The Competition Act, 2002 (CA) seeks to: (1) prevent practices that cause or are likely to cause an appreciable adverse effect on competition (AAEC) in India; (2) promote and sustain competition in markets; (3) protect consumer interests; and (4) ensure freedom of trade among market participants. Sections 3 (anticompetitive agreements) and 4 (abuse of dominant position) of the CA are the substantive provisions that lay down the enforcement regime in India. These provisions came into effect on 20 May 2009. Further, Sections 5 and 6 of the CA are the substantive provisions on regulation of combinations2 in India and came into effect on 1 June 2011. The Competition Commission of India (CCI), has also promulgated the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (the Combination Regulations), setting in place the principal framework for review of pre-merger notifications by the CCI. The Combination Regulations came into effect on 1 June 2011, and at the time of writing this chapter, these have been amended eight times with the most recent amendments enacted on 14 August 2019 and 30 October 2019.
The CCI has the primary jurisdiction (to the exclusion of civil courts) over matters that allege contravention of the provisions of the CA.3 Notably, the CA currently does not provide for withdrawal of complaints or inter se settlements between parties before a final adjudication on merits. Appeals from the CCI's decision lies with the National Company Law Appellate Tribunal (NCLAT),4 which is a common tribunal to hear appeals related to corporate/company law, insolvency law and competition law issues. The Supreme Court of India (the Supreme Court) remains the apex court to hear all disputes including competition law appeals from the NCLAT.
It is also possible to approach a High Court,5 invoking its writ jurisdiction to uphold constitutional guarantees, including issues relating to due process and principles of natural justice. The CCI does not have any statutory power to review (its own orders), or contempt powers that Indian courts usually have. The NCLAT, however, has both review and contempt powers.6
Section 3 of the CA deals with anticompetitive horizontal and vertical agreements in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services. These agreements may be oral or written. Sections 3(1) and 3(2) of the CA prohibit these agreements and declare them void if they cause or are likely to cause an AAEC within India. However, agreements entered into to restrain any infringement or to impose reasonable conditions necessary to protect statute-conferred intellectual property rights (IPRs) (such as IPRs conferred under Copyright Act, 1957, Patents Act, 1970, and Trademarks Act, 1999) are exempted from competition scrutiny under Section 3 of the CA.
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. Once it has been established that an enterprise is dominant in a relevant market in India, the dominance would be considered to have been abused if the enterprise was engaged in certain exploitative or exclusionary conduct.
Finally, Section 6(1) of the CA prohibits combinations that may cause or are likely to cause an AAEC in India, and Section 6(2) requires that a combination (unless exempted)7 must be mandatorily notified to the CCI before consummation. It is important to note that India does not recognise the concept of voluntary notification of combinations. Therefore, if the Jurisdictional Thresholds are not met, no notice can be filed with the CCI.
Notably, the CA only provides for civil consequences for a contravention of its provisions. There are no criminal sanctions under the CA.8 Section 27 lays down the general penalties and sanctions for contravention of Sections 3 and 4 of the CA. These include: (1) cease-and-desist orders; (2) modification of agreements; and (3) monetary penalty up to 10 per cent of the average 'relevant turnover' of the contravening enterprise for the previous three financial years. For of cartels, the penalty on each cartel participant can extend up to three times its profits or 10 per cent of its average relevant turnover for each year of continuance of the cartel agreement, whichever is higher.
In the landmark ruling of the Supreme Court in Excel Crop Care Ltd. v. Competition Commission of India & Anr,9 the Supreme Court observed that the penalty for anticompetitive practices found to be in contravention 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. This essentially implies that where cartel contraventions arise from products or services, then the penalty should be calculated based on the profit or turnover based on the same products or services. The Supreme Court noted that imposing a penalty based on relevant turnover allows for proportionality in punishment handed to the violators, which equally functions as a deterrent.
In addition to contravention of the CA by enterprises, Section 48 of the CA also empowers the CCI to impose monetary penalties on individuals who: (1) at the time of commission of the contravention, were in charge of and responsible for the conduct of the business (such as key managerial personnel and directors); and (2) are found to have actively participated in the contravention by consent, connivance ot neglect (such as a director, manager, secretary or other officer of the company). In its decisional practice, the CCI has consistently scrutinised individual conduct and has imposed penalties to the tune of 10 per cent of the average income of these individuals for the previous three financial years. More importantly, if the fine imposed on the individual is greater than 1,000 rupees, the individual also faces disqualification from appointment as a managing or whole-time director or manager of an Indian company, per Schedule V to the Companies Act, 2013.
At the time of writing this chapter, the CCI has not promulgated any fining guidelines, preferring to allow the law to develop on how fines are computed. There are no decided factors that the CCI is required to consider while calculating fines. However, as discussed in detail in Section II, the Competition Law Review Committee (CLRC) has recommended the issuance of fining guidelines by the CCI to ensure transparency and faster decision-making.
i Prioritisation and resource allocation of enforcement authorities
Due to the legacy of welfare state model, the CCI has conducted suo motu (or 'own initiative') investigations in sectors that affect the 'common (wo)man', such as sugar, agriculture, chemicals and domestic cooking gas. Further, the CCI has conducted investigations in important 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 gross domestic product. According to the secretary of the MCA (the ministry responsible for administration of the CCI), competitive procurement in India could result in cost savings to the extent of around 20 to 30 per cent, which would ultimately have a long-term impact on the economy.10 This, among other reasons, seems to have driven the CCI to focus on public procurement cases.
ii Enforcement agenda
The marked focus of the CCI in enforcement in the past year has been on digital economy. The CCI ordered a second investigation against Google LLC for the alleged abuse of its dominant position in various relevant markets including the market for licensing smart mobile operating systems, and also directed investigations against domestic technology start-ups, MakeMyTrip India Private Limited and Oravel Stays Private Limited.
On the leniency front, continuing with the trend of 2018, the CCI disposed-off two additional matters involving leniency 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 voluntary 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). Notably, the CCI granted a 100 per cent waiver of penalty in both cases.
Section 3(3) of the CA deals with practices, decisions and agreements among enterprises,11 persons, associations of persons or associations of enterprises, engaged in identical or similar trade of goods (i.e., horizontal agreements) including cartels. 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.12
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 cause AAEC and are, therefore, prohibited. However, this presumption of AAEC is rebuttable, and respondents can defend themselves by following the principles laid down in the Indian Evidence Act, 1872 relating to rebuttable presumptions. This proposition is strengthened by the operation of Section 36(1) of the CA, which clearly provides that the legislative intent is to ensure that the CCI abides by the principles of natural justice and due process, while inquiring into allegations of contravention of any provision of the CA.
