these FSAs.

In the paper, firstly, I will look into the aspect of the “dominance” of these entities under the competition law, then about the allegations of predatory pricing and thirdly, the issues with the cloud kitchens of these companies. This paper shows that how these allegations can easily be refuted because they do not satisfy the requirements of the Act.

Are these FSAs “dominant” under Section 4

As mentioned earlier, there are various claims made by NRAI and other institutions that these FSAs are engaged in predatory pricing and subsequently in the “abuse of dominance” under Section 4 of the Competition Act. However, most of these allegations assume that companies like Zomato and Swiggy are “dominant” in their relevant market. I argue that this contention cannot be proved under the current law.

It is clear that in order to prove the “dominance” of any entity under the Act there is a need to look into the “relevant market” and then prove the dominance of the entity concerned in the market. In the present case, the “relevant market” can be the market for “online food delivery services”.11 However, whether there is a dominance of Swiggy or Zomato in this relevant market is difficult to prove. This is because under Section 4(1) of the Competition Act, the wording prohibits the abuse of dominance by “an enterprise or group”. Similarly, in the explanation the “dominant position” is also defined with respect to “an enterprise or group”. Hence, we will have to provide the dominance of Zomato or Swiggy on their individual level, which is difficult given the nature of the food delivery market.

There are many tests laid down by the courts on the aspect of “dominance”. I will analyse these tests to look whether these FSAs can come within the definition of “dominance”. One test was laid down in Belaire Owners Assn. v. DLF Ltd.12; where the test of dominance was based predominantly on the market share of the entity, advantage of being an early mover and the resources of the entity vis-à-vis the competitors. In the present case, it is very difficult to prove the dominance of either Zomato or Swiggy through this test. Because in terms of resources both the entities are at an equal pedestal with both companies able to raise equal money through the market.13 Both the entities entered into this market at the same time14, so there is no question of an early mover. Lastly, in terms of market share, currently both the entities have around same market share of 45%15, even during the last year; this figure remained roughly the same with Zomato at 44% and Swiggy at 43%.16 Therefore, even in terms of market share it is difficult to show that there is a dominance of one entity in the food delivery market.

Besides market share, there is another test laid down in MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd.17, wherein the stress was given to the specific position that a player holds in the market as compared to its competitors. If a player in terms of historical legacy, technology and brand value is able to do certain things which cannot be replicated by its partners then that show the dominant position of the player.18 If we apply this test, it shows that while Zomato and Swiggy together can do certain things like deep discounting, it cannot be replicated by other players. However, if we compare these two entities, in most factors, no one is at a comparative advantage as compared to the other.19 Hence, even in this test, none of the player can be said to be in dominant position. Therefore, it becomes clear that irrespective of whichever parameter we use, proving “dominance” becomes problematic in the case of FSAs.

Another important aspect that must be looked at is the use of deep discounting by these FSAs which can allegedly come under the purview of predatory pricing. “Predatory pricing” under Section 4 happens when a player sells the goods and services below the costs that in turn reduces the competition in the market.20 The complaint filed by the NRAI also alleges that the deep discounts by these FSAs forces the restaurants to lower their prices and this in turn cause severe repercussions to their business. The impact of these deep discounts often attracts customers as can be seen from the increase in sales through Zomato gold21, this in turn compels more restaurants to stick to these platforms which in turn attracts more customers which creates a network effect.22 This network effect is difficult to be replicated by other players in the market.23 Therefore, we can say that the discounts offered in these platforms often leads to decrease in the competition in the market, hence they can come within the definition of “predatory pricing” under Section 4. This claim of predatory pricing can also be stretched to prove “dominance” of these FSAs. In Uber (India) Systems (P) Ltd. v. Competition Commission of India24, the Supreme Court held that the presence of predatory pricing can itself be prima facie indicative of the presence of dominance in the market.

However, there are multiple problems with this allegation as well. Firstly, the concept of predatory pricing is prohibited because by lowering the prices, the competition is usually wiped out and then the player gradually starts increasing the prices.25 However, this strategy does not seem to work in the case of FSA. This is because in their case, the competition is not entirely wipeout because other players are also present. Moreover, deep discounts are also not providing consumer loyalty which means that if discounts are reduced there is no certainty of a loyal consumer base.26 Moreover, owing to increased pressure from the NRAI, the companies are compelled to lower their discount rates which seem to have created an impact on their consumers as well.27 If the discounts are lowered, it is very difficult to attract new customers. Therefore, the FSAs are still not in a position despite so many years, to make profit out of their discounts. Secondly, the reliance on Uber case28 may also not work entirely as the legal position in not entirely clear on that aspect. This is because recently in Fast Track Call Cab (P) Ltd. v. ANI Technologies (P) Ltd.29, the Court has held that the discounts given by Ola Company may not come under the purview of predatory pricing because this market also has the presence of other significant players like Uber, etc. Therefore, these discounts by Ola can be seen more as an attempt to establish its position in the market.30 The same argument can be extended in the case of FSAs wherein they can claim that owing to the existence of the other dominant player; the discount is merely an attempt to sustain the competition by the other player. Thirdly, despite providing discounts for so many years, they are still not in a position to benefit out of it; this shows that given the dynamic nature of the market, these discounts are not a predatory measure.

