The Dominance and Monopolies Review: India
The conduct of dominant enterprises is regulated by Section 4 of the Indian Competition Act 2002, as amended (the Act). Section 4 prohibits the abuse of a dominant position by an enterprise or group. Notably, an abuse of a dominant position is prohibited, not dominance itself or the creation of dominance. The Act regulates the conduct of both private and public sector (state-owned) enterprises as well as departments of the government that engage in non-sovereign functions.
Since 20 May 2009, the date Section 4 entered into effect, the Competition Commission of India (the Commission) has enjoyed exclusive jurisdiction for enforcement of Section 4. Under the Act, the Commission has wide powers of investigation and enforcement.
In February 2020, based on the report submitted by the Competition Law Review Committee (which was constituted to comprehensively review and recommend changes to the Act and the underlying regulations), the central government published the draft Competition (Amendment) Bill 2020 (the Draft Amendment Bill) inviting public comments. Notably, no major changes are envisaged to the abuse of dominance provisions of the Act except for an exemption for the reasonable exercise of intellectual property rights, which currently is available only for anticompetitive agreements under Section 3.
No formal policy statements in respect of the application of Section 4 have been made by the Commission to date. However, the Commission, through its advocacy initiatives, as well as enforcement actions (discussed below), has made it clear that its enforcement priority is India's digital market and, interestingly, three of the four investigations (relating to abuse of dominant position) directed by the Commission over the past year focus on these markets.
Year in review
Between the first quarter of 2020 and April 2021, the Commission rendered final decisions, following an investigation by the Director General (DG), in nine cases related to Section 4 (i.e., abuse of dominance). Of these, penalties have been levied in two cases for abuse of dominant position: Association of Man-Made Fibre Industry of India (AMMFI)2 and International Spirits and Wines Association of India (ISWAI).3 In all the other cases (namely, Air Cargo Agents Association of India (ACAAI),4 Meet Shah,5 InPhase,6 Starlight Bruchem Ltd,7 Chettinad International Coal Terminal Pvt Ltd (CICTPL),8 Haryana Urban Development Authority (HUDA)9 and Prasar Bharti),10 the Commission found no infringement of Section 4 of the Act and closed the case. In Meet Shah, Prasar Bharti and HUDA, the Commission accepted the objective justifications argued by the enterprises being investigated; and in ACAAI, InPhase and CICTPL, the Commission found that the enterprises in question were not dominant. In Starlight Bruchem Ltd, the Commission found the allegations of the informant to be without any merit.
During the same period, the Commission issued four prima facie orders under Section 26(1) of the Act, directing investigations into allegations of infringement of Section 4. A snapshot of these cases is set out below.
|Sector||Case name||Conduct||Case opened*|
|Digital markets (digital payments)||Alphabet Inc12||The Commission found that Google's conduct of mandating use of the application store's payment system for paid apps and in-app purchases amounted to imposition of unfair conditions as it restricted the choice available to app developers while also giving Google a competitive advantage. The Commission also noted that allowing Google Pay as the only unified payment interface-based app as a valid payment method was imposing unfair and discriminatory conditions, denial of market access for competing apps of Google Pay and constituted leveraging on the part of Google. The Commission further noted that pre-installation of Google Pay may create a sense of exclusivity and default as users may not opt to download competing apps. The Commission noted that it was necessary to understand the nature of such contractual arrangements and whether they harm the process of competition in the market.||9 November 2020|
|Digital markets (online intermediation services for booking of hotels) and franchising services for budget hotels||MakeMyTrip India Pvt Ltd13||The Commission stated that the alleged absolute exclusion of Treebo pursuant to the arrangement between Oyo and MakeMyTrip (MMT) may lead to refusal to deal, which may have adverse effects on competition. The Commission also noted that the imposition of a price parity arrangement by MMT needed to be investigated under Section 4. The Commission further stated that the imposition of an exclusivity condition by MMT on Treebo was exclusionary and could potentially lead to denial of market access.||24 February 2020|
|Decorative paints||Asian Paints Limited14||The Commission noted that the alleged conduct of Asian Paints of threatening and pressurising dealers to prevent JSW Paints from establishing a presence in the relevant market was abuse of dominance by Asian Paints. The Commission was of the view that Asian Paints had denied access to necessary distribution channels in the relevant market and had limited the availability of alternate products, thereby reducing competition in the market.||14 January 2020|
|* 'Case opened' refers to the date of the prima facie order passed by the Commission directing the Director General to conduct an investigation|
In addition to the above, the Commission dismissed complaints alleging abuse of dominant position at the prima facie stage in more than 30 cases.