Joint venture agreements between actual or potential competitors that increase efficiencies in production, supply, distribution, storage of goods or provision of services are exempted from competition scrutiny under Section 3(3) of the CA.
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 Industry13 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 the 'relevant market' is not a mandatory precondition for making assessment of an alleged contravention 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.
The CCI has extraterritorial jurisdiction. This means that anticompetitive practices, including cartels outside 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. The CCI has cooperated and exchanged relevant information by invoking these MOUs during its examination of several global mergers.
In the context of cartels, like the US and EU, the CA has a 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 (the 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 is that the party claiming such relief must be a party to the cartel and must provide full, true, vital disclosures and continue to cooperate with the CCI. 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 to 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 the 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 Second Zinc Carbon Dry Cell Batteries18 case arose out of an 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 Batteries19 case of 2018) and 'bi-lateral' cartel between its subsidiary Panasonic Energy India Co Limited (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 the clause to be presumptively anticompetitive. The CCI 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 a contravention.
The Electric Power Steering case20 also arose out of an application under Section 46 of the Act read with the LPR filed by NSK Limited Japan (NSK). JTEKT Corporation Japan (JTEKT) also filed an application under Section 46 before the CCI, but NSK was the first to approach the CCI. After an analysis of evidence, the CCI found that NSK and JTEKT, and their Indian subsidiaries Rane NSK Steering Systems Limited (RNSS) and JTEKT Sona Automotive India Limited (JSAI), respectively, indulged in cartelisation in the Electric Power Steering systems market from at least 2005 to 25 July 2011, by directly or indirectly determining prices, allocating markets, coordinating bid responses and manipulating the bidding process of certain automobile original equipment manufacturers (OEMs). The CCI in this case found contravention of the provisions of Sections 3(3)(a), 3(3)(c), 3(3)(d) read with Section 3(1) of the CA. The CCI granted a 100 per cent reduction in penalty to NSK and RNSS for vital disclosures by submitting evidence of a cartel, which enabled the CCI to form a prima facie opinion about the existence of a cartel and also full, genuine and continuous cooperation throughout the investigation. For JTEKT and JSAI, the reduction in penalty allowed was 50 per cent. The CCI granted a 50 per cent reduction of penalty on the ground that JTEKT and JSAI provided 'significant added value' and genuine, full, continual and expeditious cooperation.
The Tree Census case 21 arose out of a complaint filed by a charitable trust working for public cause against three companies involved in the business of software design consultancy and implementation services. The informant alleged that the three companies had predetermined a tender floated by the Pune Municipal Corporation (PMC) for selection of an agency to carry out a geo-enabled tree census. The DG conducted a thorough investigation pursuant to a direction of the CCI and relied on evidence such as bid documents, call detail records of concerned persons, internet protocol addresses of computers from which bid documents were uploaded, emails and statements of key officials and WhatsApp communications between key persons. The CCI relying on the evidence collected by the DG found that there was a tacit understanding between SAAR IT Resources Private Limited (OP-1) and CADD Systems and Services Private Limited (OP-2) as well as between OP-1 and Pentacle Consultants (I) Private Limited (OP-3), pursuant to which OP-2 and OP-3 merely acted as proxy bidders or cover bidders for OP-1. In view of the CCI, the lack of proper scrutiny by PMC ensured that OP-2 and OP-3 could qualify in the technical round and benefit OP-1, to get the tender. If OP-2 and OP-3 were not eligible bidders, then the tendering process itself would have failed with there being no participants other than OP-1, which would have remained the lone bidder. The CCI in reaching these conclusions, inter alia, relied upon similarities in bid documentation, call detail records and screenshots of messages of the opposite parties. The CCI imposed penalty in this case at the rate of 10 per cent of the average relevant turnover for the past three financial years.
On 24 February 2012,22 the CCI penalised 48 cylinder manufacturers for collusive bidding in tenders for procurement of 14.2 kilogram LPG cylinder containers by Indian Oil Corporation Limited (IOCL). The CCI had found that the cylinder manufacturers were in contravention of the provisions of Section 3(3) read with Section 3(1) of the CA. The cylinder manufacturers had appealed the decision of the CCI before the former appellate body, the COMPAT, but the COMPAT upheld the findings of contravention on merits. The Supreme Court on 1 October 2018 set aside the aforementioned finding of contravention by the CCI and the COMPAT primarily on the grounds: (1) that the procurer (i.e., the IOCL) had control over negotiation of final prices of cylinders and (2) that a possible explanation for quoting similar price was not the meeting of minds but market conditions leading to the situation of oligopsony that prevailed because of limited buyers and influence of buyers in the fixing of prices.23
The Supreme Court noted that the appellants had satisfactorily demonstrated that the price parallelism during the bidding process was attributable to the oligopsonistic nature of the market thereby rebutting any presumption of anticompetitive agreement amongst the bidders. The Supreme Court also found that pursuant to the appellants having established that the identity in prices was a result of the market's oligopsonistic nature, the burden and onus to disprove this finding shifted back on to the CCI. Since the CCI had failed to prove that the price parallelism was not a result of the nature of the market, no finding of contravention could be sustained.
The judgment of the Supreme Court clarifies that in markets involving unique characteristics, for instance, where a large or dominant state-owned enterprise operates as a buyer and a limited number of smaller market players operate as sellers, the CCI must prove that coordinated behaviour, such as price parallelism, is not a result of the oligopsonistic nature of the market. This is a welcome clarification, specifically in the Indian scenario where antitrust investigations often involve unique market conditions, wherein tenders are floated by large state-owned enterprises at regular intervals in markets with limited sellers.
