The Competition Commission of India (CCI), established under the Competition Act, 2002 (as amended) (CA), has exclusive original jurisdiction to enforce the provisions of the CA.2 An appeal from a final decision of the CCI lies with the National Company Law Appellate Tribunal (NCLAT),3 which replaced the erstwhile Competition Appellate Tribunal (COMPAT) in May 2017. The NCLAT now also has original jurisdiction to decide any claim for compensation made under the CA. The final appeal under the CA lies with the Supreme Court of India (Supreme Court), which is the highest court in India. In addition, parties to a proceeding under the CA may approach a High Court,4 invoking their writ jurisdiction to uphold constitutional guarantees, including issues relating to due process and principles of natural justice. The CCI has not been conferred with any statutory power to review its own orders, nor does it have contempt powers of a court. The NCLAT enjoys both of these powers under the CA.5
Sections 3 and 4 of the CA, which deal with anticompetitive agreements and abuse of dominant position, respectively, and the enforcement powers of the CCI came into force on 20 May 2009. The CA became fully operational on 1 June 2011 with the coming into force of the provisions relating to the regulation of certain mergers, acquisitions and amalgamations. Broadly, the CA seeks to prohibit anticompetitive agreements and abuse of dominant position; and regulate acquisitions, mergers and amalgamations of companies that meet the prescribed thresholds (referred to as 'combinations' under the CA).
Any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition (AAEC) within India is prohibited and void under Section 3(1) and 3(2) of the CA, respectively. Section 3(3) of the CA deals with practices, decisions and agreements among enterprises,6 persons, associations of persons or associations of enterprises, engaged in identical or similar trade of goods (horizontal agreements) and Section 3(4) of the CA deals with agreements between entities at different levels of a supply chain (vertical agreements). Horizontal agreements that determine purchase or sale prices, limit or control production, supply, markets, technical development, investment or provision of services, share the market or source of production or provision of services, or result in bid rigging or collusive bidding are presumed to have caused AAEC within India, and are hence prohibited. However, this presumption is rebuttable, with the burden to prove otherwise resting on the defendant. On the other hand, the assessment of vertical agreements is guided by the 'rule of reason' test. As such, vertical agreements are prohibited and void only if it is established that such agreements cause or are likely to cause AAEC within India. Contrary to Section 3, which requires establishing an 'agreement', thereby necessitating involvement of more than one enterprise or person or an association of enterprises or persons, Section 4 deals with the unilateral conduct of a 'dominant' enterprise. Broadly speaking, Section 4 of the CA prohibits certain exclusionary and exploitative conducts by a dominant enterprise.
Finally, Sections 5 and 6 of the CA regulate inorganic expansion or restructuring, such as acquisitions, mergers or amalgamations, which meet the prescribed financial thresholds, in order to ensure that such expansion or restructuring does not cause substantial distortion or lessening of competition in the defined relevant market. These provisions contain an ex ante regime which requires mandatory notice and approval of transactions that meet the prescribed financial thresholds mentioned in the CA and revised by notifications of the Ministry of Corporate Affairs, Government of India from time to time. The merger control regime is a mandatory and suspensory regime, meaning that parties are required to mandatorily notify the CCI if the prescribed financial thresholds are met, and no step towards closing of the transaction can take place before the receipt of approval of the CCI.
i Prioritisation and resource allocation of enforcement authorities
Under the Constitution of India, the government is mandated to adopt a social welfare model of governance. The CCI is a body formed under the Ministry of Corporate Affairs, and its stated focus has been on areas that affect consumers, including impoverished ones. In this endeavour, the CCI has conducted suo motu (or 'own initiative') investigations in sectors that affect the 'common man' (sugar, agriculture, chemicals, domestic cooking gas, etc.). Further, the CCI has conducted investigations in important lifeline sectors of the economy (cement, steel, tyres, civil aviation, real estate, insurance, pharmaceuticals, etc.). The CCI has also particularly focused on public procurement, which accounts for more than 26 per cent of India's GDP. According to the Secretary of the Ministry of Corporate Affairs (the nodal ministry for the CCI), competitive procurement in India could result in cost saving to the extent of around 20 to 30 per cent, which would ultimately have a long-term impact on the economy.7 This, among other reasons, has driven the CCI to focus on public procurement cases.
ii Enforcement agenda
In the past year, the CCI's focus has been on enforcement actions arising out of or involving applications under Section 46 of the CA read with the Competition Commission of India (Lesser Penalty) Regulations, 2009 (LPR). An application under Section 46 of the CA read with the LPR contains a wilful disclosure of a cartel with evidence. In return, an applicant under Section 46 of the CA is afforded the opportunity of being granted a reduced penalty (similar to the Leniency Policy of the European Commission). Up to the beginning of 2018, the CCI had decided only one case involving an application under Section 46 of the CA read with the LPR. However, between January 2018 and December 2018, there was a steady increase in the number of cases arising out of applications under Section 46 of the CA read with the LPR. In fact, the last calendar year saw the CCI close seven such cases. Notably, in the past year, the CCI for the first time also granted a 100 per cent waiver of penalty in at least four cases involving applications under Section 46 of the CA read with the LPR.
Under the CA, 'cartels' constitute a subgroup of horizontal agreements prohibited under Section 3(3) of the CA. The term 'cartel' has been defined to include an association of producers, sellers, distributors, traders or service providers who, by agreement among themselves, limit, control or attempt to control the production, distribution, sale or price of, or trade in, goods or the provision of services.
As mentioned earlier, horizontal agreements that directly or indirectly determine purchase or sale prices, limit or control production, supply, markets, technical development, investment or provision of services, share the market or source of production or provision of services or lead to rigging of bids or collusive bidding are presumed to have caused AAEC. Hence, a party alleged to be engaged in a cartel must satisfy the CCI that it conducted itself in a manner that did not or would not result in an AAEC within India. The phrase 'shall presume' is regarded as a rebuttable presumption, especially because the CCI is mandated to abide by the principles of natural justice, which includes granting an opportunity of being heard to a suspected delinquent or defaulter before an order is passed against it.
As regards assessing what constitutes an AAEC, the CA has provided six factors8 that the CCI has to take into consideration:
- creation of barriers to new entrants in the market;
- driving existing competitors out of the market;
- foreclosure of competition by hindering entry into the market;
- accruing benefits to consumers;
- improving the production or distribution of goods or the provision of services; and
- promoting technical, scientific and economic development by means of production or distribution of goods or the provision of services.
The first three factors relate to anticompetitive effects arising out of the agreements in question and the defendant would be running a potential risk if the agreement in question is causing or is likely to cause the listed effects. On the other hand, the remaining three factors relate to generation of pro-competitive effects by the agreement in question and may provide a safe harbour to a party alleged to be in breach. In the Auto Parts case,9 the CCI has held that whether an agreement restricts the competitive process is always an analysis of the balance between the positive and the negative factors listed above.
The penalties10 in cases of a proven breach of horizontal agreements, including cartels, are substantial. Besides cease-and-desist orders and other directions, the CCI can impose a pecuniary penalty in non-cartel cases of up to 10 per cent of the average of the relevant annual turnovers for the last three preceding financial years upon each member that is a party to the anticompetitive agreement. In the case of proven cartels, the penalty is up to three times the relevant profits for each year of the continuance of such agreement, or 10 per cent of the relevant annual turnover for each year of the continuance of such cartel, whichever is higher. The CCI can also modify an agreement and impose costs. The CCI uses the terms 'turnover', 'income' and 'revenue' seemingly interchangeably, while the CA does not mention 'income'. When imposing penalties on individuals, the CCI is found to employ the term 'income'.