During the same period, the National Company Law Appellate Tribunal (the Tribunal) rendered judgments in 10 competition law cases relating to Section 4. The Tribunal upheld the Commission's findings in each of these cases except one (All India Online Vendors Association (AIOVA)).18 In AIOVA, the Tribunal set aside an order of the Commission under Section 26(2) of the Act. The Commission's order had dismissed allegations of abuse of dominance against Flipkart India Private Limited and Flipkart Internet Private Limited. The Tribunal ordered the Commission to direct the DG to initiate an investigation into the matter. In this case, the informant had alleged that Flipkart India Private Limited, being a business-to-business wholesaler, sold goods to companies such as WS Retail Services Private Limited (owned by founders of Flipkart Internet Services Private Limited until 2012) at discounted prices and, in turn, these were sold by sellers such as WS Retail on the online marketplace operated by Flipkart Internet Private Limited at heavily discounted prices. The Tribunal relied on observations made by the tax authority (the Income Tax Appellate Tribunal (ITAT)) in a tax proceeding against Flipkart that the Flipkart entities were providing preferential treatment to certain entities operating on its platform at the expense of other entities and were engaging in predatory pricing. The Tribunal observed that the Commission could not ignore findings by another judicial authority (ITAT) and that the findings of the ITAT were sufficient to constitute a prima facie case under the Act. In Verifone19 and Adani,20 the Tribunal upheld final orders of the Commission imposing penalties on Verifone and Adani for abuse of dominance in their respective relevant markets by imposing unfair and discriminatory terms and conditions on their customers. In Adani, the penalty was reduced as Adani had removed the offending terms from its agreements.
Market definition and market power
i Market definition
Identifying the relevant market is the starting point of every competition law assessment for determining dominance and abuse of dominance by an enterprise and enables the Commission to identify the competitive constraints being faced by the enterprise in question.
Under the Act, the product and geographic characteristics of the market are analysed to arrive at the definition of the relevant market. Market definitions are identified by the Commission based on the facts and circumstances of each case. In Section 19, the Act also identifies factors that the Commission must take into account in defining the relevant product and geographic markets.
The Act defines 'relevant product market' as a market comprising all those products or services that are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or services, their prices and intended use. Although the definition of 'relevant product market' seeks to identify the competitive constraints from the demand-side perspective, the Commission has, in its decisional practice, also focused on supply-side substitutability – the Commission introduced this notion in 2011 in the first predatory pricing case before the Commission: National Stock Exchange.21 The Draft Amendment Bill seeks to include the concept of supply-side substitutability in the statute as a part of the relevant market assessment. The Draft Amendment Bill defines this supply-side substitutability as all products and services that are regarded as interchangeable or substitutable by the supplier, by reason of the ease of switching production between these products and services and marketing them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices. In its decisions, the Commission typically considers the following evidence in defining the relevant product market, in addition to relying on economic tools: evidence of substitution in the past; views of customers and competitors; market reports and consumer surveys; and barriers and costs associated with switching demand to potential substitutes.
The notion of 'relevant geographic market' is defined in the Act as a market comprising an area in which the conditions of competition for the supply of goods or provision of services or the demand for goods or services are distinctly homogeneous and can be distinguished from the conditions prevailing in the neighbouring areas. To identify the relevant geographic market, the Commission considers the following evidence: basic demand characteristics (across geographies) in terms of preferences for brands, lifestyle, language, culture, lifestyle and the need for a local presence; views of customers and competitors; current geographic pattern of purchases; trade flows; and barriers and costs associated with switching sources from other geographic areas.
In AMMFI, the Commission defined the relevant product market as 'the market for supply of Viscose Staple Fibre (VSF) to spinners'. The Commission noted that natural fibres and man-made fibres differ in terms of characteristics, such as composition, resilience and capability to absorb moisture, and must, therefore, be considered as two separate product categories by manufacturers of yarn. The Commission further found that within man-made fibres, VSF, a cellulosic fibre, has different characteristics to other kinds of man-made fibres. For instance, VSF can be readily dyed and blends easily with other fibres. The Commission took note of the observations made by the Directorate General of Anti-Dumping and Allied Duties in Order No. 14/6/2009-DGAD, distinguishing VSF from other fibres. The Commission also observed that during the investigation period, the price of VSF had been 40 per cent to 60 per cent higher than cotton and polyester stable fibre (PSF). The Commission found that the correlation and regression analyses submitted by the opposite party (Grasim) did not conclusively establish substitutability between VSF and PSF and cotton and VSF. The views of the spinners and the apparel retail chains were also considered by the Commission. The Commission concluded that from the perspective of the spinners, VSF was not substitutable with other fibres. The relevant geographic market was defined as the 'whole of the geographical area of India' since the demand for VSF emanates from spinning mills located across the country.