Recently, in LPG Cylinder cases decided in August24 and November 2019,25 the CCI applied the Supreme Court's ruling in the Rajasthan Cylinders case26 and exonerated several LPG cylinder manufacturers in cases where DG had found contravention of the provisions of the CA. The CCI observed that although similar prices were quoted by cylinder manufacturers, the same was a result of prevailing monopsony/oligopsony in the market and not cartelisation. While in the November 2019 case, the CCI has not found any contravention, in the August 2019 case, the CCI has found several cylinder manufacturers to be in contravention of the provisions of the CA, but this finding is in relation to alleged boycott of a bid and not for quotation of similar or identical prices.
ii Trends, developments and strategies
As stated above, the CCI in 2019 disposed-off two more matters involving applications under Section 46 of the CA read with the LPR and granted a 100 per cent waiver of penalty to the first applicant in both the cases. This is a welcome trend as it would encourage more firms to voluntarily disclose collusive conduct to the CCI, which is the most pernicious form of anticompetitive behaviour. The past year also witnessed the Supreme Court providing an important clarification on behaviour of firms in peculiar market conditions that could be misinterpreted as collusive conduct. This clarification came as a big relief for several cylinder manufacturers; even the CCI adopted the binding precedent of the Supreme Court.27 The NCLAT is still overburdened with cases arising out of the Insolvency and Bankruptcy Code, 2016 and various other company cases, which are typically handled as high priority. Accordingly, there were only a few final decisions of the NCLAT from the first statutory appeal allowed under the CA.
In September 2018, the MCA constituted the CLRC to recommend necessary changes in the competition laws of India. The CLRC submitted its key recommendations to the central government in August 2019, including several recommendations in relation to the enforcement regime. Some of these recommendations are mentioned below:
- introduction of settlement and commitment mechanisms for enforcement cases under the CA;
- issuance of penalty guidelines; and
- introduction of a dedicated and specialist bench in the NCLAT for hearing appeals under the CA.
These recommendations will be key to making antitrust enforcement more robust in India.
III ANTITRUST: RESTRICTIVE AGREEMENTS AND DOMINANCE
Section 3(4) of the CA deals with agreements between entities operating at different levels of a supply chain in different markets (i.e., vertical agreements). These include:
- tie-in arrangement: any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods;
- exclusive supply agreement: 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 agreement: 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.28
Unlike horizontal agreements, there is no presumption of AAEC for vertical agreements under the CA. The onus is upon the CCI to prove AAEC based on an assessment of the factors provided under Section 19(3) of the CA (discussed in the ensuing paragraph). The CCI is guided by the 'rule of reason' test. As such, vertical agreements are prohibited and void under the CA only if it is established that these agreements cause or are likely to cause an AAEC within India and the enterprise imposing them holds sufficient market power in the relevant market.
The AAEC test is the substantive test to ascertain contravention of the CA. It is a subjective test comprising an analysis of both anti-competitive and pro-competitive factors. These factors are set out below:
- 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.29
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,30 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.
Notably, the treatment of vertical agreements under the CA is unique since practices such as tie-in arrangements and refusal to deal fall within the purview of abuse of dominant position in more mature jurisdictions such as the EU. Further, resale price maintenance, which is a hardcore restriction in the EU, is tested under the rule of reason approach in India.
As for unilateral conduct, the now repealed Monopolistic and Restrictive Trade Practices Act, 1969 viewed large enterprises negatively. The CA does not prohibit an enterprise for holding a dominant position. However, it prohibits abuse of dominant position. The CA lists 13 factors for the assessment of an entity's alleged 'dominant position'31 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.32 The CA provides several factors for assessing the relevant product market and geographical market, and the CCI must examine each of the factors, as the case may be, to ascertain whether the dominant enterprise could affect the relevant market.
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'.33 Section 4(2) of 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 meant to be exhaustive, rather than illustrative.
i Significant cases
The year 2019 saw increased scrutiny of unilateral actions especially with the CCI commencing various important investigations, all of which are undergoing investigation by the DG at the time of writing this chapter.
After holding Google LLC and Google India Private Limited (jointly, Google) liable for abuse of dominant position in 2018, the CCI on 16 April 2019 ordered another investigation34 against Google. This case arose out of an allegation of Google's abuse of dominant position by engaging in different kinds of anticompetitive practices, either in the market in which it was dominant or in separate markets, with the aim of cementing Google's dominant position in online general web search services and online video hosting platform (through YouTube). In its preliminary analysis, the CCI defined three relevant markets, namely (1) the market for licensable smart mobile device operating systems in India; (2) the market for app stores for android mobile operating systems; and (3) the online general web search service market, and found that Google was dominant in all the three markets. It is pertinent to mention that while the CCI formally defined only three relevant markets, it noted that each application, such as online video hosting platforms, browsers, maps and music software, constituted a separate relevant market.
As regards Google's abusive conduct, the CCI found that Google's licensing agreements with android device manufacturers were conditional on the signing of two additional agreements that prima facie, among other things: (1) disincentivised the development and sale of non-Android devices; (2) allowed Google to leverage its dominance in one market to protect another market; and (3) amounted to a tie-in arrangement. Google argued that licensing was not conditional on the additional agreements; however, the CCI opined that the additional agreements were de facto compulsory because if manufacturers did not sign them, they could not install must-have applications, such as Google Play, which directly impacted the commercial saleability of their devices. The CCI has now ordered a detailed investigation in the matter.
In the ONGC case,35 the informant, a representative body of various ship owners, alleged that Oil and Natural Gas Corporation of India (ONGC), by way of imposition of unfair and onerous terms and conditions through a charter hire agreement had abused its dominant position in contravention of Section 4(2)(a)(i) of the CA. ONGC, in order to undertake oil and natural gas exploration and production activities used to seek support services from offshore oilfield services providers (member companies of the informant) pursuant to a competitive bidding process. One such service used by ONGC was charter-hire of offshore support vessels (OSV). The informant alleged that because of its dominant position, ONGC had inserted one-sided terms in the charter hire agreement for OSV. The CCI defined the relevant market as the 'market for charter hire of OSVs in the Indian Exclusive Economic Zone (EEZ)'. The CCI limited the relevant geographic market to Indian EEZ having regard to factors such as trade barriers and national procurement policies.
The CCI also found ONGC to be in a dominant position in the said relevant market because of factors such as high market share (82 per cent) and ONGC being the largest buyer of OSV services. Importantly, the CCI noted that while high market share is only one of the guiding factors in determination of a dominant position, yet, it is a 'potent screening test'. The CCI in this case did not find contravention of provisions of the CA but in holding so, it laid down an important principle. The CCI held that mere existence of an unfair condition on a consumer may constitute contravention of the CA but in a business-to-business (B2B) transaction, it was essential to undertake a fairness or reasonability test, and mere existence of the same is not sufficient to find contravention. In CCI's view in B2B transactions it needs to be examined how the impugned condition affects the trading partners of the dominant enterprise as well as whether there is any legitimate and objective necessity for the same.