On 8 May 2017, the Supreme Court, in a landmark decision, upheld the decision of the appellate tribunal, observing that the penalty for anticompetitive practices found to be in violation of the CA should be based on the 'relevant turnover' relating to the infringing product or service and not on the total turnover, particularly for multi-product companies.11 In addition, where the contravention is by companies, the CCI is empowered to penalise individuals who are responsible for the conduct of business of the company or who had consented to or connived in the infringement taking place or whose negligence resulted in the infringing conduct.12 The CCI has applied the provisions under Section 48 to fix the liability of individuals and penalise them in a number of cases. However, a major criticism when invoking Section 48 has been that while the CCI has invoked Section 48 in certain cases, it has omitted to invoke Section 48 in other cases without any objective justification.
In relation to cartels, the Supreme Court in Competition Commission of India v. Co-Ordination Committee of Artist and Technicians of West Bengal Film and Television Industry had made certain observations which seemed to indicate that it was necessary for the CCI to define the relevant market in all cases including cartels. However, by way of a clarificatory order dated 7 May 2018, the Supreme Court clarified that delineation of 'relevant market' is not a mandatory pre-condition for making assessment of an alleged violation under Section 3(3) of the CA. Defining the relevant market may only be necessary when the presumption of AAEC is being rebutted in terms of Section 19(3) of the CA.
In cases of non-compliance13 with orders passed by the CCI, where no appeal has been preferred before the NCLAT within the statutory period prescribed under the CA, and where a CCI order has not been stayed by the NCLAT, further penalties over and above the principal penalties may be imposed. In some circumstances where there is repeated non-compliance with a CCI order, the Chief Metropolitan Magistrate of Delhi, upon an application filed by the CCI before it, may order imprisonment against a defaulter for a term of up to three years or a fine of up to 250 million rupees, or both.
Anticompetitive practices, including cartels outside India yet affecting India, are also amenable to the CCI's jurisdiction by the application of the 'effects doctrine'.14 The CA enables the CCI to enter into international cooperation arrangements or memorandums of understanding (MOUs) with the prior approval of the central government with overseas competition agencies,15 so that each authority may share experiences in their respective jurisdictions and raise the enforcement bar across the globe for the benefit of consumers. To date, the CCI has entered into MOUs with the Russian Anti-Monopoly Authority, the United States Department of Justice and the Federal Trade Commission, the Australian Competition and Consumer Commission, the European Commission, CADE (the Brazilian Antitrust Authority), the National Development and Reform Commission (Chinese regulator) and the Canadian Competition Bureau. It is believed that the CCI has cooperated and exchanged relevant information by invoking these MOUs during its examination of several global mergers.
The statutory safe harbour available to a member of a cartel is the leniency programme.16 As briefly discussed above, an enterprise or an individual willing to avail itself of the benefit of the leniency programme needs to make an application to the CCI under Section 46 of the CA read with the LPR. Certain amendments to the LPR were notified on 22 August 2017 (Amended LPR), which bring clarity to the existing leniency regime in India and provide incentives for companies and individuals to proactively assist in cartel enforcement. Prior to submission of the investigation report by the Office of the Director General (DG) to the CCI, any member of a cartel or an individual who has been involved in the cartel on behalf of the enterprise may file an application to the CCI under Section 46 of the CA read with the LPR. The basic condition for the success of an application under Section 46 of the CA read with LPR is that the party claiming such relief must be a party to the cartel, and must provide true and vital information regarding the cartel in question to the CCI. It should also continue to fully cooperate with the CCI until the conclusion of the proceedings. The CCI may grant a fine reduction of up to 100 per cent to the first applicant, up to 50 per cent to the second applicant and up to 30 per cent to the third applicant and subsequent applicants.17 The Amended LPR provides important clarifications, for instance it clarifies that there is no limit in the number of applicants that can approach the CCI (so long as an applicant can provide 'significant added value' to the investigation) and individuals who have been involved in the cartel on behalf of an enterprise can also apply for lesser penalty as stand-alone applicants. Apart from the above, the Amended LPR bring in some other important changes. As per the Amended LPR there is a possibility of a reduction in penalty of up to 100 per cent both before and after the forming of the prima facie opinion by the CCI and now names of the individuals who have been involved in the cartel need to be mentioned in the application. It is important to bear in mind that while an applicant under Section 46 of the CA may benefit from reduced penalties, the risk relating to the payment of compensation claims (which arises with the passing of the CCI's order) still remains.
i Significant cases
The year 2018 was marked with several decisions emanating from applications under Section 46 of the CA read with the LPR. Arguably, the most significant decision of the CCI in relation to cartels was in the First Zinc Carbon Dry Cell Batteries case,18 which arose out of an application filed by Panasonic Energy India Co Ltd (Panasonic) under Section 46 of the CA read with the LPR. Panasonic disclosed a cartel controlling the distribution and price of zinc-carbon dry cell batteries in India, involving Eveready Industries India Limited (Eveready) and Indo National Limited (Indo), apart from itself. Based on the disclosure made by Panasonic, the CCI ordered an investigation by the DG (the investigative wing of the CCI). During the course of the investigation, the DG conducted simultaneous dawn raids on the premises of all three participants of the cartel. Eveready filed their application under Section 46 of the CA read with the LPR three days after the dawn raid and Indo filed their application several days after Eveready filed their application. After an investigation, the CCI found that there was coordination among the cartel participants to increase maximum retail prices, monitor and control 'price-competition' at all levels of the distribution chain, control supply and also allocate markets for zinc-carbon dry cell batteries. Price increases were led by Eveready, which would typically announce price increases through a press release. Without any time lag, Panasonic and Indo would also increase their prices on the pretext of following the market leader, even though ordinarily revision of prices required time due to the requirements of changing price labels and packaging, etc.
The decision of the CCI in the First Zinc Carbon Dry Cell Batteries case is an important one because it provides clarity on the factors that the CCI will take into consideration while granting lesser penalties under Section 46 of the CA. The CCI found that the information and evidence provided by Panasonic was 'full and true' disclosure, which not only enabled the CCI to order an investigation but also helped in establishing the contravention. Accordingly, the CCI granted a 100 per cent reduction in the penalty for Panasonic. Notably, this marks the first instance of a grant of a 100 per cent reduction in the penalty under Section 46 of the CA. In respect of Eveready and Indo, the CCI found that even though the information and evidence shared by them was already available to the CCI, owing to the continuous and expeditious cooperation extended by these companies, the CCI granted 30 per cent and 20 per cent reductions in the penalties (on the basis of their respective priority status) to Eveready and Indo, respectively, as against the maximum that would have been available under the LPR.