In InPhase, the relevant product market was defined as the 'market for manufacture and sale of insulated-gate bipolar transistor (IGBT) based power quality solutions (PQS) for less than 1kV usage'. The Commission found that the purpose of power quality products is to resolve issues relating to power quality. Both the informant and ABB India Limited (ABB) (the opposite party) had admitted to customising their power quality products, to suit the on-site requirements of customers. A 'one size fits all' approach to PQS was found to be inappropriate. The Commission noted that there was no need to delineate distinct heterogeneous product markets in respect of different types of IGBT-based PQS. For purposes of defining the relevant geographic market, the Commission noted that, since the conditions of competition were homogeneous throughout India, the relevant geographic market was the territory of India.
In CICTPL, in the main investigation report, the DG (after conducting a catchment area analysis followed by an actual user overlap test) defined the relevant market to be the market for 'provision of common user coal terminal services at seaports in and around Kamarajar Port, i.e., Kamarajar Port and Krishnapatnam Port'. In the supplementary investigation report, the DG defined the relevant market to be the market for 'provision of common user coal terminal services in and around Kamarajar Port'. The DG conducted a qualitative preference assessment test to define the relevant geographic market and concluded that each port had its own captive hinterland exclusive from the other. However, the Commission held the relevant market to be the market for 'provision of common user coal terminal services at sea-ports in and around Kamarajar Port which includes CICTPL and common user coal terminals at Krishnapatnam Port'. The Commission stated that at least 50 per cent of the respondents to the DG's questionnaire were substituting Krishnapatnam port for Kamarajar Port and vice versa. The Commission further noted that actual coal imports by users showed that consumers were moving to Krishnapatnam Port in response to the alleged abusive conduct by CICTPL and that CICTPL was constrained by the prices charged by Krishnapatnam Port. The Commission found that even if some of the users of the port would prefer to avail the services of Kamarajar Port due to their proximity to the port in terms of the distance, convenience or even cost, such factors could not justify defining the market narrowly to exclude Krishnapatnam Port from consideration as a part of the relevant market. The Commission concluded that there was overlap in the hinterlands of both Krishnapatnam Port and Kamarajar Port, and that these ports put a competitive constraint on each other as evident from the fact that they have common users.
In ISWAI and Starlight, the Commission identified state-wide geographic markets based on the conditions for procurement, distribution and sale of liquor (or country liquor), which vary from one state to another.
The concept of 'dominant position' has been defined in the Act to mean a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to: (1) operate independently of competitive forces prevailing in the relevant market; or (2) affect its competitors or consumers or the relevant market in its favour. In assessing dominance in the relevant market, the Commission is required by Section 19 of the Act to assess dominance in the context of a broad range of non-exhaustive factors, including market share, size and resources of the enterprise, size and importance of the competitors, vertical integration, entry barriers and dependence of consumers on the allegedly dominant enterprise. The role and importance of each of these factors varies depending upon the facts of each case and the alleged theory of harm but, in its decisions, the Commission will typically assess dominance of the allegedly dominant enterprise under each of the Section 19 factors. Generally, market share and the size and resources of the enterprise will be the most important criteria in the Commission's assessment of dominance.
In AMMFI, the Commission found that Grasim was dominant in the relevant market. Grasim was the sole producer of VSF in the country and from 2011–2016, it enjoyed a market share of 87 per cent. Spinners did not find the prospect of importing VSF to be commercially viable on account of the anti-dumping duty imposed on imported VSF during the period under investigation. Grasim was a flagship company of the Aditya Birla Group and had a controlling stake in many large and small companies. The affiliated companies of the Grasim corporate family had witnessed significant growth in recent years in terms of revenue and assets, and the revenues earned by Grasim from the sale of VSF had also seen a substantial increase. The Commission also found that the manufacturing process of VSF was highly capital intensive and involved a complex technological process that required the incurring of huge investments. Moreover, the industry was subject to stringent environmental regulation and the production process required a large amount of water, which operated as significant entry barriers for potential entrants.