The year 2019 also saw the automotive sector's continuous scrutiny under the CA for vertical restrictions. The CCI continued its trend of investigating allegations of resale price maintenance disguised under the garb of discount policies in the automotive dealership industry in India. The CCI ordered an investigation against Maruti Suzuki India Limited (MSIL), an automotive manufacturer in India based on an anonymous complaint.36 The complaint alleged that MSIL penalised dealers who provided additional discounts to customers over and above what was recommended by MSIL. It was also alleged that the entire mechanism of controlling dealer discounts was enforced by MSIL through mystery shopping audits whereby, fake customers would pay surprise visits to inquire into dealer discounts at various stores and would report any additional discounts offered by the dealers to MSIL. In turn, MSIL would show cause the concerned dealer through email and in the absence of any credible justification, the dealer was directed to pay the penalty by way of cheque deposits to a specified account.
The hallmark of this order rests in the approach adopted by the CCI to arrive at its prima facie finding. Incidentally, the dealership agreements were silent on the discount control mechanism and allowed dealers the discretion to set discounts at will. MSIL cited various clauses of the dealership agreement to show lack of authority on its part to impose penalty for providing higher discounts. It also highlighted its efforts to encourage dealers to provide additional discounts instead, by contributing to the schemes floated by the dealers. However, the CCI disregarded the dealership agreement and deep dived into the actual on-field conduct of MSIL. Accordingly, despite the dealership agreements allowing MSIL's dealers to provide additional discounts, the CCI focused on the substance or actual practice by assessing whether additional discounts were in fact permitted by MSIL without any restraints or penal measures. The order shows that the CCI appears to have now upped its ante by predicating its findings on actual conduct of enterprises rather than being simply swayed by formal agreements. While the final fate of this order remains to be seen, it is clear that the auto-space will continue to be on the CCI's radar of priority sectors.
The number of complaints relating to restrictive practices in the e-commerce or digital sector have also increased. The Snapdeal case37 involved allegations of resale price maintenance against Kaff Appliances (India) Private Limited (Kaff). A complaint was filed with the CCI by Jasper Infotech Private Limited alleging resale price maintenance restrictions on its online marketplace website, www.snapdeal.com (Snapdeal). Snapdeal argued that it had displayed products of Kaff at discounted prices on its website and aggrieved by the discounted pricing, Kaff uploaded a 'caution notice' on its own website stating that Snapdeal is selling its products without authorisation; and that Kaff would not honour warranties on products purchased through Snapdeal. The CCI observed that Kaff did not implement resale price maintenance in its distribution network. In relation to the caution notice, the CCI opined that the said caution-notice by Kaff indicated its genuine concern regarding sale of counterfeit goods. Taking cues from EC's decisional practice, the CCI emphasised that the right of a manufacturer to choose the most efficient channel should not be interfered with unless it leads to anticompetitive effects. Accordingly, the CCI did not find Kaff's conduct in contravention of the CA.
In a significant development at the appellate level, the Supreme Court upheld a judgment of the former COMPAT ordering an investigation against online ride-hailing app company, Uber India Systems Private Limited (Uber) for abuse of dominant position. This case arose out of a complaint filed by Meru Travels Solutions Private Limited against Uber before the CCI alleging that Uber had abused its dominance by alluding to predatory pricing and imposing unfair conditions. The CCI did not find a prima facie contravention, but this decision was reversed by the COMPAT. The COMPAT opined that it was a fit case to order a thorough investigation. However, Uber approached the Supreme Court for setting aside the judgment of the COMPAT, but the Supreme Court upheld the COMPAT's decision. The Supreme Court found that Uber was losing 204 rupees per trip in respect of every trip made by the cars of the Uber fleet owners. The Supreme Court was of the view that the incurred losses could not be economically and commercially justified and were indicative of Uber's intent to eliminate competition in the market.
ii Trends, developments and strategies
Given the pace of growth of online trade and e-commerce in India, in April 2019, the CCI commenced a market study on India's e-commerce sector to better understand its functioning and implications on competition. This study was undertaken under the competition advocacy provisions of the CA.38 The CCI published its interim findings on 30 August 2019 focusing on the markets for pan-India provision of goods and services including: (1) groceries; (2) mobiles; (3) hotels; and (4) food. On 8 January 2020, the CCI published its final report (the E-commerce Report). The key issues identified by the CCI in the E-commerce Report are as follows:
- platform neutrality: Online platforms make use of algorithms to influence search rankings. They also play a dual role of marketplace and sellers and have unfettered access to data on prices of competing products, consumer preferences, etc. This results in diminution of transparency on the online platform and distort the competitive landscape in favour of private labels owned by online platforms and preferred sellers;
- unfair business contract terms: Superior bargaining position of the online platforms allows them to unilaterally and arbitrarily increase the commission charged from the service providers. Other arbitrary terms include tying and bundling of services (such as, use of an online platform's delivery fleet in the online food aggregators' sector) and data-masking of data related to seller's own products and services by the online marketplace;
- pricing: Deep discounting policies by online platforms increase the burden on the service providers and force them to set unviable rates that cut into their profits in the long run. The CCI acknowledged that while deep discounts aid customer onboarding, it may be imposed only when aligned with rational business practices;
- exclusivity agreements: Exclusivity agreements between certain platforms and service providers (online food and hotel booking sectors) which raises the risk of market access restrictions for competing market players; and
- platform price parity clause: Parity clauses imposed by online marketplaces require that sellers don't offer better prices on other marketplace platforms or on their own website, or both. These clauses were identified as being market distortive due to their ability to disincentivise platforms to compete, increase coordination between platforms and raise barriers to entry.
Given the boom of e-commerce and digital markets, the Indian competition law landscape is likely to adapt its policies to meet the dynamic developments in commercial transactions. Notably, the E-commerce Report highlights the need for this adaptation and advocates online marketplaces taking certain voluntary measures in relation to, inter-alia: (1) search-ranking, (2) data collection policies; and (3) discounting practices. These measures are aimed at decreasing market distortion owing to the imbalance in bargaining power and information asymmetry in the e-commerce sector.
Additionally, the Indian automobiles and auto components sector is also on the CCI's radar. The fact that the CCI took action against MSIL for alleged contravention of the CA purely based on an anonymous email complaint, is testament to the fact that the CCI is unlikely to gloss over the appointment of mystery shoppers or external agencies to monitor the prices and discounts offered by car dealers. This hardened approach of the CCI follows from earlier actions against Honda Motorcycle and Scooter India Private Ltd39 and Hyundai Motors India Limited40 for the imposition of similar vertical restrictions.