In addition, there are some other arguments raised against FSAs based on search bias and preferential listing of restaurants.31 However, even these allegations are unsustainable because these contentions are difficult to be proved as these search algorithms act as a black box.32 Moreover, they are anyway subject to the test of “dominance”.

Contention with the food kitchens

Another important argument that is levelled against these FSAs is the launch of food kitchens by these companies. The allegation is that through these food kitchens these companies are basically engaged in leveraging, which is not allowed under Section 4(2)(e) of the Competition Act. The leveraging happens when any economic player uses its position of dominance in one relevant market to protect or enter the other relevant market.33 This section considers “leveraging” as an abuse of dominance. In the present case, it was alleged that these FSAs are using their online platform to extract consumer data and then using that data to sell their own food products through the same platform.34 Thus, these food kitchens are in better position as compared to the other restaurants to sell their own products by using the consumer data which is not available to the other restaurants.

Even if we assume the “dominance” of these FSAs in the food delivery market35, still these allegations can be refuted on the basis of the precedents of CCI on this matter. Firstly, in order to prove leveraging, one has to prove the presence of two relevant markets. Further it has to be shown that the “dominant” position in one market is used to enter/protect the other market. This aspect of “leveraging” was discussed in Baglekar Akash Kumar v. Google LLC36, where the CCI looked into the issue of Google using its dominant position in e-mailing services (Gmail) to “enter” into the market of specialised video- conferencing (Google Meet). The CCI held that since no customer of Gmail is forced to use the Google Meet by virtue of using Gmail and there are no consequences that the customers have to face by not using “meet”, there is no case of leveraging made out.37

If we apply this test, it appears that allegations of “leveraging” against these FSAs are also not made out. Firstly, the two relevant markets in this case can be “online market food delivery” and the second market can be “sale of food products through online medium”.38 Now, even if these food kitchens are available on the applications of these FSAs, no consumer is obligated to buy the food from these food kitchens; moreover there are no consequences that the consumers might have to accrue by ordering from other restaurants, therefore, the argument for leveraging might not succeed.

Moreover, the precedents of CCI related to leveraging involved factors like non-changeability of the products in the second relevant market39 and the restraint caused to the consumers thereof. However, these contentions cannot be raised in the present case because as mentioned earlier there is already a lot of competition in the second market of “sale of food products through online medium” and the products offered by these food kitchens are easily substitutable. Therefore, there is no effective restraint caused to the consumers in the secondary market.

Conclusion and way forward

It becomes obvious that the FSAs can easily escape the allegations of anti-competitive marketing strategies if we apply a purely ELP perspective. The precedents of the CCI coupled with the provisions of the Competition Act makes it apparently clear that the pricing practices of the FSAs cannot come under the purview of the “abuse of dominance” under Section 4 of the Act. Moreover, it is very difficult to establish the dominance of one entity in the market for online food delivery. Although, these entities together cover more than 75% of the market, still on an individual level, they can easily show lack of dominance. This further emphasis the need to include the concept of “collective dominance” in the Competition Act to deal with the situations of duopolistic dominance.40

In addition, the precedents of the CCI concerning dominance and leveraging also were restrictive in their approach. Therefore, this analysis shows that although the concerns regarding the conduct of these FSAs were genuine, their practices can still be permitted under the law. The only way to rectify these problems is by amending the law to that extent. One of the methods by which law can be amended is by making a change in the existing Section 4 of the Act.

Section 4(1) of the Act reads as:

“No enterprise or group shall abuse its dominant position.41

Similarly, Section 4(2) reads as:

“There shall be an abuse of dominant position under sub-section (1), if an enterprise or a group.42

Both these clauses use the word “enterprise”, these clauses must be amended to include the word “enterprises”. Therefore, the amended clauses must read as “No enterprise or enterprises or group(s) shall abuse their dominant position”. The said amendment must be done in the entire section wherever the word “enterprise” alone is used.

A similar provision was also present in the EU Competition Law in the form of Article 102 of Treaty on the Functioning of the European Union (TEFU) that uses the word “one or more undertakings”. However, the words “one or more” were often understood in a narrow manner to include only the two or more companies of the same corporate group.43 Later on in Flat Glass case44, it was clarified that even economically independent companies can come within the phrase.

However, in order to avoid such confusion in India, an explanation must also be added to the existing Section 4 wherein it must read that:

For the purpose of this section, it is hereby clarified that the word “enterprises” include two or more economically independent enterprises that can jointly exert their dominance in the relevant market.

It is submitted that such an amendment in the existing Section 4 can help in introducing the concept of “collective dominance” in the Indian law which will make it easy to make companies liable for abusing their dominant positions in a duopolistic set up like that of “online food delivery”. In the wake of many markets turning up duopolistic like e-commerce (Flipkart and Amazon), cab services (Ola and Uber) and food delivery (Swiggy and Zomato), it is imperative that the proposed amendment be introduced into the existing law to deal with the problems posed by such markets.


* Third year student, NLSIU.

*The article has been published with kind permission of Eastern Book Company cited as (2022) PL August 60.

1 Rohan Mandal and Jeezan Riyaz, “Funding of Food Aggregators and Competition Law: A Post Covid Analysis”, The HNLU CCLS Blog, 14-9-2021, <https://hnluccls.in/2021/09/14/funding-of-food-aggregators- competition-law-a-post-covid-analysis/> (accessed on 26-3-2022).