In ISWAI, the Commission found that the provisions of the 'Liquor Wholesale Order' granted powers and discretion to the Uttarakhand Agricultural Produce Marketing Board (the Board) to decide the manner in which business operations could be carried out in the entire state and that this regulatory exclusion of competition gave the Board a monopoly that ensured the retailers' complete dependence on Garhwal Mandal Vikas Nigam Ltd and Kumaun Mandal Vikas Nigam Ltd. These, in turn, were dependent on the Board for supplies. Thus, the Commission held the Board, Garhwal Mandal Vikas Nigam Ltd and Kumaun Mandal Vikas Nigam Ltd, all state entities, to be in a dominant position.
In InPhase, the Commission found that approximately 54 per cent of the relevant market of IGBT-based PQS of less than 1kV was enjoyed by reputed manufacturers, while the unorganised sector accounted for the remaining 46 per cent. During financial years 2013–14 and 2014–15, ABB, the opposite party, was not even in the top three positions in terms of turnover generated from the sale of IGBT-based PQS. The Commission found that the market was competitive as evidenced by the presence of a large number of competitors. No enterprise could function independently of market forces on account of the presence of significant competitive constraints. The Commission also noted the DG's finding that the entry of the informant and P2Power into the market evidenced the absence of entry barriers. IGBT was easily available in the market and IGBT-based PQS could be developed by any technical person. The Commission also found that the process of manufacturing IGBT-based PQS was not capital-intensive in nature. In addition, several credible market research reports had concluded that the market for IGBT-based PQS was still in its infancy and the entry of new market players could result in significant benefits to consumers. Based on these findings, ABB was found not to be dominant in this relevant market.
In CICTPL, the Commission held that CICTPL was not dominant in the market for 'provision of common user coal terminal services at sea-ports in and around Kamarajar Port, which includes CICTPL and common user coal terminals at Krishnapatnam Port' because of the location of Krishnapatnam Port, which had significant competitive constraints on CICTPL.
Under Section 4(2) of the Act, an enterprise (or a group) abuses its dominant position if it:
- directly or indirectly imposes unfair or discriminatory:
- conditions in the purchase or sale of goods or services; or
- price in purchase or sale (including predatory price) of goods or services (unless these discriminatory conditions or prices are required to meet competition);
- limits or restricts:
- production of goods or provision of services or markets thereof; or
- technical or scientific development relating to goods or services to the prejudice of consumers;
- indulges in conduct resulting in denial of market access in any manner;
- makes the 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; or
- uses its dominant position in one relevant market to enter into or protect another relevant market.
Section 4(2) of the Act appears to contain an exhaustive list of conduct that may constitute abuse of dominance, unlike Article 102 of the Treaty on the Functioning of the European Union (TFEU). The list of 'abuses' in Section 4(2) is sufficiently broad and could cover most exploitative and exclusionary conduct that could be characterised as an abuse of dominance. Section 4(2)(c), in particular, which prohibits any conduct by a dominant enterprise resulting in 'denial of market access in any manner', is frequently used by complainants or informants to cover exclusive dealing, refusal to supply and other theories of anticompetitive harm that do not explicitly fall within any of the other categories in Section 4(2).
It is notable that, unlike Article 102 of the TFEU as interpreted by the EU courts, the Act does not explicitly provide for objective justifications as defences to the anticompetitive conduct of dominant enterprises. Under the Act, the only defence recognised for abusive conduct of a dominant enterprise is the 'meeting competition' defence. To date, the Commission has not provided any published guidance, including in its decisions, on the scope of this defence. As previously noted, the Draft Amendment Bill seeks to exempt the reasonable exercise of intellectual property rights from Section 4.