IV SECTORAL COMPETITION: MARKET INVESTIGATIONS AND REGULATED INDUSTRIES
The CA provides for a mechanism of cooperation between the CCI and other Indian sectoral regulators to coordinate their enforcement actions through a process of consultations on various matters.41
In an interesting development towards the end of 2018, the Supreme Court settled the law on the role of the CCI in the telecoms sector, which has its own specialist regulator called the Telecom Regulatory Authority of India (TRAI) under the Telecom Regulatory Authority of India Act, 1997 (the TRAI Act). In the Telecom Operators case,42 the Supreme Court upheld a judgment of the High Court of Bombay quashing the CCI's prima facie order of investigation against Bharti Airtel Limited, Vodafone India Limited, Idea Cellular Limited (collectively, Incumbent Dominant Operators or IDOs) and the Cellular Operators Association of India (COAI). The prima facie order was on the basis that the IDOs did not provide interconnection points to Reliance Jio Infocomm Limited (RJIL), as a result of a cartel. The Supreme Court noted that while the CCI had exclusive jurisdiction to adjudicate upon issues governed by the CA, it also held that the issue of denial of points of interconnection 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 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 TRAI Act alone. 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,43 where the CCI dismissed the information after noting that another regulator, namely the Securities Exchange Board of India, was considering similar issues.
In 2019, the High Court of Bombay in Star India Private Limited v. Competition Commission of India and Others,44 used the principle iterated in the Supreme Court's ruling in Telecom Operators case to set aside another prima facie investigation order of the CCI against media broadcasters, Star India Private Limited and Sony Pictures Network India Private Limited. The case concerned, inter alia, refusal to deal with Noida Software Technology Park Limited. In this case, while an investigation was ordered by the CCI, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) also had jurisdiction over the same issue under the Telecommunication (Broadcasting and Cable Services) Interconnection Regulations, 2004 and was also seized of the matter. In the view of the High Court, unless the necessary 'jurisdictional facts' were adjudicated by the TDSAT, the CCI could not pass an order commencing its own investigation.
V MERGER REVIEW
The Indian merger control regime is a mandatory regime; and accordingly, CCI approval must be obtained if the Jurisdictional Thresholds are met and the transaction is unable to benefit from the safe harbours set out in the Combination Regulations and in the notifications issued by the MCA from time to time. Further, the Indian regime is also suspensory in nature. As a result, a 'combination' cannot be consummated (entirely, or in part) without obtaining the CCI's prior approval (except for green channel notifications discussed below). Where a combination is implemented without obtaining the CCI's prior approval, the CCI can (and does) levy a penalty45 and may even declare the transaction to be void. As noted in Section I, there is no concept of a voluntary notification to the CCI (i.e., if the Jurisdictional Thresholds are not met, no notification can be filed with the CCI).
As described above in Section I, Sections 5 and 6 of the CA are the substantive merger control provisions that state which transactions are considered 'combinations' and prescribe the Jurisdictional Thresholds. As such, any direct or indirect acquisition of shares, voting rights, assets or control over the management or affairs of an enterprise, mergers (including court-approved mergers), and amalgamations46 are required to be notified to the CCI if the transactions exceed the Jurisdictional Thresholds and cannot make use of the safe harbours. The Jurisdictional Thresholds involve an analysis of the worldwide and Indian assets and turnover of both: (1) the directly transacting parties (the parties test); and (2) the acquiring group and the target (the group test), as shown in the tables below.
|Parties test||Either acquirer or target or both have:||20 billion rupees||Or||60 billion rupees|
|Group test||Acquirer group to which the target will belong, and the target, both have:||80 billion rupees||Or||240 billion rupees|
|Parties test||Either acquirer or target or both have:||US$1 billion with at least 10 billion rupees in India||Or||US$3 billion with at least 30 billion rupees in India|
|Group test||Acquirer group to which the target will belong, and the target, both have:||US$4 billion with at least 10 billion rupees in India||Or||US$12 billion with at least 30 billion rupees in India|
Mergers, acquisitions and amalgamations involving small targets are exempted from notification requirements. On 27 March 2017, the MCA has prescribed a de minimis exemption, whereby a transaction is not required to be notified to the CCI if the target either has value of assets of less than 3.5 billion rupees in India or turnover of less than 10 billion rupees in India. The de minimis exemption is currently available until 28 March 2022, unless otherwise extended. Apart from the de minimis exemption, the MCA has introduced a series of exemptions from merger control notification obligations under Section 5 and Section 6 of the CA. These include, combinations involving (1) central public sector enterprises and their subsidiaries operating in the oil and gas sectors under the relevant regulations for a period of five years from 22 November 2017; (2) reconstitution, transfer, and amalgamation of nationalised banks under the relevant banking regulations for a period of 10 years from 30 August 2017; and (3) regional rural banks notified by the Central Government for a period of five years from 10 August 2017.
In addition, Schedule I to the Combination Regulations also provide certain safe harbours from notification obligation. These are of a qualitatively different nature and concern combinations which are 'ordinarily not likely to cause an AAEC in India'.
Merger notifications can be made in Form I or Form II. It is recommended, but not required, that notification should be made in Form II when the parties' businesses overlap horizontally or vertically in any relevant market and their combined market share in the horizontal market exceeds 15 per cent, or if their individual or combined market shares in the vertical market exceeds 25 per cent.47 Form II requires more extensive information as compared to Form I. The merger filing fee has been recently revised for the second time since the regime came into effect.48 The revised filing fee for Form I notification is 2 million rupees and the filing fee for a Form II notification is 6.5 million rupees.
Merger notification can be filed with the CCI at any time after the execution of the trigger document (i.e., execution of binding transaction documents or any other document conveying an agreement to acquire control, shares, voting rights and assets in acquisitions, and approval of the parties' board of directors in mergers). Further, in acquisitions, the onus to file the merger notification is on the acquiring entity whereas, in a merger or amalgamation, the onus to file is on both parties. The parties can also withdraw and refile notifications.