The second significant decision was in the Broadcasting Services19 case, which also arose out of an application under Section 46 of the CA read with the LPR. The application in this case was filed by Globecast India Private Limited (Globecast) disclosing a cartel with Essel Shyam Communication Limited (ESCL) to rig tenders for procurement of broadcasting services of various sporting events in India. It was admitted by both Globecast and ESCL that there was exchange of commercially sensitive information in relation to tenders. However, ESCL claimed that the exchange of commercially sensitive information was due to the proposed acquisition of ESCL by Globecast and a teaming arrangement between them. However, Globecast argued that the exchange of commercially sensitive information was due to a consultancy agreement between ESCL and Bharat (an employee of Globecast), a fact that was not known to Globecast. Globecast's position before the CCI was that the entire anticompetitive conduct, involving exchange of commercially sensitive information and subsequent coordination of bids, was the brain child of Bharat and ESCL, and Globecast had no knowledge of the same except for one event in 2012, as all other communications between Bharat and ESCL took place through the personal Gmail ID of Bharat. Bharat, on the other hand, argued that ESCL had placed all bids after discussions with Globecast. The CCI held that as infringement of the CA was accepted by both Globecast and ESCL, contentions pertaining to whether Globecast had knowledge of the infringement were inconsequential to the finding of cartelisation. The CCI clarified that as Bharat was an employee of Globecast at the time of contravention of the provisions of the CA and was responsible for submission of bids on its behalf, Globecast was liable for the conduct that took place through Bharat and which resulted in bid rigging. The CCI granted a 100 per cent waiver of the penalty to Globecast as the information and evidence provided by it was not only crucial in the formation of a prima facie opinion by the CCI but it also helped in establishing infringement of the CA. ESCL had also filed an application under Section 46 of the CA read with the LPR but after the formation of prima facie opinion by the CCI. Accordingly, the CCI granted ESCL a 30 per cent reduction in the penalty for adding value to the investigation.
Other cartel decisions of the CCI arising out of applications under Section 46 of the CA read with the LPR were the Solid Waste Management cases, Flashlights case and the Second Zinc Carbon Dry Cell Batteries case. In the Solid Waste Management cases,20 the CCI provided an important clarification in respect of grant of confidentiality to the information and evidence disclosed under an application under Section 46 of the CA read with the LPR. The parties in this case alleged that the DG, by disclosing in its investigation report the contents of the statements made before it, had in effect disclosed the contents of their respective applications under Section 46 of the CA read with the LPR, in breach of confidentiality accorded to the applicants under the LPR. However, the CCI clarified that an application under Section 46 of the CA read with the LPR and statements before the DG were separate sets of evidence and the confidential treatment granted under the LPR did not extend to evidence obtained or collected by the DG, even if such an evidence is obtained from an applicant under Section 46 of the CA. Once such information is provided separately before the DG, confidentiality over it would be governed by the Competition Commission of India (General) Regulations, 200921 and not the LPR.
The Flashlights22 case is another interesting case that arose out of an application under Section 46 of the CA read with the LPR filed by Eveready. The CCI in this case was provided with documentary evidence to establish exchange of commercially sensitive information among the alleged cartelists. The CCI, after conducting a review of the relevant emails of the alleged cartelists, concluded that the agreement to raise prices was never implemented (while a draft press release to jointly raise prices was available, there was email exchange which suggested that due to the CCI being active, parties were hesitant to issue the press release and hence there was no implementation), and hence, there was no infringement of the CA. In the CCI's view the exchange of data relating to production and sales of a product only indicated possibility of collusion and could be only considered as a 'plus factor'.
The Second Zinc Carbon Dry Cell Batteries23 case arose out of a separate application filed by Panasonic Corporation Japan under Section 46 of the CA read with the LPR, disclosing an 'ancillary' (the primary cartel being the one in the First Zinc Carbon Dry Cell Batteries case discussed above) and 'bi-lateral' cartel between its subsidiary Panasonic and Geep Industries (India) Private Limited (Geep). Panasonic was a contract manufacturer of Geep, and had entered into a product supply agreement containing a clause that obliged Geep to maintain prices agreed between Panasonic and Geep and not to take any steps detrimental to Panasonic's market interests. The CCI found such a clause to be inherently anticompetitive. The CCI in this case also granted a 100 per cent reduction in the penalty for Panasonic, for providing information and evidence that helped the CCI in forming a prima facie opinion and in establishing infringement.
It is manifest that while the cases arising out of applications under Section 46 of the CA read with the LPR outnumbered ordinary course cases, there were a few decisions of significance. One example is the Ethanol case24 (which arose from multiple complaints filed before the CCI), in which the CCI penalised 18 sugar mills for cartelising in the supply of ethanol to public sector oil marketing companies in India. The CCI imposed a total penalty of 380 million rupees on the sugar mills and two trade associations of ethanol producers. The finding of contravention by the CCI was based on economic evidence such as bids having identical basic prices and net delivered prices despite varying costs of production, bids having identical freight despite varying distances between the sugar mills and the oil depots, and circumstantial evidence such as an increase in the frequency of trade association meetings and calls between competitors and office bearers of trade association near the date of tender.
The year 2018 also witnessed significant developments at the appellate level. The NCLAT on 25 July 2018 confirmed the finding of cartelisation by the CCI in the Cement Cartel case.25 Importantly, the NCLAT, in upholding the finding of infringement by the CCI ,confirmed that the correct test to be adopted for proving a cartel under the CA is of 'balance of probabilities' and not of 'beyond reasonable doubt'. At the same time, in a landmark ruling the Supreme Court in the LPG Cylinder case 26 set aside a judgment of the erstwhile COMPAT, upholding the findings of bid rigging made by the CCI against several manufacturers of liquefied petroleum gas cylinders. The Supreme Court set aside the finding of infringement mainly on the grounds that in this particular case a finding of existence of a cartel was not sustainable as the procurer had control over negotiation of final prices and a possible explanation for quoting a similar price was not the meeting of minds but market conditions leading to a situation of oligopsony. The Supreme Court also noted that the CCI failed to undertake the required and necessary inquiry to gather more evidence.
ii Trends, developments and strategies
A staggering increase in the number of cases involving applications under Section 46 of the CA was witnessed in 2018. It was also observed that in cartel cases the CCI was willing to provide reductions in the penalty to second and subsequent applicants for cooperation even if the information and evidence provided by them was already available to the CCI. This is a positive trend that should encourage more enterprises to approach the CCI. If in a given case, all cartelists wilfully admit wrongdoing, then the CCI can efficiently and speedily remedy the market. However, the CCI has been imposing 'higher than usual penalties' in leniency cases, which may potentially deter second or subsequent applicants from approaching the CCI. Notably, the parties who were applicants under Section 46 of the CA read with the LPR in the First Zinc Carbon Dry Cell Batteries case have preferred an appeal in the NCLAT against the hefty penalties being imposed by the CCI. One must bear in mind that one of the intended objectives of any leniency programme is to avoid protracted litigations.
Following the replacement of the COMPAT with the NCLAT, very few competition appeals have been disposed of. This is a consequence of the NCLAT being overburdened with cases arising out of the Insolvency and Bankruptcy Code, 2016 and various other company cases, which are typically handled as high priority. The Supreme Court's decision in the LPG case has also ushered in a different outlook towards bid-rigging cartels, particularly in oligopolistic markets. The extent to which defendants in similarly placed markets may rely upon the Supreme Court's order before the CCI remains to be seen. The decision of the Supreme Court, which is binding on the CCI under Indian law, is bound to have an impact on future decisions of the CCI.
The Supreme Court's decision in the Telecom Operators case 27 (discussed in detail in Section V of this chapter) is also a noteworthy development. It clears the air in relation to the stage at which the CCI can initiate proceedings in markets where a sectoral regulator is present.