ii Discrimination, exploitative and exclusionary abuses
In AMMFI, the Commission held that Grasim had abused its dominance by charging different prices to similarly placed domestic consumers. The Commission found that even for similar transactions involving the same month, the same plant, the same grade and the same denier, customers had been charged differently and that Grasim was not able to offer a satisfactory explanation for such differential treatment. The Commission then found that such discrimination by a dominant upstream firm could result not only in distortion in the downstream markets but could also have an adverse effect on the production efficiency of the downstream firms. In addition, Grasim had adopted a non-transparent discounting policy. The Commission observed that a dominant firm was subject to the responsibility to not engage in discrimination against similarly placed customers and must adopt a transparent pricing policy towards its customers. Grasim's practice of requiring customers to furnish documentation of their production and export details to avail of its discounts was regarded by the Commission as ex facie unfair and a manifestation of its market power as it enabled Grasim to prevent resale and trading of its products, thereby restricting an alternative source of supply. In its defence, Grasim contended that the terms of the discounts offered to various customers were drawn up by mutual consent of the parties and were necessary to calculate the discounts. The Commission found that Grasim was unable to establish why seeking production and export details from the customers was necessary to calculate discounts. The Commission found that there was no reason for Grasim to demand granular details of production and exports from its customers. Being a dominant enterprise, Grasim could not take the defence that a contractual term that otherwise violated the provisions of the Act was agreed upon by mutual consent of the parties. In addition, such conduct gave rise to the imposition of supplementary conditions in violation of the Act.
In ISWAI, the Commission held that the Board had abused its dominant position in the 'market for wholesale procurement of branded alcoholic beverages in the State of Uttarakhand' by 'not [placing] any orders for many brands of Pernod and USL for many months during the 11 [month] period [that the] Liquor Wholesale Order was in effect', thereby limiting or restricting wholesale procurement and distribution of Indian-made foreign liquor (IMFL) in the state of Uttarakhand and causing a denial of market access to producers of certain IMFL brands. However, the Commission did not find that Garhwal Mandal Vikas Nigam Ltd and Kumaun Mandal Vikas Nigam Ltd had abused their dominant position in the 'market for distribution of branded alcoholic beverages in the licensed area of Garhwal Mandal Vikas Nigam Ltd in the State of Uttarakhand' and 'market for distribution of branded alcoholic beverages in the licensed area of Kumaun Mandal Vikas Nigam Ltd in the State of Uttarakhand', respectively, as they were entirely dependent on the Board for obtaining supplies and they could not directly procure from the IMFL manufacturers. The Commission held that the arbitrary and capricious procurement undertaken by the Board had led to an increase in sales of brands of some manufacturers and led to a steep decline in the sales of others (USL and Pernod in the present case). The implementation of the policy in an inappropriate manner by the Board led to some brands and players attaining an unfair advantage over (and harming the sales of) others, thereby distorting competition in the market. The Commission held that the provisions of the Liquor Wholesale Order did not require the Board to favour a few brands over others by discriminating against some brands that had more sales as compared to other brands with lower sales. The Commission noted that the Board and the other opposite parties were the only route to access the market for alcohol manufacturers on account of the sole rights of procurement and distribution provided under the Liquor Wholesale Order and that the Board did not place orders for many brands during the period. The Commission held that such conduct indicated limiting or restricting wholesale procurement and distribution of IMFL and denial of market access to producers of certain brands of IMFL in the state of Uttarakhand, despite the existence of demand for such IMFL brands by the retailers.
In Meet Shah, the informants were aggrieved by the pricing practices adopted in the sale of e-tickets on the website of the Indian Railway Catering and Tourism Corporation (IRCTC), the state-run e-ticketing agent of the Indian Railways. The total fare for a ticket booked on the website comprises, among other things, a base fare, which in turn has two components, namely actual base fare and total base fare. The informants alleged exploitative abuse based, inter alia, on the actual base fare being rounded off to the next higher multiple of five to arrive at the total base fare. The Commission noted that this pricing practice had been implemented pursuant to a policy decision of the Union of India. Importantly, such pricing was implemented uniformly in respect of all passengers without any discrimination. The Commission found that the practice of rounding-off had efficiency parameters and improved the quality of the Railways' services for its passengers, in addition to saving a substantial amount of time and effort in terms of logistics and infrastructure. The IRCTC's contention that the rounding-off policy was, in part, aimed at recouping the losses accruing from operating in the passenger segment was accepted as valid justification by the Commission. In the Commission's view, no case for abuse of dominant position had been made out on the facts and circumstances of the case.
In ACAAI, it was alleged that the unilateral actions and decisions of the International Air Transport Association (IATA) prejudiced the functions, market practices and interests of air cargo agents and that the IATA mandated the cargo agents to collect increased or extra charges under the heading of 'surcharge' from consumers whenever there was an increase in price of aviation fuel, causing cargo agents to suffer losses of commission. The Commission held that the IATA was not dominant in the 'market for account settlement services in respect of air cargo segment in India', as during the relevant period (2009 to 2013), 'no' airlines were using the Cargo Account Settlement Systems, as they were all using their own account settlement systems in respect of payment to cargo agents in the air cargo segment in India. Thus, the IATA market share was 'nil'. The Commission also observed that even beyond the relevant period, the IATA market share was never more than 21.18 per cent.