A notified transaction cannot be consummated (in part or in entirety) until the CCI approval is received or 210 calendar days (excluding clock stops) have passed from the date of notification, whichever is earlier. Non-filing of a 'combination' and implementing the transaction before CCI approval (i.e., gun jumping) can attract a monetary penalty49 of the higher of 1 per cent of the combined assets or turnover of the parties to the combination. Further, where a transaction is not notified at all, the CCI has a 'look-back' provision to initiate an inquiry within the period of one year from the date of consummation of the transaction.50
The CCI has 30 working days from the date of filing the merger notification to form a prima facie opinion on whether the proposed combination results in an AAEC in the relevant markets in India. This is akin to what is called a Phase I review in other jurisdictions. The time taken by the parties to respond to CCI's requests for additional information is excluded from the 30 working day period (i.e., a 'clock stop'). If the CCI forms a prima facie opinion that a proposed combination does not (or is not likely to) cause an AAEC in India, it issues a formal order approving the proposed combination.
However, if the CCI is unable to form such an opinion, it issues a notice to the parties seeking their views on why a detailed investigation to examine the competitive effects should not be initiated. If the parties are successful in addressing the CCI's concerns (by voluntarily offering structural or behavioural remedies, if required), the CCI does not initiate a formal Phase II inquiry and approves the transaction. However, if the CCI is not satisfied, it initiates a formal Phase II investigation.
The CLRC had also made certain recommendations to streamline the merger control regime in India with international best practices, to further improve the ease of doing business in India, and to further ease the approval process for mergers and acquisitions in India. One recommendation was introduction of a green channel notification mechanism for combinations that are unlikely to result in any AAEC to avoid delay in merger implementation. The 2019 amendment to the Combination Regulations, which came into effect on 15 August 2019, have now introduced a green channel mechanism that can be optionally utilised by parties to certain types of transactions set out in the newly added Schedule III to the Combination Regulations.
The green channel route is an automatic and fast-paced approval channel and is available to the parties that do not have any horizontal, vertical or complementary overlaps. While determining overlaps, Schedule III of the Combination Regulations requires parties to self-assess and consider all plausible alternative relevant market definitions. The overlaps also need to be evaluated vis-à-vis: (1) the parties themselves; (2) all the group entities for all the parties; (3) all entities where the parties directly or indirectly hold shares; and (4) all entities where the parties directly or indirectly exercise control. Upon receipt of an acknowledgment of a notification filed under the green channel, the transaction will be deemed approved by the CCI and can be consummated by the parties on the same day without waiting for the statutory period of 210 days to expire.
The 2019 amendment have also restructured the format of Form I by adding certain additional items. It now requires details of: (1) interconnected transactions; (2) rights acquired by the parties to the combination; (3) foreign investment as a result of the combination; (4) information on complementary business activities between the parties, etc.; (5) market-facing data (such as, market size, shares) for the past three years as against the earlier practice of the past one year; (6) all plausible alternative relevant markets (including explanations for accepting or rejecting a specific definition); and (7) any proceedings before the CCI or other competition authorities to which the parties are or were a part of in the past five years.
In addition to the green channel proposal, the CLRC in line with EC's decisional practice has also recommended dilution of the standstill obligation for public bids, hostile takeovers and open market purchases. Currently, given the suspensory nature of the regime, a 'combination' cannot be consummated until prior approval from the CCI is received. This is equally applicable to minority acquisition of listed shares on the stock exchange, including potential hostile acquisitions, where the execution and completion are instantaneous. Even arrangements that enable the purchaser to surrender beneficial rights including voting rights and place the purchased shares in an escrow pending CCI approval have not passed muster with the CCI in the past. For example, companies like Thomas Cook (India) Limited,51 Zuari Agro Chemicals Limited52 and Deepak Fertilisers Petrochemicals Corporation Limited53 have faced significant penalties for carrying out market transactions without prior CCI approval.
To address this issue, the CLRC recommended that parties to these transactions may be allowed to purchase securities in the open market provided they surrender the beneficial rights attached to the securities and deposit the securities in an escrow account until CCI approval is received. To this effect, the CCI has proposed further amendments to the Combination Regulations whereby parties will be allowed to approach the CCI for approval after the open market purchase provided that the beneficial rights (voting or economic) attached to the shares are kept in abeyance until approval and the target entity is not influenced. Other noteworthy recommendations of the CLRC relating to merger control include:
- the introduction of 'material influence' standard to determine control along with subordinate legislation to provide guidance: Currently, the definition of 'control' in CA does not indicate the rights that may amount to control. The CCI's decisional practice has used the standard of ability to exercise 'decisive influence' as well as 'material influence' to determine control (such as, shareholding, special rights, and board representation);
- introduction of deal-value threshold for merger notification, including objectively quantifiable standards for computation of the value as well as a local nexus criterion. This would ensure that only those transactions that have a significant economic link to India are caught by the threshold;
- that equal opportunities should be given to CCI and the notifying parties for proposing remedies at various stages of the merger assessment process, with the ultimate decision to reject all proposals with the CCI. It is also recommended that the CCI must undertake the process of market testing of remedies in appropriate cases and that the process of market testing must be robust;
- codification of all permissible time exclusions from the 210-day review timeline for assessment of mergers since the timeline is sacrosanct. The 210-day timeline must commence once the parties have provided all information to CCI; and
- streaming of exemptions to Section 5 of the CA.
i Significant cases
The year 2019 saw the clearance of several mergers, important from an international as well as domestic jurisdiction perspective.
For instance, in L&T/Schneider ,54 the CCI conducted its eighth Phase II investigation and granted conditional approval to the India leg of the global transaction involving Larsen & Toubro Limited (L&T), Schneider Electric India Private Limited (SEIPL) and MacRitchie Investments Pte Limited (MacRitchie). The proposed transaction envisaged the consolidation of the two closest competitors in the low voltage (LV) switchgear industry in India, namely L&T and SIEPL. The CCI assessed the proposed transaction at the product level and the cluster/portfolio level and narrowed down 15 product markets that were highly concentrated with combined market shares of more than 30 per cent. At the cluster level, six products were identified where the combined market shares of the parties were in the range of 55 to 60 per cent. The CCI formed a prima facie opinion that the transaction would likely cause an AAEC in the overall market for LV switch gears in India and conducted a Phase II investigation. The parties offered the CCI a remedy package consisting of several behavioural commitments. Notably, while negotiating the remedy package, the CCI observed that 'white labelling' was an industry practice in the LV switchgear market, and many manufacturers entered into brand label agreements with third-party manufacturers to complete their product portfolio. The CCI also observed that the EC in its decisional practice had recognised white labelling as an effective alternative to divestment of high market share products in the LV switchgear industry.55
The CCI ultimately accepted the remedy package offered by the parties, which included SIEPL's commitment to strengthen the existing third-party LV switchgear manufacturers by offering them white-labelling product manufacturing services for five products manufactured by L&T. The transaction assumes significance given that this order marks the first-of-its kind insofar as it mandates pure play behavioural remedies ranging between three to five years. Until now, in all its previous Phase II investigations, the CCI's preferred remedy has been divestment or a combination of divestment coupled with certain behavioural commitments.
