COVID 19Hot Off The PressNews

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

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

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

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

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

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

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

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

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

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

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

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

Legislation UpdatesNotifications

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

Note:

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

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


Ministry of Corporate Affairs

[Notification dt. 11-03-2020]

Corp Comm LegalExperts Corner

Introduction 

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

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

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

Undeveloped Jurisprudence on “Excessive Pricing” in India

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

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

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

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

1. When “Excessive Pricing” Triggers Competitive Behaviour

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

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

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

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

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

3. When the Entry Barriers are Not Strong

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

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

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

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

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

Conclusion

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


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

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

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

Case BriefsSupreme Court

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

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

Factual Matrix

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

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

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

The Supreme Court considered the matter on following points:

(a) Jurisdiction of CCI

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

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

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

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

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

OP. ED.

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

Extraterritorial jurisdiction: To infinity and beyond

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

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

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

Penalising the guilt: The is and the ought

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

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

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

Appeals of CCI orders: Hear Hear

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

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

Case closed or not

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

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

Lag due to the lack: Recommendation for way ahead

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

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

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

————-

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

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

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

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

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

[5]  Competition Act, 2002, S. 27.

[6]  Competition Act, 2002, S. 47.

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

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

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

[10]  (2005) 2 SCC 145.

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

[12]  (2010) 7 SCC 751.

[13]  (1998) 4 SCC 90.

[14]  CCI, (n. 8)

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

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

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

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

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

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

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

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

Cabinet DecisionsLegislation Updates

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

Benefits:

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

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

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

Background:

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

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

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

[Press Release no. 1527701]

Cabinet

Case BriefsTribunals/Commissions/Regulatory Bodies

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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