In CICTPL, the Commission held that the conduct of CICTPL, regardless of it being opportunistic, could not be termed as abuse arising out of dominance as CICTPL was not dominant in the relevant market for 'provision of common user coal terminal services at sea-ports in and around Kamarajar Port, which includes CICTPL and common user coal terminals at Krishnapatnam Port' due to the location of Krishnapatnam Port, which imposed significant competitive constraints on CICTPL.
In HUDA, the informant alleged that HUDA abused its dominant position by incorporating illegal terms and conditions and supplementary obligations in contravention of the provisions of the Act. The informant contended that HUDA's policy (as contained in Clause 2 of the allotment letter) of not allowing the owners of institutional plots to transfer or sell amounted to an abuse of dominant position by HUDA in terms of the Act. The Commission found that the institutional plots were allotted at prices that were considerably lower than the market rates and that the purpose of the allotment of institutional plots was not to allow the allottees to subsequently transfer them with a view to earn profits out of these transfers or sales. Notably, HUDA had also modified this policy decision, to some extent, allowing transfers. The Commission held that these considerations could not be ignored. The Commission refrained from giving any determinative findings on this aspect and held that HUDA had not contravened the provisions of Section 4 of the Act.
In InPhase, the parties were involved in the manufacture of power quality and power conversion products. The informant alleged that, since it had developed a product that was superior to the products of the opposite party (ABB), which was gaining traction among consumers, the latter was devising ways to 'suppress technological innovation/development and competition posed by the product of the Informant'. Based on an analysis of the evidence on record, however, the Commission concluded that ABB was not dominant in the relevant market and directed the closure of the case without going into the merits of the allegations of abuse of dominance.
In Prasar Bharti, the opposite parties (Prasar Bharti and the Ministry of Information and Broadcasting) were engaged in the provision of infrastructure facilities for FM radio broadcasting. The informants had alleged that the opposite parties were abusing their dominant position by imposing abusive terms and conditions on private FM radio broadcasters through the agreement entered into under the Phase III FM Radio Policy. The informants alleged that the mandatory use of the infrastructural facilities of the opposite parties and an increase in licence fee without informing the private FM broadcasters were abusive. The informants also alleged that the opposite parties were imposing non-reasonable fees and rates, maintenance charges and miscellaneous charges on the FM radio broadcasters. The Commission assessed each of the allegations in detail and concluded that the opposite parties were not abusing their dominant position. The Commission held that the mandatory use of the infrastructural facilities was not abusive, as the FM policy of co-location of transmission infrastructure, in addition to reducing the costs involved, also ensured a level playing field for broadcasters in each city. The Commission held that the non-communication of charges by Prasar Bharti in a timely manner (which the informants were obliged to pay for continuation of their agreement) was not abusive under Section 4 of the Act. In relation to allegations of charging a higher base rate for open space and covered space, the Commission observed that there was no material evidence to show that an unreasonable and unfair price had been imposed. The Commission also analysed the various clauses of the infrastructure agreement and found that the clauses were not abusive.
In Verifone, the opposite party (Verifone) was engaged in the business of supplying point-of-sale (POS) terminals along with core POS terminal applications and software development kits (SDK). These products were sold to customers such as the informant, which acted on behalf of the acquiring banks and provided value-added services to develop and integrate applications into POS terminals. The informant alleged that, in January 2012, Verifone asked it to sign a draft SDK agreement containing several onerous and one-sided clauses without any scope for negotiation. On its part, the informant made several attempts to engage in a constructive discussion with Verifone regarding the unfair nature of the provisions of the SDK agreement, which were largely ignored. In this case, the Tribunal held that the terms of the SDK agreement deviated from standard industry practice and were non-negotiable, which was a contravention of Section 4 of the Act.
In Adani, the Tribunal found Adani to have abused its dominant position in the market for supply and distribution of natural gas in Faridabad, in contravention of Section 4 of the Act. The informants were supplied natural gas by Adani to meet their fuel requirements under a gas supply agreement (GSA). It was alleged that the terms of the GSA were biased in favour of Adani. For example, Clause 16.3 of the GSA vested in Adani the sole discretion of accepting or rejecting requests of the consumers in a situation of force majeure, while Clauses 17.2 and 17.4 vested in Adani the right to terminate the agreement in the event of a buyer's failure to take 50 per cent or more of the cumulative daily contracted quantity during a period of 45 consecutive days. The Tribunal upheld the finding of the Commission that several terms of the GSA infringed the Act.