2 Harish Kugunavar, “Analysing the Legal Battle of NRAI and Zomato and Swiggy Through the Lens of Antitrust Law”, The Leaflet, 9-8-2021, <https://theleaflet.in/analysing-the-legal-battle-of-nrai-and- zomato-and-swiggy-through-the-lens-of-antitrust-law/> (accessed on 29-3-2022).

3 Salman S.H., “The Future for Indian Food tech Giants Swiggy and Zomato is not Just About Food Delivery”, Inc., 27-4-2021 <https://inc42.com/features/the-future-for-indian-foodtech-giants-swiggy-and- zomato-is-not-just-about-food-delivery/> (accessed on 30-3-2022).

4 Mehab Qureshi, “Why is the National Restaurant Association of India Irked with Swiggy, Zomato”, The Quint, 8-7-2021 <https://www.thequint.com/tech-and-auto/why-is-national-restaurant- association-of-india-irked-with-swiggy-zomato> (accessed on 24-3-2022).

5 Ibid.

6 Ankan Das, “The Dark Side of Discounts: The Lesson from Zomato Gold to Indian Food Startups”, Inc., 13-12-2019, <https://inc42.com/datalab/the-dark-side-of-discounts-lessons-from -zomato-gold-for-indias-food-startups/> (accessed on 23-3-2022).

7 Competition Act, 2002, S. 4.

8 Competition Act, 2002, S. 19(1).

9 See National Restaurant Assn. of India v. Zomato Ltd., 2022 SCC OnLine CCI 22. (The probe however was centered around S. 3, hence the question of “abuse of dominance” might still remain unresolved.)

10 Competition Act, 2002.

11 Geographical market in this case is India.

12 2011 SCC OnLine CCI 89.

13 Vaibhav Gautam Bansode, “Zomato versus Swiggy: Swiggy Valuation Stands at $10.7 Billion; Why is Zomato in Focus?”, Zee Business, 25-1-2022, <https://www.zeebiz.com/market-news/news-zomato-vs- swiggy-swiggy-valuation-stands-at-107-billion-why-is-zomato-in-focus -check-this-report-here-176998> (accessed on 27-1-2022).

14 Ibid.

15 Ibid.

16 Ibid.

17 2011 SCC OnLine CCI 52.

18 MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd., 2011 SCC OnLine CCI 52, para 10.36.

19 See “Zomato versus Swiggy—Who Leads the Food Delivery Race in India?”, <https://dfdnews.com/2021/08/12/zomato-vs-swiggy -who-leads-the-food-delivery-race-in-india/> (accessed on 25-3-2020).

20 Competition Act, 2002, S. 4 Expln. II.

21 Supra note 6.

22 Aditya Kumar Singh and Hardik Malik, “Antitrust Implications of Food Service Aggregator Owned Cloud Kitchens”, NLSIR, 29-3-2022, <https://nlsir.com/antitrust-implications-of-food-service -aggregator-owned-cloud-kitchens/> (accessed on 31-3-2022).

23 CCI, Market Study on E-Commerce in India: Key Findings and Observations (2020), 111, <https://www.cci.gov.in/sites/default/files/whats_newdocument/ Market-study-on-e-Commerce-in-India.pdf> (accessed on 30-3-2022).

24 (2019) 8 SCC 697.

25 Tilottama Raychaudhuri, “Abuse of Dominance in Digital Platforms: An Analysis of Indian Competition Jurisprudence”, Competition Commission of India Journal on Competition Law and Policy, (2020) Vol. 1, 1-27 at pp. 5-6.

26 Supra note 6.

27 Ibid.

28 Supra note 24.

29 2017 SCC OnLine CCI 36.

30 Fast Track Call Cab (P) Ltd. v. ANI Technologies (P) Ltd., 2017 SCC OnLine CCI 36, para 121.

31 Kamakshi Puri, “Platform Neutrality by E-Commerce Platforms: A Competition Law Requirement?”, India Corp Law, 23-5-2020, <https://indiacorplaw.in/2020/05/platform-neutrality-by-e-commerce-platforms- a-competition-law-requirement.html> (accessed on 22-3-2022).

32 Aditya Kumar Singh and Hardik Malik, “Antitrust Implications of Food Service Aggregator Owned Cloud Kitchens”, NLSIR, 29-3-2022, <https://nlsir.com/antitrust-implications-of-food-service -aggregator-owned-cloud-kitchens/> (accessed on 31-3-2022). In fact, in Prachi Agarwal v. Swiggy Bundl Technologies (P) Ltd., 2020 SCC OnLine CCI 22, the CCI has not even found a prima facie case on this point.

33 Competition Act, 2002, S. 4(2)(e).

34 Supra note 1.

35 Here we are assuming that there is “dominance” of these entities in the first relevant market otherwise, the defence of lack of dominance is always available to them. See, All India Online Vendors Assn. v. Flipkart (India) (P) Ltd., 2018 SCC OnLine CCI 97.

36 2021 SCC OnLine CCI 2.

37 Baglekar Akash Kumar v. Google LLC, 2021 SCC OnLine CCI 2, para 20.

38 An argument can be that the second market should be “sale of food products by online kitchens”, but this argument is not sustainable because if we apply the significant and non-transitory increase in price (SSNIP) test, then a 5% increase in the price of the food offered through these food kitchens, consumers will easily shift to any other restaurant available on the site, consumer will order food from any restaurants.