Lastly, it is pertinent to note that the Central Government in India has constituted an expert committee in September 2018 to review the CA and the Rules and Regulations promulgated under it, in view of the changing business environment in India and the international best practices. The committee's recommendations may include changes to the cartel enforcement regime. It is speculated that the committee may recommend bringing clarifications in law on the concepts of 'buyer's cartels' and 'hub and spoke cartels'.
In future, the CCI needs to adopt a pragmatic approach in levying penalties in cartel cases involving applications under Section 46 of the CA read with LPR. The penalties imposed should not be so high that the reduction under Section 46 seems merely notional. The controversial Cement Cartel case is also before the Supreme Court after being upheld by the NCLAT in July 2018. Lastly, in light of the trend of increase in number of leniency driven cases, the CCI needs to keep in mind the resources available with it to deal with such cases. Until now the CCI has been impressively swift in concluding cases arising out of and involving applications under Section 46 of the CA read with the LPR.
III ANTITRUST: RESTRICTIVE AGREEMENTS AND DOMINANCE
As mentioned above, vertical agreements causing AAEC within India or likely to cause AAEC within India are prohibited under the CA. As per the CA, vertical agreements include:
- tie-in arrangements: any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods;
- exclusive supply agreements: any agreement restricting in any manner the purchaser in course of his or her trade from acquiring or otherwise dealing in any goods other than those of the seller or of any other person;
- exclusive distribution agreements: any agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal or sale of the goods;
- refusal to deal: any agreement that restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought; and
- resale price maintenance: any agreement to sell goods on condition that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged.
As for unilateral conduct, the now repealed Monopolistic and Restrictive Trade Practices Act, 1969 viewed large enterprises negatively. The CA does not view the large size of an enterprise as a negative factor, but it prohibits abuse of a dominant position by an enterprise. The law provides 13 factors listed in the CA that the CCI must examine to conclude whether an enterprise alleged to be abusing its position of dominance is actually a 'dominant' enterprise28 within the 'relevant market'. The relevant market test includes the examination of statutory factors related to the relevant product market and relevant geographical market tests.29 The CA provides several factors for assessing the relevant product market and geographical market tests, and the CCI must examine each of the factors, as the case may be, to ascertain whether the dominant enterprise could affect the relevant product or geographical markets.
A dominant position has been explained in the CA as a position of strength enjoyed by an enterprise in the relevant market, in India, that enables it to operate independently of competitive forces prevailing in relevant market or affect its competitors or consumers or the relevant market in its favour. As mentioned above, the CA only prohibits an 'abuse of a dominant position'.30 The CA prescribes the following as abuse:
- directly or indirectly imposing unfair or discriminatory conditions in the purchase or sale of goods and services or prices in the purchase or sale (including predatory pricing) of goods or services;
- limiting or restricting production of goods or the provision of services or market therefor or technical or scientific development relating to goods or services to the detriment of customers;
- indulging in a practice or practices resulting in the denial of market access in any manner;
- making conclusion of contracts subject to acceptance by other parties of supplementary obligations that, by their nature or according to commercial usage, have no connection with the subject of such contracts; and
- using a dominant position in one relevant market to enter into, or protect, another relevant market.
It is generally believed (but not yet decided) that the above list is exhaustive, rather than descriptive.
i Significant cases
In the past year, the CCI and the NCLAT have decided certain important cases relating to vertical agreements and abuse of dominant position.
In one of the most important technology market investigations, the CCI in the First Google case investigated allegations of abuse of dominant position by Google Inc and Google India Private Limited (collectively referred to as Google) in relation to the markets for online general web search services and online search advertising services in India.31 To determine whether Google was in a dominant position in the relevant markets, the CCI analysed the market share of Google in the relevant markets and considered the factors mentioned under Section 19(4) of the CA. The CCI held that Google was holding a dominant position in the relevant markets as it consistently held a market share that was exponentially greater than its nearest competitor, was vertically well integrated and had a scale advantage in a market where entry barriers existed. The CCI also took note of high dependence of users and advertisers on Google and lack of countervailing buyer power of an average user or advertiser before Google.
As regards abuse of dominant position, the CCI held that Google:
- had violated Section 4(2)(a)(i) of the CA (provision on unfair condition by a dominant enterprise) by predetermining the 'universal search' ranking results to trigger at the first, fourth or tenth position on the Google search engine results page;
- had violated Section 4(2)(a)(i) of the CA by prominently displaying and placing its commercial flight search box with links to Google's specialised search options and services, thereby depriving users of additional choices; and
- had violated Section 4(2)(a)(i), 4(2)(e) (using a dominant position in the online general web search market to strengthen its position in the market for online syndicate search services) and 4(2)(c) (limiting provision of services) of the CA by imposing prohibitions under the negotiated search intermediation agreements on website owners from using similar services from competing search engines.
It is important to note that two members of the CCI wrote a dissent note to the decision of the majority, as according to them there was no infringement of the CA by Google. Among other things, the dissenting members opined that the Google Flight commercial unit was visually distinguishable and there was no cogent evidence to assess how the mere presence of the commercial unit amounted to imposition of an unfair condition. In the dissenting members' opinion, user preferences should have been taken into account in the investigation but the same was completely disregarded. Regarding the finding of the majority on search intermediation agreements, the dissenting members found that an infrigement was not established because delineation of the relevant market was a legal requirement under the CA and the same was not done by the DG during the investigation. The dissenting members also opined that it was imperative for the DG to obtain a testimony of the direct partners with whom Google had negotiated the search intermediation agreements in India and conduct a competitive analysis of the effect of the impugned clause on competition in India before finding a contravention. Lastly, with regard to the contravention found by the majority in connection with universal results, the dissenting members were of the opinion that as Google brought a change in the system on its own, even before the information was filed, there was no need for any regulatory intervention.
In the past year, the CCI has decided another abuse of dominant position case against Google. The Second Google case32 dealt with Google AdWords. It was alleged that Google's User Safety and AdWords Policies and the bidding process for AdWords were extremely arbitrary, vague and one-sided. It was also alleged that Google arbitrarily and without any notice suspended the AdWords account of the complainants with a view to reduce or eliminate competition for its own product, Google Helpout and a close associate, iYogi. The CCI defined the relevant market as the 'market for online search advertising services in India' and found Google to be in dominant position due to 'consistently high market shares' and 'Google's insurmountable scale'. As for abuse of dominant position the CCI did not find any contravention. The CCI, after conducting a thorough investigation of Google's policies and conduct, came to a conclusion that there was no contravention of the provisions of Section 4 of the CA. The CCI in reaching this conclusion acknowledged that an online advertising platform like AdWords could not be left without any mechanism that ensured safety of end consumers and prevented unscrupulous advertisers from making false and misleading claims and representations. Importantly, in respect of imposition of certain standard terms and conditions by Google, the CCI held that inviting customers to accept standard terms and conditions was a conventional and commercial practice, followed by businesses around the world. According to the CCI, there were certain terms and conditions (such as a clause allowing Google to modify terms at any time) that were uniform among online businesses around the world and could not be practically negotiated with millions of customers. In fact, in the CCI's view such standard terms and conditions reduced the potential for discrimination and uncertainty among users and businesses. The Second Google case provides valuable guidance to technology companies providing internet-related services in relation to crafting their user safety and other policies. The CCI has clarified that certain seemingly onerous terms and conditions in these policies may in fact be necessary, and hence justified, having regard to the facts and circumstances of the case.