Remedies and sanctions
Pending final determination of a case by the Commission, the Commission may issue interim orders restraining the parties from engaging in anticompetitive activities during the course of investigation. Recently, the Commission issued an interim order in MakeMyTrip India Pvt Ltd and directed MakeMyTrip and GoIbibo India to list FabHotels and Treebo on their online portals.
If an enterprise or group is found to have abused its dominant position, in terms of Section 27 of the Act, the Commission may impose fines of up to 10 per cent of the enterprise's or group's average turnover for the preceding three financial years. Keeping in view the principles of proportionality, while deciding the amount of penalty, the Commission takes into account any aggravating or mitigating factors based on the facts and circumstances of each case. In addition, the Commission may pass a cease-and-desist order together with any other orders or directions as it may deem fit. The Commission has not yet issued any guidelines on penalties. The Supreme Court has clarified that, for determining the amount of penalty, the Commission must take into account the relevant turnover generated from products and services affected by the infringing conduct, as opposed to total turnover. The Supreme Court noted that any penal law imposing punishment is made for the general good of society and emphasised the principle of proportionality, which requires that the penalties imposed must not exceed what is appropriate and necessary for attaining the objective pursued.
Since the first quarter of 2020, the Commission has passed orders in two cases under Section 27 of the Act in respect of abuse of dominant position: AMMFI and ISWAI. In AMMFI, the Commission observed that Grasim had not pleaded any mitigating factors in respect of the imposition of penalty. The Commission imposed a penalty of 3.016 billion rupees on Grasim (5 per cent of the average relevant turnover generated by Grasim in the market for sale of VSF to spinners in India during financial years 2014–15 and 2016–17). In ISWAI, the Commission imposed a penalty of 10 million rupees on the Board due to the nature and periodicity of the contravention involved and the mitigating factors presented by the Board.
In Verifone, the Tribunal upheld the penalty of 44.8 million rupees imposed by the Commission. In Adani, the Tribunal reduced the penalty levied on Adani from 4 per cent of the turnover for the relevant three years to 1 per cent after considering the mitigating factors in favour of Adani. The Tribunal observed that during the investigation, Adani had voluntarily revised the terms of the GSA to make them more consumer friendly. These revisions eliminated discrimination against industrial customers, including members of the informant.
The Commission is empowered under Section 48 of the Act to proceed against officers of a company found to have abused its dominant position.
i Proceedings before the Commission
The Act provides the procedure for the filing of information (i.e., the complaint), the investigation process, inquiry by the Commission and the procedure for appeal.
Any person may file a complaint with the Commission, in the prescribed format together with requisite fees, alleging contravention of the provisions of the Act. The informant (i.e., the complainant) may also file an application with the Commission for interim measures by describing the harm that would be caused if no interim protection is granted. In Samir Agarwal,22 the Supreme Court of India clarified that wide interpretation must be given to the term 'informant' to include any person even if the person is not aggrieved. Once the information is filed, the Commission, as far as possible, is required to record its opinion on the existence of a prima facie case within 60 days of the filing of the information.
If the Commission is satisfied that a prima facie case of anticompetitive conduct is made out, the Commission directs the office of the DG to investigate the matter. The DG conducts the investigation and submits the investigation report to the Commission. The affected parties are given an opportunity to challenge the findings in the investigation report. After considering the submissions made by the parties, the Commission proceeds to decide the matter. Appeals from the Commission's orders are filed with the Tribunal. The Supreme Court of India is the final appellate authority for all matters under the Act.
ii Appellate procedure
An appeal against the final order of the Commission may be made to the Tribunal within 60 days of the date of receipt of the final order by the party. An appeal against the order of the Tribunal may be made to the Supreme Court of India within 60 days of the date of receipt of the Tribunal's order.
Interim measures are available to parties before the Commission, the Tribunal and the Supreme Court of India. Frequently, parties also file writ petitions before the state high courts if they believe that principles of natural justice are being violated or their legitimate legal rights are being ignored by the Commission.
Although the Act does not provide for private enforcement, it does allow a successful informant or any other person affected by the findings of the Commission to make an application before the Tribunal for compensation from the dominant enterprise based on the findings of the Commission or the orders of the Tribunal.