39 Shamsher Kataria v. Honda Seil Cars (India) Ltd., 2014 SCC OnLine CCI 95.

40 The concept of collective dominance under S. 4 was rejected by the CCI in Ashok Kumar Vallabhaneni v. Geetha SP Entertainment, 2019 SCC OnLine CCI 27.

41 Competition Act, 2002, S. 4(1).

42 Competition Act, 2002, S. 4(2).

43 Liza Lovdahl Gormsen, “Collective Dominance: An Overview of National Case Law”, <https://www.biicl.org/documents/10061_554_collective_dominance.pdf> (accessed on 23-3-2022).

44 SIV v. Commission, (1992) 2 ECR 1403.

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): On finding that DLF being a new entrant in developing commercial space in Kolkata and having only one property, Commission held that the same cannot be treated as a dominant enterprise which can operate independently of competitive forces.

Instant information was filed under Section 19(1)(a) of the Competition Act, 2002 by Informant 1 and Informant 2 against DLF Commercial Complexes Limited (OP 1) and others alleging inter alia, abuse of dominant position in contravention of the provisions of Section 4 of the Competition Act.

Analysis and Decision

Commission found that the only allegation made against DLF was that by abusing its dominant position in the relevant market DLF has imposed unfair conditions in the sale of commercial space in its project DLF Galleria located in Kolkata.

Though the informant had miserably failed to furnish any facts or figures to show that DLF enjoys a dominant position in developing commercial space in the metropolis of Kolkata.

Further, as per the information available in the public domain the DLF, being a new entrant in developing commercial space in Kolkata, is having only one property related to commercial retail space.

In view of the above-said factors, DLF cannot be treated as a dominant enterprise which can operate independently of competitive forces prevailing in the relevant market or affect the competitors or the relevant market in its favour.

Coram expressed that, as the factum of DLF enjoying a dominant position in developing commercial space in Kolkata has neither been established by the informant nor it has been substantiated from the information available in the public domain no case of violation of section 4 of the Act was made out against DLF.

Therefore, no prima facie case was made out for making a reference to the Director-General for conduction investigation into the matter. [Rajarhat Welfare Association v. DLF Commercial Complexes Ltd., Case No. 10 of 2011, decided on 25-5-2022]

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) addressed a matter wherein it was alleged that certain Car Companies were abusing their dominant position and denying the cashless claim to consumers if the insurance policy had not been obtained through them, their dealers or their insurance broking companies.

Manav Seva Dham (Informant) alleged contravention of provisions of Sections 3 and 4 of the Competition Act, 2002 by Maruti Suzuki India Limited (OP 1/Maruti), Tata Motors Ltd. (OP 2/Tata), Hyundai Motor India Limited (OP 3/Hyundai), Hero Moto Corp Limited (OP 4/Hero), Mahindra and Mahindra Limited (OP 5/Mahindra) and Toyota Kirloskar Motor Private Limited (OP 6/Toyota).

It was stated that the OP were enjoying a dominant position in the market for automobiles and motor insurance in India, which enables them to operate independently of competitive forces.

Further, it was added that there had been apparent monopoly and cartelization by the OPs in selling insurance policies through their fully owned insurance broking or subsidiary companies and servicing and repairing motor vehicles in respect of the insurance policies sold by them, which is detrimental to the insurance policyholders.

Due to the above stated, the informant has received several complaints from the insurance companies as well as insurance policyholders about the monopolistic practices of the OPs.

OPs even ensure that the genuine spare parts are only available with their authorised dealers, and their authorised dealers continue to charge arbitrary high prices from the consumers, who are forced to avail the services for repairing and maintaining their motor vehicles since the genuine spare parts, diagnostic tools, and technical information required to service their cars are not made available to independent repair workshops, failing which, the warranty of the vehicle would lapse.

Hence, the OPs have created a monopoly over the motor insurance and repair services for their motor vehicles.

Analysis of the Commission

Primarily, the Informant was aggrieved by the alleged conduct of the OPs of disallowing of the cashless claim to consumers if the insurance policy has not been obtained through them, their dealers, or their insurance broking companies.

Whether the Opposite Parties are in a position of dominance and have abused their dominant position, as alleged?

Commission noted that nothing concrete has been submitted in the regard to the allegations made.

Further, the Coram expressed that,

Consumers have a choice to purchase their vehicle from various manufacturers and the same also is true in respect of availing insurance facility for vehicles.

Informant had alleged regarding some arrangement of OPs with their insurance broking companies for the provisions of insurance services to customers who buys vehicles from them.

Commission observed that, even if dealers offer to sell insurance policies to customers, the customers may yet have the option to buy such policy from alternative channels should they want.

“…facility of cashless claim may be an additional benefit extended by certain brokers and may not be confined to the broking arms of the aforementioned Opposite Parties alone.”

Hence, no prima facie case existed. [Manav Seva Dham v. Maruti Suzuki India Ltd., 2022 SCC OnLine CCI 17, decided on 22-3-2022]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT):  The Coram of Justice Jarat Kumar Jain (Judicial Member) and Dr Alok Srivastava (Technical Member) held that Ola’s below-cost pricing was not predatory pricing with a view to dislodging any competitor from the market but towards establishing itself as an effective and reliable brand in the market and also opening up a latent market to its advantage.

Two appeals filed by appellant Meru Travel Solutions (P) Ltd. and Fast Track Call Cab (P) Ltd. assailed the common order passed by the Competition Commission of India under Section 26(6) of the Competition Act, 2002.