In L&T/Mindtree,56 the CCI approved the acquisition of 66.15 per cent of the total equity shareholding of Mindtree Limited (Mindtree) by Larsen & Toubro Limited (L&T). The CCI observed that both L&T and Mindtree (Parties), are engaged in the provision of IT and IT-enabled services. The CCI left the definition of the relevant market open in the absence of competitive concerns in any of the possible alternative relevant markets. This transaction is considered to be the first hostile takeover to receive CCI approval. Deals with similar structures involving secondary purchases and a block deal on the market have been fined in the past for closing the stock market purchase pre-CCI approval.
Similarly, in the IHH/Fortis57 case, the CCI approved the acquisition of Fortis Healthcare Limited (FHL) by Northern TK Venture Pte Limited (NTK). NTK belongs to the IHH Health Care Berhad (IHH) group, which is a global provider of integrated healthcare services. NTK had submitted that the hospitals operated or owned by FHL and itself were active in the market for 'private tertiary hospitals' and provided primary, secondary, tertiary and quaternary services. The CCI assessed market power and observed that the parties would face significant competitive pressure from, inter alia, Apollo Hospitals, Narayana Health, Manipal Hospitals. However, the CCI voiced certain concerns regarding Apollo Gleneagles Hospital, a joint venture (JV) that was entered into by a subsidiary of IHH, Gleneagles Development Pte Limited (GDPL) and Apollo Hospitals. The CCI expressed concern that FHL, Apollo Hospitals and GDPL were competitors in the field of healthcare and that the JV could act as a platform to facilitate collusion. In order to alleviate the concerns of the CCI, NTK gave voluntary commitments, which would ensure that the JV and the entity created post transaction would operate as 'separate, independent and competitive businesses'. These included ensuring no common directors were appointed by IHH or GDPL on the board of the JV or the entity created post transaction; no sharing of 'commercially sensitive information' and such other commitments to prevent information sharing. The commitments were accepted by the CCI and the transaction stood approved.
The CCI also cleared Saudi Arabian Oil Company's (Saudi Aramco's) proposed acquisition of 70 per cent shareholding in Saudi Basic Industries Corporation (SABIC).58 The CCI identified several overlapping products sold by the parties. However, owing to the low incremental market share that would be gained by Saudi Aramco from SABIC and the presence of competitors such as Reliance Industries Limited, DowDuPont, Mitsui & Co Ltd, Gas Authority of India Limited and IOCL, the CCI concluded that there will likely be no adverse effect on competition. Regarding the potential for vertical relationships, the CCI noted that other vertically integrated companies, such as Reliance Petroleum Limited, IOCL and Mangalore Refinery and Petrochemicals Limited, exist in the market and, accordingly, approved the combination as it was unlikely to cause any competitive concerns.
ii Trends, developments and strategies
The CCI has continued to reform the merger control regulations since 2011. The introduction of a green channel mechanism is certainly laudable to further bolster the ease of doing business in India. This will permit the CCI to prioritise its resources. However, there are also uncertainties surrounding its structure. For example, the newly introduced Schedule III requires parties to ensure that there are no horizontal, vertical or complementary overlaps in all plausible alterative market definitions. The incorporation of this expression has far reaching ramifications and makes an overlap assessment highly onerous in application. Complementary activity is a newly introduced expression, and there is no guidance on the import or interpretation of complementary activities. This again places a heavy burden on parties to determine what constitutes complementary activity and may require the parties to effectively seek the CCI's views through informal consultations, on a case-by-case basis. Further, given the onus imposed on the parties, even assessing suitable horizontal and vertical overlaps to the CCI's satisfaction may turn out to be challenging.
The 2019 amendment also does not specify the actions that will follow if the merger notification filed under green channel route is declared void ab initio, for example, whether another notification would be required and how the CCI would assess the transaction. The CCI has further streamlined the structure of Form I based on its learnings over the years. However, the burden on the parties to choose and justify their choice of relevant market definition is increased. This intent extends to the heavy data-gathering exercise for market information, which is now required for the preceding three years, regardless of the extent of overlaps.
Additionally, the CCI also cleared its eighth transaction which underwent a Phase II investigation. This was also the first transaction in which the CCI accepted modifications to the transaction in the form of pure-play behavioural remedies, and did not require any structural remedy (divestment) to be carried out, in order to reduce the anticompetitive impact of the transaction.
As mentioned above, the 2019 amendment to the Combination Regulations have far reaching ramifications. This amendment seeks to bring about a major shift in the existing merger control landscape in India. The green channel mechanism has been introduced to further streamline the approval process for M&A and is in line with the central government's policy of ease of doing business in India. However, the uncertainties surrounding the structure of the green channel mechanism may render the process onerous.
As regards the amendments to the Combination Regulations in the last year, the CCI is also expected to provide the much-needed guidance and clarifications on the gaps created by these amendments.
The CLRC recommendations as well as the amendments to Combination Regulations took centre stage in 2019, instilling optimism and confidence not only in the Indian competition law regime but also in the business environment in India. The CLRC's recommendations are aligned with the central government's larger policy initiative of enhancing ease of doing business in India. Therefore, it is not surprising to find that the central government has been very quick to take note of the CLRC's recommendations. In 2020, one can expect implementation of other CLRC recommendations.
In enforcement, as mentioned earlier, the focus of the CCI has been on the digital economy. In 2019, the CCI initiated some high-stakes investigations, and 2020 may hold answers to the antitrust woes of giant tech companies and e-commerce platforms. On the leniency front, while the number of cases involving leniency applications came down, the CCI instilled confidence in the regime by granting 100 per cent waiver of penalty in the two applications decided in 2019.
As regards the merger control regime, the central government and the CCI have significantly streamlined the regime by introducing the green channel notification route and through a series of amendments to the Combination Regulations. But that is not all; the CCI clearly believes in streamlining the regime through its decisional practice as well. The CCI maintains the reputation of granting swift approvals – with an average time of 45 to 60 days. The CCI remains open to remedies and learning from foreign jurisdictions.