Ashok Kumar Gupta, the chairperson of the Commission, has said that the 'digital economy is evolving and so should the approach to look at it'.23 He stated further that the legal framework set out in the Act for determination of an appreciable adverse effect on competition is sufficiently broad, gives the Commission flexibility to develop and test all such theories of harm that may be relevant in digital markets and that the Commission is open to bring in such new dimensions in its substantive assessments. The chairperson has also said that the '[t]echnology now allows firms to compile and refine information into a more useful finished product and that allows the firms to protect [their] position by creating an ecosystem comprising multiple portals among which users can easily switch. Building of such ecosystems intensifies the likelihood of increased entry barriers, market concentration and reduced innovation.'24 The Commission has directed several investigations of companies operating in digital markets.
The Commission has recently invited public comments regarding a review of the Confidentiality Regime as provided in the Competition Commission of India (General) Regulations, 2009. The Commission has proposed that, under the new regime, the parties would submit the confidential, as well as non-confidential, versions of their filings on a self-certified basis stating and undertaking categorically that such versions have been prepared in accordance with the parameters for seeking confidentiality in accordance with the new regulation in this regard. The proposal also provides that the Commission may set up a confidentiality ring comprising authorised party representatives who would be able to review the entire case records in an unredacted form subject to appropriate undertakings against disclosure. It is also proposed that the existing default position, which enables the informant to seek confidentiality of its identity merely upon requesting this in writing, would be eliminated, and that the Commission would be empowered to grant confidentiality over the identity of the informant in appropriate cases.
1 Anand S Pathak is the managing partner at P&A Law Offices.
2 Case No. 62 of 2016, XYZ v. Association of Man Made Fibre Industry of India.
3 Case No. 2 of 2016, International Spirits and Wines Association of India (ISWAI) v. Uttarakhand Agricultural Produce Marketing Board.
4 Case No. 79 of 2012, Air Cargo Agents Association of India v. International Air Transport Association.
5 Case No. 30 of 2018, Meet Shah v. Union of India, Ministry of Railways.
6 Case No. 12 of 2016, InPhase Power Technologies Private Limited v. ABB India Limited.
7 Case No. 53 of 2017, Starlight Bruchem Ltd. v. Flora and Fauna Housing & Land.
8 Case No. 73 of 2015, Tamil Nadu Power Producer Association v. Chettinad International Coal Terminal Pvt. Ltd.
9 Case No. 94 of 2016, Gurgaon Institutional Welfare Association v. Haryana Urban Development Authority.
10 Cases Nos. 29 of 2016 and 19 of 2017, Next Radio Limited, Mumbai v. Prasar Bharti.
12 Case No. 7 of 2020, XYZ v. Alphabet Inc.
13 Case No. 1 of 2020, Rubtub Solutions Pvt. Ltd. v. MakeMyTrip India Pvt. Ltd.
14 Case No. 36 of 2019, JSW Paints Private Limited v. Asian Paints Limited.
15 WP (C) 4378/2021, WhatsApp LLC v. Competition Commission of India.
16 WP (C) 4407/2021, Facebook Inc. v. Competition Commission of India.
17 LPA 163/2021, WhatsApp LLC v. Competition Commission of India; and LPA 164/2021, Facebook Inc. v. Competition Commission of India.
18 Competition Appeal (AT) No. 16 of 2019, All India Online Vendors Association (Sellers Association) v. Competition Commission of India.
19 TA(AT) (Competition) No. 1 of 2017, Verifone India Sales Pvt Ltd v. CCI & Atos Worldline India Pvt Ltd.
20 TA (AT) (Competition) No. 33 of 2017, M/s Adani Gas Limited v. Competition Commission of India.
21 Case No. 13 of 2009, MCX Stock Exchange v. National Stock Exchange.
22 Civil Appeal No. 3100 of 2020, Samir Agrawal v. Competition Commission on India.
23 Competition Commission of India, 'Fair Play' Volume 34, July–September 2020, http://www.cci.gov.in/sites/default/files/Newsletter_document/FAIRPLAYISSUE34ENGLISH.pdf.
24 Ashok Kumar Gupta, Keynote Address, 'Regulating the Digital Economy', US–India Business Council, Virtual Roundtable (29 July 2020), http://www.cci.gov.in/sites/default/files/speeches/USIBC.pdf?download=1.