Commission decided that on the basis of information submitted by Fast Track and Meru and analysis of DG’s investigation report, the dominant position of Ola in the relevant market and abuse of its dominant position was not established and Ola had not been found to have anti-competitive agreements with drivers.

By the present decision, both the appeals will be disposed off.

Analysis and Discussion

Technology | Ola v. Other Radio Taxis

Tribunal noted that before the advent of technology-leveraged, network-based aggregator models, taxi services such as Meru, Fast Track, Easy Cab, Taxi For Sure etc. also leveraged technology to pride ease of booking and taxi ride, yet Ola’s model differed from them in many ways, particularly its use of the smartphone-based application which could be used with remarkable ease by the riders and provide taxi services anywhere in the area within minutes of ‘hailing’ through the mobile phone.

Hence, it could not be said that Ola employed technology in a much more effective and enabling fashion to provide services which previous radio taxi operators were not able to.

Market Share

Ola market share is seen to increase from 5-6% in 2012-13 to 59-60% in 2014-15 and to 61% in 2015-16. Thus, there was a significant rising trend noted upto January 2015, whereafter Ola market share had been plateauing or witnessing a gradual decline.

Though the active fleet size increased but in Tribunal’s opinion merely the size of the fleet does not decide the dominant position of a particular radio taxi service provider.

“We note that the technological edge that the platform crested by Ola which provide ease of taxi bookings, rider security, payments, drivers welfare made many riders comfortable with the network of Ola. The customer incentives worked in conjunction with these facilities and conveniences to attract riders to Ola and a certain brand image was created and reinforced over a period of time.”

Further, another highlighting factor noted was that Ola was itself facing competition in the relevant market from established players such as Meru and Fast Track and later from Uber while it was trying to establish its brand.

Below Cost Pricing | Predatory pricing by Ola?

In Tribunal’s opinion, the strategy adopted by Ola was in view of the market conditions, helped by a heavy infusion of foreign funding. Hence, there was no below-cost pricing by Ola for any sustained period of time which could be labelled as predatory pricing and abuse of its dominant position in the market.

Coram also agreed with the finding of DG that the below-cost pricing adopted from May-June 2014 onwards could be treated as the variable cost which, as argued by Senior Counsel of Respondent Ola, was the expenditure that Ola undertook to establish its brand in the market and increase its market share.

It was also noted that Uber also adopted an almost similar network approach for the provision of radio taxi, hence Tribunal was inclined to agree with Ola’s arguments that Uber was a significant competitor in the relevant market and Ola was responding to pricing actions of Uber while trying to establish itself in the Bengaluru market of radio taxi services.

Tribunal found that the situation in the present matter was akin to that in the matter CCI v. Fast Way Transmission (P) Ltd., (2018) 4 SCC 316, wherein the Supreme Court held that when an enterprise enjoys a dominant position in the relevant market, it is enabled to operate independently of competitive forces or affect its competitors or consumers or that relevant market in its favour.

“We do not think that Ola could operate independently of other competitors in the relevant market, and hence it did not enjoy a dominant position in the market.”

Conclusion

Stating that Ola started from a low market share of about 20%, Tribunal held that it cannot agree that Ola was at that initial time in a dominant position and was trying to push out competitors from the market by employing below-cost, predatory pricing.  An increase in its market share over a period of time, was due to a combination of factors, of which below-cost pricing was one.

Another significant factor, with regard to Ola’s agreements with its drivers, Tribunal noted that the agreements cover many aspects, which concern welfare measures for drivers and helping them source credit for buying vehicles. The incentives provided to drivers are dynamic and not constant in time. The drivers have the option to shift to other networks depending on their requirements and convenience.

Hence the driver’s agreement that Ola has with drivers with entirely optional and does not in any way bind the drivers to Ola’s network in any way.

Therefore, Tribunal did not find the driver’s agreements anti-competitive in violation of Section 3 of the Act.

Ola is working on generating demand through customer discounts and then bringing in more drivers to cater to the increased demand. Ola tries to create a win- win for the riders and drivers, and of course to its enterprise.

Lastly, Tribunal held that the Orders of CCI do not require any interference and therefore the appeals were dismissed. [Meru Travels Solution (P) Ltd. v. Competition Commission of India, 2022 SCC OnLine NCLAT 37, decided on 7-1-2022]


Advocates before the Tribunal:

For Appellant:

Ms. Sonal Jain, Mr. Udayan Jain, Mr. Abir Roy, Mr. Ishkaran Singh, Ms. Kajal Sharma and Ms. Riya Dhingra, Mr. Vivek Pandey, Mr. Raj Surana, Mr. Ishaan Chakrabarti, Advocates.

For Respondents:

Ms. Shama Nargis, Deputy Director, CCI.

Mr. Ajay Kumar Tandon for R-1, CCI. Ms. Purnima Singh, Ms. Neha Bhardwaj, Ms. Shivani Malik, Ms. Astha Baderiya, Advocate for R-1.

Mr. Rajshekhar Rao, Sr. Advocate with Ms. Nisha Kaur Uberoi, Mr. Gautam Chawla, Mr. Raghav Kacker, Ms. Sonal Sarda and Mr. Samriddha Gooptu, Ms. Sakshi Agarwal, Mr. Ishan Arora, Mr. Madhav Kapoor, Advocates for R-2.