In the Esaote S.p.A. case33 it was alleged that the Esaote group (Esaote), manufacturer of standing/tilting MRI machines or G-Scan machines, had abused its dominant position by unilaterally modifying terms of contractual conditions and using its dominant position in one relevant market to enter into another relevant market. Having regard to the physical characteristics, end-use, price and consumer preferences the CCI defined the relevant product market in the instant case as the narrower market for 'dedicated standing/tilting MRI machines' as opposed to a broader product market including all types of MRI machines. In view of the majority of members of the CCI, 'dedicated standing/tilting MRI machines' had several advantages over conventional MRI machines because of which conventional MRI machines were not a true substitute. The advantages recorded by the CCI were the ability to image the changes that occured in brain, cerebrospinal fluid, spine and joints when the patient was in a standing position with the effect of gravity on these structures, ability to diagnose ailments of specific portions of body (joints or spine, etc.) pertaining to weight-bearing posture of the body and ability to cause less claustrophobia. As Esaote had patent rights over the technology of G-Scan machines and was the only seller of G-Scan machines in India, the CCI found Esaote to be in a dominant position. As for determination of abuse of dominant position by Esaote, the CCI found several counts of infringement of Section 4 of the CA by Esaote. The CCI found that contrary to the contractual conditions, the machines supplied by Esaote were not new and did not perform to the level assured by Esaote and Esaote also failed to provide head coils and perforated radio frequency cages. These conducts, according to the CCI, constituted a clear contravention of the provisions of Section 4(2)(a)(i) of the CA (unfair condition/business practice). The CCI found contravention of Section 4(2)(a)(ii) of the CA (unfair and discriminatory price) as well, as contrary to contractual conditions Esaote unilaterally provided cheaper alternatives and raised arbitrary and discriminatory charges for maintenance. Lastly, the CCI also found that Esaote had restricted supply services and caused denial of market access, in contravention of Section 4(2)(b) and (c) of the CA, respectively, by giving exclusive rights to its group company for supply of spare parts and providing aftersales services to the consumers of its G-Scan MRI machines. It is pertinent to note that the chairperson of the CCI wrote a dissent note, finding no contravention, as he did not agree with the majority of members on delineation of a narrower relevant market. In the chairperson's view the relevant product market was the market for MRI machines because, among other things, the demand for G-Scan machines was insignificant in India and weight-bearing imaging features could be added to a conventional MRI machine by adding a device at a fractional cost.
In the GAIL cases,34 complaints had been filed against GAIL (India) Limited (Gail) by some of its regasified liquified natural gas customers (complainants). Broadly, the allegations pertained to: (1) the terms of the long-term gas supply agreement (GSA) between GAIL and the complainants; and (2) the manner in which GAIL performed its obligations under the GSA. One of the allegations against GAIL was that its GSAs were a standard contract whose minimum duration was 20 years. Such duration was alleged to have resulted in foreclosure of the market for 'supply and distribution of natural gas to industrial consumers'. The CCI held that projects in the energy sector were characterised by significant and continuous up-front investments made by sellers of energy, and therefore, the duration of the GSA was justified to guarantee sellers a steady stream of revenue and render operations viable. The CCI also observed that existence of such GSAs did not result in the denial of market access to new entrants or competing enterprises, as there was evidence to suggest that competitors of GAIL had entered the market during the subsistence of the GSA and were presently active. The CCI in this case also assessed the manner in which GAIL imposed the 'take or pay' liability on its customers. 'Take or pay' liability is an obligation on the buyer to pay for the quantities of gas not taken but agreed to be taken. It was alleged that GAIL failed to make certain 'nominations' under the GSA, which made it impossible for the complainants to calculate their 'take or pay' liability. The CCI held that when determining abuse arising out of a contract, the conduct of both parties was relevant for examination. Accordingly, the Commission analysed: (1) the degree of adherence to the terms of the GSA by the complainants; and (2) the extent of acquiescence of the complainants. The investigation revealed that neither GAIL nor the complainants had strictly adhered to their obligations to make 'nominations' and also that the Complainants had never raised objections in this regard before GAIL. Objections were raised by the complainants only when the 'take or pay' liability was imposed on them. The CCI also took into account the fact that GAIL had imposed only a fraction of the 'take or pay' liability in order to mitigate the losses it suffered because of reduced offtake of gas by the complainants. In view of the above, the CCI did not find any violation of the CA due to imposition of 'take or pay' liability. Importantly, the CCI in these cases has clarified that where a party has consciously negotiated and entered into an agreement with a dominant enterprise then it is not appropriate to impugn such agreements under the CA unless it is evident that the aggrieved party has been considerably prejudiced or the competition in the market has been impeded.
In the AICF case35 the CCI was investigating allegations of abuse of dominant position by All India Chess Federation (AICF), a national sports federation for the sport of chess in India, recognised by and affiliated to the Federation Internationale des Echecs (FIDE), the apex international body governing the sport of chess. A preliminary objection was raised by AICF that allegations of abuse of dominant position could not be sustained as Section 4 of the CA applies only to 'enterprises'36 and AICF was not an enterprise because, among other things, it performed its functions without any motive to earn profits. In the CCI's view a person engaged in economic activity, no matter with or without profit motive, was an enterprise, as such a person interfaces with the market. Having regard to the nature of allegations against AICF and the factors mentioned in Section 19(4) and (5) of the CA, the CCI defined the relevant markets as the 'market for organisation of professional chess tournaments/events in India' and 'market for services of chess players in India'. As regards determination of dominant position, the CCI held that by virtue of having sole regulatory powers in India and being the predominant buyer of the services provided by professional chess players in India, AICF was a dominant enterprise. In its analysis of infringement of the CA, the CCI found that the blanket ban on chess players from participating in tournaments not authorised by AICF was an absolute restriction with very harsh consequences and without any reasonable justification. The CCI found this blanket ban to be in contravention of Section 4(2)(b)(i) (unfair condition), Section (4)(2)(c) (denial of market access), Section 3(4)(c) (exclusive distribution) and Section 3(4)(d) (refusal to deal).
Apart from the decisions of the CCI, 2018 also witnessed two important decisions at the appellate level. The NCLAT set aside a 2017 decision of the CCI penalising Hyundai Motor India Limited (Hyundai) for imposing vertical restraints causing AAEC.37 The reasons for setting aside of the decision of the CCI was primarily procedural irregularities rather than substantive legal issues. The setting aside of the CCI decision was mainly on the ground that in imposing a penalty on Hyundai the CCI relied solely upon the report of the DG without conducting any inquiry of its own. Apart from this, the NCLAT decision also pointed out several crucial shortcomings in the decision of the CCI. For instance, the NCLAT found that the CCI in its decision had recorded that Hyundai had appointed mystery shopping agencies for enforcing resale price maintenance which penalised the erring dealers. But in its decision the CCI failed to record any evidence to establish that the erring dealers were in fact penalised. This was the first substantive decision of the CCI relating to the issue of resale price maintenance and it has now been set aside by the NCLAT.