1 Rahul Singh is a partner and Anmol Awasthi and Ebaad Nawaz Khan are associates at Khaitan & Co.
2 A 'combination' refers to an acquisition of shares, assets, control or voting rights, or a merger or an amalgamation where the assets and turnover of the transacting parties exceed certain prescribed financial thresholds (the Jurisdictional Thresholds) set out under Section 5 of the CA. The Jurisdictional Thresholds are discussed in detail in Section V of this chapter.
3 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 that performs a sovereign function on behalf of the central government or a state government, to the extent of their activities relatable to sovereign functions.
4 NCLAT replaced the former Competition Law Appellate Tribunal (COMPAT) by way of an amendment to the CA through the Finance Act, 2017 effective from 26 May 2017.
5 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).
6 Sections 53O and Section 53U, CA.
7 The exemptions are provided in Schedule I to the Combination Regulations and by way of the various notifications issued by the Ministry of Corporate Affairs (MCA) from time to time.
8 In cases of repeated non-compliance with orders passed by the CCI, 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.
9 (2017) 8 SCC 47.
10 Press Release by the Press Information Bureau dated 5 November 2018 (available at http://pib.nic.in/newsite/PrintRelease.aspx?relid=184608).
11 An 'enterprise' under Section 2(h) of 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 the 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.
12 Section 2(c), CA.
13 (2017) 5 SCC 17.
14 Section 32, CA.
15 Proviso to Section 18, CA.
16 Section 46, CA.
17 Clause 4, LPR.
18 Suo Motu Case No. 03 of 2017: In Re: Anticompetitive conduct in the Dry-Cell Batteries Market in India.
19 Suo Motu Case No. 02 of 2016: In Re: Cartelisation in respect of zinc carbon dry cell batteries market in India.
20 Suo Motu Case No. 07 (01) of 2014: In Re: Cartelisation in the supply of Electrict Power Steering Systems.
21 Case No. 12 of 2017: Nagrik Chetna Manch v. SAAR IT Resources Private Limited & Others.
22 Suo Motu Case No. 03 of 2011: In Re: Suo moto case against LPG cylinder manufacturers.
23 Rajasthan Cylinders and Containers Limited v. Union of India and Others, (Civil Appeal No. 3546 of 2014).
24 Suo Motu Case No. 01 of 2014: In Re: Alleged cartelisation in supply of LPG Cylinders procured through tenders by Hindustan Petroleum Corporation Ltd. (HPCL) v. Allampally Brothers Ltd. & Others.
25 Suo Motu Case No. 04 of 2014: In Re: Formation of cartel in the supply of 14.2 kg LPG cylinders fitted with S. C. valves procured by HPCL through e-Tender No.10000040-HD-121001 dated 04.08.2010 v. Prathima Industries Pvt. Ltd. & Others.
26 Rajasthan Cylinders and Containers Limited v. Union of India and Others, (Civil Appeal No. 3546 of 2014).
27 Suo Motu Case No. 01 of 2014: In Re: Alleged cartelisation in supply of LPG Cylinders procured through tenders by Hindustan Petroleum Corporation Ltd. (HPCL) v. Allampally Brothers Ltd. & Others.
28 Section 3(4)(a)–(e), CA.
29 Section 19(3), CA.
30 Case No. 03/ of 2011: Shamsher Kataria v. Honda Siel Cars India Ltd & Ors.
31 Section 19(4), CA.
32 Section 19(5), (6) and (7) read with Section 2(r), (s) (t), CA.
33 Section 4(2) (a) to (e), CA.
34 Case No. 39 of 2018: Mr. Umar Javeed & Others v. Google LLC & Others.
35 Case No. 01 of 2018: Indian National Shipowners' Association (INSA) v. Oil and Natural Gas Corporation Limited (ONGC).
36 Suo Motu Case No. 01 of 2019: In re: Alleged anti-competitive conduct by Maruti Suzuki India Limited in implementing discount control policy vis-à-vis dealers.
37 Case No. 61 of 2014: In Re: Jasper lnfotech Private Limited v. KAFF Appliances (India) Pvt. Ltd.
38 Section 49, CA.
39 Case No. 17 of 2017: Vishal Pande v. Honda Motorcycle and Scooter India Private Ltd.
40 Case Nos. 36 & 82 of 2014: Fx Enterprise Solutions India Pvt. Ltd. and Another v. Hyundai Motor India Limited. Set aside by NCLAT in Competition Appeal (AT) No. 06 of 2017, 19.
41 Sections 21 and 21A, CA.
42 (2019) 2 SCC 521: Competition Commission of India v. Bharti Airtel Limited and Others.
43 Case No. 47 of 2018: In Re: Jitech Maheshwari And National Stock Exchange of India Limited.
44 Star India Private Limited v. Competition Commission of India and Others (Writ Petition No. 9175 of 2018, High Court of Bombay).
45 Section 43A, CA.
46 Section 5, CA.
47 Regulation 5(3), Combination Regulations.
48 On 30 October 2019, the CCI amended the Combination Regulations to increase the filing fee for Form I from 1.5 million rupees to 2 million rupees, and from 5 million rupees to 6.5 million rupees for Form II.
49 Section 43A, CA.
50 Proviso to Section 20(1) of the CA.
51 Thomas Cook (India) Limited/Sterling Holiday Resorts (India) Limited (Combination Registration No. C-2014/02/153), Order under Section 43A of CA. The CCI findings were upheld by the Supreme Court in Competition Commission of India v. Thomas Cook (India) Limited and Ors., (2018) 6 SCC 549.
52 Zuari Agro Chemicals Limited and Another/Mangalore Chemicals and Fertilizers Limited (Combination Registration No. C-2014/06/181), Order under Section 43A of CA.
53 SCM Solifert Limited/Mangalore Chemicals and Fertilisers Limited (Combination Registration No. C-2014/05/175), Order under Section 43A, CA. The CCI findings were upheld by the Supreme Court in SCM Solifert Limited v. Competition Commission of India, (2018) 6 SCC 631.
54 Larsen &Toubro Limited and MacRitchie Investments Pte. Limited/Schneider Electric India Private Limited (Combination Registration No. C-2018/07/586).
55 Case No. M.8678: ABB/General Electric Industrial Solutions.
56 Larsen &Toubro Limited/Mindtree Limited (Combination Registration No. C-2019/03/652).
57 Northern TK Venture Pte Limited/Fortis Healthcare Limited (Combination Registration No. C-2018/09/601).
58 Saudi Arabian Oil Company/Saudi Basic Industries Corporation (Combination Registration No. C-2019/09/683).