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): On finding merit in allegations of news publishers’ Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi (Members) expressed that,

Google appears to operate as a gateway between various news publishers on the one hand and news readers on the other. Another alternative for the news publisher is to forgo the traffic generated by Google for them, which would be unfavourable to their revenue generation.

Digital News Publishers Association (Informant) filed the present information under Section 19(1)(a) of the Competition Act, 2002 against Alphabet Inc., Google LLC, Google India Private Limited and Google Ireland Limited (referred to as ‘Google’/OPs’) alleging violation of Section 4 of the Competition Act.

Trajectory of the Facts

Informant averred that its members have endeavored to provide credible and fact-checked news, which is the bedrock of any democracy.

Further, as per the Informant, the majority of the traffic on news websites comes from online search engines (more than 50%), wherein Google is claimed to be the most dominant search engine. Based on the same, the Informant averred that more than 50% of the total traffic on the news websites is routed through Google and, being the dominant player in this field, Google, by way of its algorithms, determines which news website gets discovered via search.

Informant contended that Google not only has a monopolistic position in search in India, it has also a very strong position in advertising intermediation and controls/retains the major share at each level.

Adding to the above facts, informant stated that Google was the major stakeholder in the digital advertising space, and it unilaterally decides the amount to be paid to the publishers for the content created by them, as well as the terms on which the aforesaid amounts have to be paid.

The dependency of the customer on Google is also stated to be a well-known fact.

Hence, the OPs abused their dominant position in the market and violated provisions of Section 4 of the Competition Act, 2002.

Analysis and Discussion

The essence of the allegations noted by the Commission was the impugned conduct of Google, resulting in denial of fair share in the digital advertising revenue to news publishers and disclosure of inadequate information to reach a fair settlement.

Further, digitalization of the economy has resulted in higher spending on digital advertising, increasing the dependence of the news publishers on digital advertising.

It was noted that the informant was aggrieved by the denial of fair advertising revenue to its members resulting from the abuse of its dominant position by Google.

Commission in Google Search Bias case held that Google is dominant in both relevant markets, i.e., market for online general web search services and market for online search advertising services in India.

In relation to the dependence of news publishers on Google, it was averred that Google’s search engine results were a prominent source of online traffic to news website publishers. The said fact was corroborated from the traffic data accessed from similarweb.com, which indicated that search engines generate 25% to 77% (depending on the publisher) of the total traffic to news publisher websites. Hence, the discoverability for news publishers appeared to be dependent on search results from Google.

Commission prima facie opined that Google was dominant in both the relevant markets, i.e. market for online general web search services and market for online search advertising services in India.

Coram noted that Google displays news content (a) on its search engine page(s) in the form of general/organic search results, i.e., Google Search, as well as through (b) its news aggregator vertical, i.e., Google News. In response to a search query related to news items, in addition to organic results, Google also displays a ‘Top Stories’ carousel on its search engine result page.

Further, Google provides a news tab on Google Search, which groups news articles related to the search query. The news tab displays the title of the news article, an excerpt from the article, the thumbnail as well as the publisher’s name.

Google displays news content in a variety of ways through hyperlinks, thumbnails, extracts, etc. These hyperlinks, when clicked, take the users to the websites of the respective news publishers. Such access by the users allows the news publishers to monetize their content by offering advertising space on their websites to potential advertisers. 

The Commission stated that it cannot deny that by virtue of its position of strength of its vertically integrated ecosystem which covers not only the markets of Online General Web Search Services and Online Search Advertising Services but also the online digital advertising intermediation services, Google appears to be a preferred service provider to publishers wanting to offer search and advertising services on their websites.

Further, the Coram prima facie was satisfied that based on the global presence of Google, it can be reasonably inferred that Google occupies a significant position in the market for online digital advertising intermediation services as well and investigation would bring out the said aspects in detail.

What appears from the above trajectory?

It appeared that the news publishers are dependent on Google for the majority of the traffic, which makes Google an indispensable trading partner for news publishers.

Prima facie, it appeared that news publishers have no choice but to accept the terms and conditions imposed by Google.

Google appears to operate as a gateway between various news publishers on the one hand and news readers on the other. Another alternative for the news publisher is to forgo the traffic generated by Google for them, which would be unfavourable to their revenue generation.

The alleged opacity on critical aspects such as data and audience management practices, or generation and sharing of revenue with publishers, exacerbates the information asymmetry and is prima facie prejudicial to the interest of publishers, which, in turn, may affect the quality of their services and innovation, to consumer detriment.

Hence, the imposition of such unfair conditions as well as price by Google in the provisions of its various services was prima facie violation of Section 4(2)(a) of the Act.

Snippets on Google

It needs to be examined whether the use of snippets by Google is a result of the bargaining power imbalance between Google on the one hand and news publishers on the other, and whether it affects the referral traffic to news publisher websites, and thus, their monetization abilities.

Coram expressed that in a well-functioning democracy, the critical role played by news media cannot be undermined, and it needs to be ensured that digital gatekeeper firms do not abuse their dominant position to harm the competitive process of determining a fair distribution of revenue amongst all stakeholders.

Therefore, the alleged conduct of Google appeared to be an imposition of unfair conditions and price which prima facie was a violation of Section 4(2)(a) of the Act.