The Fast Way Transmission case38 involved allegations of abuse of dominant position against a dominant multi-channel operator (a multi-channel operator is an entity that carries television channels to persons who watch cable television) which terminated its channel placement agreement with a broadcaster using a unilateral clause in the agreement. The CCI found the impugned action to be an abuse of dominant position due to denial of market access but the erstwhile COMPAT set aside the decision of the CCI on the ground that denial of market access can only be caused by one competitor against another. The Supreme Court was hence faced with the question of whether abuse of dominant position by denial of market access in contravention of Section 4(2)(c) of the CA can only be caused by one competitor against another. Section 4(2)(c) of the CA states that 'There shall be an abuse of dominant position . . . if an enterprise or a group . . . indulges in practice or practices resulting in denial of market access in any manner'. In the Supreme Court's view, the phrase 'in any manner' was one of wide import which must be given its natural meaning. Accordingly, the reasoning that denial of market access in contravention of Section 4(2)(c) of the CA can only be caused by one competitor against another was not sustainable. Surprisingly, despite finding infringement of the CA, the Supreme Court set aside the penalty imposed by the CCI as it found that reasonable justification (very low TRP) was provided by the multi-system operators for terminating its agreement with the complainant broadcaster company.
ii Trends, developments and strategies
In the past year, the CCI has provided the much-needed clarification as regards what types of contractual non-compliances would constitute abuse of dominant position. The test, it appears, is whether contractual non-compliances cause prejudice to the aggrieved party or impedes competition. If no prejudice is caused and the competition is not impeded then a mere contractual or technical non-compliance would not constitute abuse of dominant position.
With the NCLAT decision in the Hyundai case, the only stand-alone final decision of the CCI in a Section 3(4) case stands vitiated for largely procedural reasons. A prominent school of thought suggests that if the NCLAT found the CCI's decision to be deficient for want of separate inquiry, it could have simply remanded the matter for re-adjudication by the CCI instead of simply setting aside the entire order.
On the Supreme Court front, the landmark cases of DLF Limited and National Stock Exchange of India Limited continue to await final judgment.
The guidance provided by the Supreme Court on 'denial of market access' in the Fast Way Transmission case was an essential clarification. However, the trend of setting aside the penalty, despite a finding of contravention of Section 4 of the CA on the grounds that there was a valid justification to the impugned conduct, has generally not found a place in the CCI's decisional practice. It needs to be seen whether the CCI will pick up on this trend.
IV SECTORAL COMPETITION: MARKET INVESTIGATIONS AND REGULATED INDUSTRIES
The CA provides for cross-references between sector regulators and the CCI in the event of overlap between jurisdictions.39 The CA states that the CCI may consult other sectoral regulators.
In an interesting development, the Supreme Court has settled the law on the role of the CCI in the telecoms sector, which has its own specialised regulator called the Telecom Regulatory Authority of India (TRAI). The Telecom Operators case40 arose out of information filed by a telecoms operator called Reliance Jio Infocomm Limited (Reliance Jio) and two others alleging cartelisation and abuse of dominant position by the incumbent dominant operators (IDOs) and the Cellular Operators Association of India (COAI). The CCI found a prima facie case of cartelisation by the IDOs and the COAI, and directed the DG to cause an investigation into the matter (prima facie order). However, the IDOs and the COAI filed writ petitions before the High Court of Bombay, requesting the quashing of the prima facie order on the grounds that the CCI did not have jurisdiction as the TRAI was already seized of the matter. In a surprising move the High Court of Bombay set aside the prima facie order observing that the TRAI, being the sectoral regulator, had the technical expertise to deal with and decide even competition issues in the telecoms sector. In the view of the High Court, the CCI ought to have waited for the final decision of the TRAI before arriving at a prima facie finding of anticompetitive conduct and ordering an investigation by its investigative arm.
The judgment of the High Court was challenged before the Supreme Court, by both the CCI and Reliance Jio. While the Supreme Court noted that the CCI had exclusive jurisdiction to adjudicate upon issues governed by the CA, it also held that the issue of denial of points of inter-connects was a technical issue pending before the TRAI and that the TRAI was the more appropriate authority and best suited to consider these issues.
The Supreme Court affirmed the findings of the Bombay High Court and held that only when the jurisdictional facts were determined by the TRAI against the IDOs, would the issue of any concerted agreement between the IDOs and COAI arise. Further, the Supreme Court noted that permitting the CCI to intervene at an early stage would result in it having to decide issues that were best left to TRAI, the sectoral regulator.
Separately, the Supreme Court also held that the CA was a special statute and if there is anticompetitive conduct, then it is within the exclusive domain of the CCI to examine and rule upon it. Even if the TRAI finds anticompetitive conduct, its powers would be limited to the action under the Telecom Regulatory Authority of India Act, 1997 alone. In the context of the present matter, it further stated that once the TRAI prima facie finds that the IDOs indulged in anticompetitive practices, the CCI can investigate the matter under the CA. Thus, the jurisdiction of the CCI was not barred, but simply pushed to a later stage. The aftermath of this decision was seen in the NSE case,41 where the CCI dismissed the information after noting that the Securities Exchange Board of India was considering similar issues.
V MERGER REVIEW
The merger control provisions of the CA have been in effect in India since 1 June 2011 and the CCI, which has been entrusted with merger control, promulgated the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations 2011 (Combination Regulations) on 11 May 2011, setting in place procedural and certain substantive aspects of Indian merger control. The Combination Regulations have been amended annually by the CCI in February 2012, April 2013, March 2014, July 2015, January 2016 and most recently on 9 October 2018.
The Indian merger control regime is a mandatory regime; accordingly, pre-merger clearance from the CCI must be obtained before completion of a transaction, and the transaction must be suspended until such clearance occurs. There is no concept of a voluntary notification to the CCI (i.e., if the thresholds tests are not met, no notice can be filed with the CCI). The revised financial thresholds42 have been prescribed as follows:
|India (rupees)||Worldwide (US dollars)|
|Combined assets||Combined turnover||Combined assets||Combined turnover|
|Parties||20 billion||60 billion||1 billion||3 billion|
|Group||80 billion||240 billion||4 billion||12 billion|
The Combination Regulations provide for filing fees ranging between 1.5 and 5 million rupees depending on which form the parties to the combination are required to file with the CCI (respectively, Form I and Form II).
In pure acquisitions, it is the acquirer that is obliged to make the filing and pay the appropriate filing fee. However, in the case of a merger or amalgamation, the parties to the combination are required to jointly make the filing with the CCI and, therefore, jointly remit the filing fee. Further, unless otherwise exempt, combinations that are structured as mergers or amalgamations approved by the boards of directors of the transacting parties on or after 1 June 2011, or that are structured as acquisitions where the definitive acquisition agreement or other binding document is executed on or after 1 June 2011, must be notified to the CCI for its approval. The notified transaction cannot be completed until the CCI gives its approval or 210 calendar days have passed from the date of notification, whichever is earlier. In cases where a transaction is not notified at all, the CCI cannot initiate an enquiry after the passing of one year from the date of completion of the transaction.
Non-filing of a notifiable transaction (i.e., gun jumping) is punishable by a fine43 of the higher of 1 per cent of the assets or turnover of the combination.