Mirror image websites

The alleged issue with regard to publishers being forced to build mirror-image websites using the AMP format, with Google caching all articles and serving the content directly to mobile users, can have revenue implications for the publishers.

Paywall Options

Since Google restricts paywall options unless publishers rebuild their paywall options and their meters for AMP, which may amount to an unfair imposition on publishers, the said aspects would be suitably examined during the investigation.

Further, it also needs to be examined whether Google imposes any discriminatory condition or price on various news publishers, which would violate Section 4(2)(a) of the Act.

Therefore, in Commission’s opinion, prima facie, Google violated the provisions of Section 4(2)(a) of the Act, which merits investigation and the informant also alleged that Google’s conduct has also violated the provisions of Section 4(2)(b)(ii) as well as Section 4(2)(c) of the Act.

DG can appropriately examine the above-stated.

Google using its dominant position in the relevant markets to enter/protect its position in the market for news aggregation services in violation of Section 4(2)(e) of the Act also needs detailed investigation.

Commission took note of the development in some countries such as France and Australia, as referred by the Informant, that Google has been asked to enter into fair/ good faith negotiation with news publishers for paid licensing of content to address the bargaining power imbalance between the two and the resultant imposition of unfair conditions by Google.

Therefore, Commission was satisfied that a prima facie case was made out against the alleged conduct of Google, which merits an investigation. [Digital News Publishers Assn. v. Alphabet Inc., 2022 SCC OnLine CCI 1, decided on 7-1-2022]

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma, Bhagwant Singh Bishnoi (Members) directs the investigation in view of an alleged violation of provisions of the Competition Act.

The informant had filed the present information under Section 19(1)(a) of the Competition Act, 2002 against Apple Inc. (OP-1) and Apple India Private Limited (AIPL) alleging contravention of various provisions of Section 4 of the Act.

Informant alleged that Apple uses a barrage of anti-competitive restraints and abuse of dominant practices in markets for distribution of applications (‘apps’) to users of smart mobile phones and tablets, and processing of consumers’ payments for digital content used within iOS mobile apps (‘in-app content’).

Further, it was added that Apple imposes unreasonable and unlawful restraints on app developers from reaching users of its mobile devices unless they go through the ‘App Store’ which is stated to be controlled by Apple. Adding to this, Apple required app developers who wish to sell digital in-app content to their consumers to use a single payment processing option offered by Apple, carrying a 30% commission.

The 30% commission may also amount to a form of ‘margin squeeze’ in breach of the provisions of Section 4 of the Act.

In contrast to the above position, app developers could make their products available to users of an Apple personal computer in an open market, through a variety of stores or even through direct downloads from a developer’s website, with a variety of payment options and competitive processing fees that average 2-5%.

In the informant’s view, the above-stated amounted to abuse of its dominant position on the part of Apple.

Apple’s marketing restrictions makes it difficult for multi-platform apps to inform their users of the ability to make out- of-app purchases, and since Apple has a monopoly over the distribution of iOS apps, app developers have no choice but to assent to this anti-competitive tie-in- arrangement and such conduct on part of OPs is in violation of the provisions of Section 4(2)(d) and Section 4(2)(e) of the Act.

Mandating the use of IAP limits the ability of the app developers to offer payment processing solutions of their choice to the users for app purchases as well as IAPs and amounts to imposition of unfair terms and condition in the purchase or sale of goods or services and moreover, it amounts to denial of market access for the competing payment gateway in violation of the provisions of Section 4(2)(c) of the Act.

Elaborating further, Apple expressly conditions the use of its App Store on the use of its In-App Purchase to the exclusion of alternative solutions in a per se unlawful tying arrangement.

Analysis, Law and Decision

While analysing the matter, Coram firstly noted that Apple’s ecosystem is tightly knit and vertically and exclusively integrated throughout the value chain wherein it offers apps, app store as well as smart devices.

Some consumers may have preference for closed ecosystem like Apple and others may have a preference for open ecosystems like that of Google.

 Apple’s proprietary in-app purchase system (IAP)

Apple prohibits app developers to include a button/link in their apps which take/steer the user to third party payment processing solution other than Apple’s IAP. While the App Store policies of Apple allows users to consume content such as music, e-books, etc. purchased elsewhere (e.g., on the website of the app developer) also in the app, its rules restrict the ability of app developers to inform users about other purchasing options through a notification in the app itself, which might be cheaper. This would result in higher price for the users of such apps.

Commission found that the lack of competitive constraint in the distribution of mobile apps affects the terms of which Apple provides access to its App Store including the commission rates and terms that thwart certain app developers from using other in-app payment systems.

Coram prima facie opined that mandatory use of Apple’s IAP for paid apps & in-app purchases restrict the choice available to the app developers to select a payment processing system of their choice especially considering when it charges a commission of up to 30% for app purchases and in-app purchases.

Market power being enjoyed by Apple due to its grip over iOS ecosystem resulted in ‘allegedly’ high commission fee of up to 30%.

Commission also observed that the intermediation by Apple between the app developer and the app user for payment-processing purposes, would also result in leveraging on the part of Apple as it is using its dominant position in the app store market to enter/protect its downstream market of various verticals in violation of Section 4(2)(e) of the Act.

The app developers have to agree to the usage of Apple’s IAP payment processing service, if they want to distribute their apps to the iOS users through Apple’s App Store. Apple conditions the provision of app distribution services on the app developer accepting supplementary obligations which by their nature or according to commercial usage, have no connection with the subject of the contract for the provision of distribution services, which results in violation of Section 4(2)(d) of the Act.

The above conduct, prima facie results in leveraging by Apple of its dominant position in App Store market to enter/protect its market for in-app purchase payment processing market, in violation of Section 4(2)(e) of the Act.

Another significant point noted by Commission was that App Store is the only channel for app developers to distribute their apps to iOS consumers which are pre-installed on every iPhone and iPad. Further, third party app stores are not allowed to be listed on Apple’s App Store.

Therefore, the above conduct prima facie results in denial of market access for the potential app distributors/app store developers in violation of Section 4(2)(c) of the Act. The said also results in limiting/restricting the technical or scientific development of the services related to the app store for iOS, due to reduced pressure of Apple to continuously innovate and improve its own app store, in violation of Section 4(2)(b) of the Act.

Conclusion

Coram prima facie opined that Apple violated the provisions of Section 4(2)(a), 4(2)(b), 4(2)(d) and 4(2)(e) of the Act, and hence warranted detailed investigation.

The Commission directed the Director-General to cause an investigation to be made into the matter under the provisions of Section 26(1) of the Act also directed the DG to complete the investigation and submit the said report. [Together We Fight Society v. Apple Inc., 2021 SCC OnLine CCI 62, decided on 31-12-2021]


Additional Read:

Apple: A monopolist under Federal or State Law? A win for Epic or Apple? Read to know

Business NewsNews

Acquisition approval by Competition Commission of India 


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

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

Background of the Acquirer and Target

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

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


Competition Commission of India 

[Source: PIB]

[Dt. 25-10-2021]

Op EdsOP. ED.

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

 

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

 

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

 

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

 

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

 

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

 

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

 


Conflicts beyond the Competition Law


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

 

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

 

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

 


Conclusion


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

 

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


 

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

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

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

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

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

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

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

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

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

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

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

Op EdsOP. ED.

Introduction

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

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

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

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

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

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

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

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

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

Exemption under guideline issued by various national and international authorities

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

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

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

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

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

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

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

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

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

Crisis cartel

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

State aid

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

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

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

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

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

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

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

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

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

Conclusion

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

40 Policy Roundtables: Crisis Cartels, OECD, 2011.

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

What were the demands of the above-stated Unions?

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

Prima Facie Observation of the Commission

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

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

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

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

What was in the DG’s report?

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

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

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

Commission’s Observation on perusing DG Report

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

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

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

Restriction on entry of OLA and UBER

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

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

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

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

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

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

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

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

Analysis

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

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

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

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

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

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

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

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

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

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

Background

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

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

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

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

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

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

Analysis

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

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

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

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

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

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

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

Informant’s Submissions

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

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

Preliminary Conference

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

What did the Commission note?

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

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

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

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

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

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

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

What did the investigation try to ascertain?

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

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

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

Analysis and Decision

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

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

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

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

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

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

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

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

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


Advocates before the Court:

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

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

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

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

Case Briefs

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

What would be the impact of the merger?

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

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

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

No Public Interest

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

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


Competition Commission of South Africa

Case BriefsTribunals/Commissions/Regulatory Bodies

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

Cartelization: Domestic Airlines

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

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

Data Analysis

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

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

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

Anti-Competitive Conduct

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

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

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

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

Role of software/algorithm deployed by the airlines

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

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

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

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

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

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

Fare Buckets and Route Analysts

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

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

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

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

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

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

Conclusive Report of DG

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

Commission’s Observation

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

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

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

Nothing amounting to the above was found.

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

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

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

Op EdsOP. ED.

I. Introduction

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

II. Standard of proof

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

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

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

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

III. Investigative powers

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

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

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

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

IV. Position in the EU/USA

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

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

V. Conclusion

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

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


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

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

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

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

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

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

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

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

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

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

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

9 Ibid.

10 Ibid.

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

12 Ibid.

13 2013 SCC OnLine Comp AT 75.

14 (2017) 8 SCC 47.

15 Ibid.

16 Ibid.

17 Ibid.

18 Ibid.

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

20 Ibid.

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

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

23  2012 SCC OnLine CCI 65.

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

25 (2017) 8 SCC 47.

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

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

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

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

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

31 2012 SCC OnLine CCI 12.

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

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

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

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

36  Ibid.

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

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

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

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

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

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

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

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

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

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

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

50 Ibid.

51 Ibid.

52 Ibid.

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

54 Nisha Kaur Oberoi, supra note 42

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

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

Colourable Exercise of Power

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

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

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

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

Analysis and Decision

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

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

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

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

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

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

Op EdsOP. ED.

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

Introduction: A Brief Overview

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

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

Indian Competition Regime: The Status Quo

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

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

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

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

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

Critique of the Indian Application of Law

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

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

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

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

Plugging the Loopholes: International Law Scenario

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

Germany

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

Japan and Australia

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

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

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

India: Turning Over a New Leaf

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

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

Conclusion and Recommendations/Suggestions

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

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

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

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

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


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

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

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

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

[5] 2020 SCC OnLine CCI 28.

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

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

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

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

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

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

[12] 2018 SCC OnLine SC 1718.

[13] 2010 SCC OnLine CCI 28.

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

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

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

Factual Matrix

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

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

Allegation

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

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

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

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

Analysis and Decision

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

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

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

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

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

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

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

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