The October 2018 amendments to the Combination Regulations brought several anticipated changes to the regime. The CA stipulates a deemed approval of a transaction 210 days after filing; the October 2018 amendments clarified that clock stops pursuant to requests for information from parties should be excluded when counting the 210-day period. Further, the earlier regulations were silent on the ability of parties to withdraw notices or refile or propose voluntary modifications before Phase II investigation. The amended Combination Regulations now expressly allow parties to withdraw and refile notices, and propose voluntary modifications in Phase I itself or immediately after a prima facie order is passed by the CCI after Phase I investigation. Now the parties need not wait for a Phase II investigation to begin before they can propose voluntary modifications. The approach iterated in the amended Combination Regulations is a welcome change which is consistent with the approach taken by leading international antitrust regulators.
The Central Government of India, through a notification dated 29 March 2017, revised and updated earlier notifications on the 'de minimis exemption' or 'small target exemption'. The prescribed effect of this March 2017 notification is that acquisitions of a target with Indian assets of up to 3.5 billion rupees or turnover of up to 10 billion rupees in India are granted an exemption from notifying the CCI. Notably, the March 2017 notification expands the scope of the earlier 'small target exemption' notifications to include mergers and amalgamations, and also provides the much-needed clarification that only the 'true target' in the case of asset acquisitions has to be considered for the purposes of determining the applicability of the asset and turnover thresholds under the CA. The 'de minimis exemption' or 'small target exemption' is currently available until 28 March 2022, unless otherwise extended.
Apart from the 'de minimis' exemption or the 'small target exemption', the Ministry of Corporate Affairs, Government of India from time to time, through notifications under the CA, has also exempted certain enterprises from the provisions of Section 5 and 6 of the CA in the public interest. In addition, Schedule I of the Combination Regulations also describes several potential transaction scenarios that 'need not normally be notified' to the CCI.
i Significant cases
The year 2018 saw the imposition of hefty penalties for gun jumping and clearance of important global mergers.
The Linde/Praxair case44 and the Bayer/Monsanto case45 were global mergers of equals that were sent into Phase II investigation by the CCI. In both of these cases the CCI identified significant overlaps and ordered a conditional approval. In Linde/Praxair, the structural remedies ordered by the CCI were divestment of Linde's industrial gas plants and cylinder filling stations operating in the eastern and southern regions of India and divestment of Linde's share in Bellary Oxygen Company Private Limited, a joint venture between Linde and Inox Air Products Limited. In addition to the above structural remedies, the CCI also ordered the parties to the transaction not to employ, or make offers of employment to, any key personnel of the businesses being divested, for a specified period of time. In Bayer/Monsanto, the structural remedies ordered by the CCI were divestment of the NSH-BAC business, vegetable seeds business, and the entire shareholding in Maharashtra Hybrid Seeds Company Limited along with any rights held therein. In addition, the CCI also ordered Bayer to undertake behavioural commitments such as following broad-based, non-exclusive licensing of GM as well as non-GM traits, allowing fair reasonable and non-discriminatory access to certain digital platforms, and a commitment not to bundle any of its products, etc. Hybrid remedies are in vogue internationally and it appears the CCI has followed the trend.
As discussed above, the amendments brought to the Combination Regulations in October 2018 allowed parties to propose voluntary modifications in Phase I of the investigation. This amended provision was used by the parties in the Northern TK Venture/Fortis Healthcare case,46 which was approved in Phase I after the acquirer provided voluntary commitments to the CCI including implementation of an elaborate 'rule of information control' between the acquirer and one of its joint ventures operating in a geographic market with a high market share of the acquirer.
In Adani Transmission Limited,47 the acquirer had advanced to the seller loans adjustable with the consideration payable for the transaction and the share purchase agreement envisaged advancement of further loans to the seller which was also adjustable with the consideration payable. In the CCI's view, in effect the loans were in the nature of advance consideration. The CCI found the act of advancing of loans, by the acquirer to the seller, adjustable with the consideration amount, and the stipulations in the share purchase agreements allowing advancing of similar loans to the seller to be in contravention of the standstill obligation under the CA. However, having regard to mitigating factors such as full cooperation by the parties in furnishing information and establishment of infringement on the basis of information voluntarily provided by the parties, the CCI imposed a nominal penalty of 1 million rupees on the acquirer.
In the LT Foods Limited case48 the parties to the proposed combination had entered into a framework agreement in terms of which the acquirers were to pay before the approval of the CCI an advance of 17 million rupees and undertake measures such as handover of inventories to the acquirers, introduction and interaction with suppliers of the seller, restriction on promotional spending and restriction on the seller entering or exiting territories. The CCI found all of these measures to be in contravention of the standstill obligation under the CA. The CCI reiterated that the standstill obligation under the CA not only prohibited completion or closure of a transaction before the approval of the CCI, but also prohibited coordination between the parties to the transaction. In the CCI's view, the intention of the parties to acquire, merge or amalgamate should necessarily remain merely a proposal. However, having regard to mitigating factors like full cooperation by the parties in furnishing information, establishment of infringement on the basis of information voluntarily provided by the parties and consideration of the proposed transaction being low, the CCI imposed a nominal penalty of 500,000 rupees on the acquirer.
At the appellate level, the Supreme Court of India on 17 April 2018 passed two significant decisions on gun jumping. In CCI v. Thomas Cook India Limited and another,49 the Supreme Court upheld a CCI decision against Thomas Cook (India) Limited, Thomas Cook Insurance Services (India) Limited and Sterling Holiday Resorts (India) Limited imposing a penalty of 10 million rupees for gun jumping. Similarly, in SCM Soilfert Limited and another v. CCI,50 the Supreme Court upheld a CCI decision against SCM Soilfert Limited and Deepak Fertilizers and Petrochemicals Corporation Limited imposing a penalty of 20 million rupees for gun jumping. The Supreme Court, in these decisions, has clarified that transactions cannot be structured in a manner to avoid compliance with the mandatory provisions of merger control under the CA. Further, these judgments of the Supreme Court also provide valuable guidance on the factors that need to be considered in determining whether a transaction is independent or interrelated.
ii Trends, developments and strategies
After the removal of the 30-day timeline for filing a CCI notification by way of the June 2017 MCA Notification, there has been a significant decline in the number of gun-jumping cases for belated filing. This is a positive sign since parties are now able to provide a comprehensive notification to the CCI without having to rush the filing due to the erstwhile 30-day deadline.
There has been a string of cases penalising parties for the payment of advance consideration, either directly or through indirect structures. It appears that this trend will continue, given the CCI's strong stance, considering such advance payments to be partial closure of the transaction.
The recent amendments to the Combination Regulations bring some degree of respite for parties, since they are now allowed to make voluntary proposals for structural modification during Phase I. This amendment is critical as it provides leeway to parties to obviate a Phase II investigation altogether if the remedies proposed voluntarily are adequate to address the CCI's concerns.
Lastly, the recent rulings of the Supreme Court confirming the CCI's decisions in certain gun-jumping cases stand testimony to the robustness of the CCI's merger control jurisprudence. It is also worth mentioning that the CCI shared information with its counterparts in other jurisdictions while reviewing global mergers. This highlights the growing camaraderie between the CCI and other antitrust agencies. Thus far, India has only seen eight Phase II cases, with no transactions being blocked. This reflects the business-friendly outlook of the CCI.
As mentioned above, the Central Government in India constituted an expert committee in September 2018 to review the entire competition law regime in India. The work of the committee is under way and it is speculated that the committee may recommend important changes to the merger control regime in India such as removal from the CA of the 30-day time limit from the trigger event to file a notification (at present this provision has been exempted from application by a notification for a period of five years), incorporation of common exemptions into the Act (at present these exemptions are contained in a schedule to the Combination Regulations), and change of the regime to a 'control regime', where only transactions involving change of control will be mandatorily notifiable to the CCI.
The CCI's 10-year anniversary in May 2019 is an opportune occasion for introspection regarding its growth, successes and failures, as well as predictions for the next decade. The CCI's enforcement interventions have historically been challenged on procedural grounds, particularly with regard to the conduct of its proceedings and the right to be heard by parties before taking action. Having surmounted these objections (and, in some cases, modified its procedures), it is now expected that the CCI and appellate bodies will delve deeper into the merits of the disputes that lie before it. As a result, it is expected that the CCI and the appellate bodies are likely to make larger contributions to the jurisprudential fabric of Indian law in the coming years. The merger control regime, while younger, is fully functional and has already conducted vital interventions in several key sectors. Recent judgments of the Supreme Court affirming the CCI's stance have also bolstered its reputation as a robust regulator, but several challenges still lurk on the horizon. Foremost among these is the unique, yet seemingly ubiquitous, issue of regulating nascent technology markets, which requires the CCI to strike a fine balance between harming consumers through straitjacketed inaction, and smothering innovative business models through aggressive zeal. The CCI's track record over the past 10 years seems to indicate that the next decade of Indian competition law ought to be met, ideally, with guarded optimism.
1 Sagardeep Rathi is a partner, Anisha Chand is a principal associate and Ebaad Nawaz Khan is an associate at Khaitan & Co.
2 However, the Central Government in India (similar to a federal government), by notification, can exempt from the application of the CA: (1) any class of enterprises in the interest of security of the state or public interest; (2) any practice or agreement arising out of and in accordance with any obligation assumed by India under any treaty, agreement or convention with any other country or countries; and (3) any enterprise which performs a sovereign function on behalf of the Central Government or a state government, to the extent of their activities relatable to sovereign functions.
3 COMPAT was replaced by NCLAT by way of an amendment to the CA through the Finance Act, 2017 effective from 26 May 2017.
4 Each state of India has a constitutional court called a High Court. Some of which have territorial jurisdiction over more than one state (e.g., Gauhati High Court has jurisdiction over the states of Assam, Arunachal Pradesh, Sikkim and Nagaland; Bombay High Court has jurisdiction over the states of Maharashtra, Goa, and the union territories of Daman and Diu).
5 Sections 53O and Section 53U.
6 An 'enterprise' under the CA has been defined as a person or a department of the government, engaged in any activity relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, but does not include any activity of the government relatable to the sovereign functions of the government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space.
7 Press Release by the Press Information Bureau dated 5 November 2018 (available at http://pib.nic.in/newsite/PrintRelease.aspx?relid=184608).
8 Section 19(3).
9 Case No. 03/2011: Shamsher Kataria v. Honda Siel Cars India Ltd & Ors.
10 Section 27(b).
11 Civil Appeal No. 2480 of 2014: Excel Crop Care Limited v. CCI & Another.
12 Section 48.
13 Sections 42 and 43.
14 Section 32.
15 Proviso to Section 18.
16 Section 46.
17 Clause 4 of the LPR.
18 Suo Motu Case No. 02 of 2016: In Re: Cartelization in respect of zinc carbon dry cell batteries market in India.
19 Suo Motu Case No. 02 of 2013: In Re: Cartelization by broadcasting service providers by rigging the bids submitted in response to the tenders floated by Sports Broadcasters.
20 Suo Moto Case No. 50 of 2015: In Re: Nagrik Chetna Manch and Fortified Security Solutions, Suo Moto Case No. 03 of 2016: In re: Cartelization in Tender Nos. 21 and 28 of 2013 of Pune Municipal Corporation for Solid Waste Processing v. Saara Traders Private Limited & Others, Suo Moto Case No. 04 of 2016: In re: Cartelization in Tender No. 59 of 2014 of Pune Municipal Corporation for Solid Waste Processing v. Lahs Green India Private Limited & Others.
21 To claim confidentiality over information provided to the DG the tests laid down in Regulations 35(3) and 35(9) of the General Regulations have to be satisfied.
22 Suo Motu Case No. 01 of 2017: In Re: Alleged Cartelisation in Flashlights Market in India.
23 Suo Motu Case No. 02 of 2017: In Re: Anticompetitive conduct in the Dry-Cell Batteries Market in India.
24 Case Nos. 21, 29, 36, 47, 48 & 49 of 2013: In Re: India Glycols Limited And Indian Sugar Mills Association and Others and other cases.
25 TA (AT) (Comp) No. 22 of 2017: Ambuja Cements Limited v. Competition Commission of India and Others.
26 Civil Appeal No. 3546 of 2014: Rajasthan Cylinders and Containers Limited v. Competition Commission of India and Others.
27 Civil Appeal No. 11843 of 2018: Competition Commission of India v. Bharti Airtel Limited and Others.
28 Section 19(4).
29 Section 19(5), (6) and (7) read with Section 2(r), (s) (t).
30 Section 4(2) (a) to (e).
31 Case No. 07 of 2012: In Re: Matrimony.com Limited And Google LLC and Others and another case.
32 Case No. 06 of 2014: In Re: Shri Vishal Gupta and Google LLC and Others.
33 Case No. 09 of 2016: In Re: House of Diagnostics LLP And Esaote S.p.A.
34 Case Nos. 16-20 and 45 of 2016, 02, 59, 62 & 63 of 2017: In Re: Rico Auto Industries Limited Informant And GAIL (India) Ltd. and Other cases.
35 Case No. 79 of 2011: In Re: Hemant Sharma and Others And All India Chess Federation (AICF).
36 To qualify as an 'enterprise' under the CA, the concerned entity must be engaged in any activity relating to production, storage, supply, distribution, acquisition or control of any article or goods, or provision of services.
37 Competition Appeal (AT) No. 06 of 2017: Hyundai Motor India Ltd. v. Competition Commission of India & Ors.
38 Civil Appeal No.7215 of 2014: Competition Commission of India v. M/S Fast Way Transmission Pvt. Ltd.
39 Section 21 and 21A.
40 Civil Appeal No. 11843 of 2018 in the Supreme Court of India: Competition Commission of India v. Bharti Airtel Limited and Others.
41 Case No. 47 or 2018: In Re: Jitech Maheshwari And National Stock Exchange of India Limited.
42 Section 5 of the CA.
43 Section 43A.
44 Notice under subsection (2) of Section 6 of CA given by Linde Aktiengesellschaft and Praxair, Inc.; Order of the CCI dated 6 September 2018 under Section 31(7) of the CA.
45 Notice under subsection (2) of Section 6 of CA given by Bayer AG; Order of the CCI dated 14 June 2018 under Section 31(7) of the CA.
46 Notice under subsection (2) of Section 6 of CA given by Nothern TK Venture Pte. Ltd.; Order of the CCI dated 29 October 2018.
47 Notice given by Adani Transmission Limited; Order of the CCI dated 30 July 2018 under Section 43A of the CA.
48 Notice given by LT Foods Limited and LT Foods Middle East DMCC; Order of the CCI dated 11 May 2018 under Section 43A of the CA.
49 Civil Appeal No.13578 Of 2015: Competition Commission of India v. Thomas Cook (India) Ltd. and Another.
50 Civil Appeal No.10678 Of 2016: SCM Soilfert Limited and Another v. Competition Commission of India.