Interim Reliefs Under the Competition Act, 2002 – A Powerful Yet Underutilized Tool?

An interim relief is an effective tool to preserve status quo pending any proceedings particularly in situations where non-intervention may render the entire proceedings meaningless. Under the Indian competition law, during an “inquiry”, the Competition Commission of India (‘CCI’) has the power to “temporarily restrain any party from carrying on such act until conclusion of such inquiry or until further orders, without giving notice to such party, where it deems it necessary”,[1] subject to the satisfaction of certain conditions. An “inquiry” is considered to have begun once CCI passes a prima facie order directing the office of director general (‘DG’) to commence an investigation. Notably, interim relief orders can be passed without issuing notice to the other party (ex parte), although CCI is required to hear the party against whom such an order has been passed, within a short span of passing such orders.[2]

Conditions for Granting Interim Measures in Competition Law Proceedings in India

In a pivotal judgment i.e., CCI v. Steel Authority of India Ltd. (‘SAIL Case’),[3] the Supreme Court of India (‘SC’), laid down the following conditions required to be satisfied in order to issue an interim relief order under Section 33 of the Competition Act, 2002 (‘Act’):

i.     CCI should clearly record its satisfaction of the contravention of the relevant provisions of the Act (based on a higher degree than formation of a prima facie view under Section 26(1) of the Act);

ii.    it must be necessary to issue an order of restraint; and

iii.  based on the evidence placed on record before CCI, it should be apparent that in absence of an interim relief, either: (a) the party suffering the lis will most likely suffer irreparable and irretrievable damage; or (b) there would be an adverse effect on competition in the market.

Importantly, the SAIL Case clarifies that to issue an interim relief order, CCI is required to form a higher degree of satisfaction regarding an act of contravention than what is required to form a prima facie view. The SC also clarified that this power has to be used “sparingly and under compelling and exceptional circumstances”.  Moreover, CCI is required to evaluate balance of convenience and the possibility of irreparable damage to the claimant or to competition. As elucidated below, CCI has followed the three-pronged test set out in the SAIL Case while granting interim reliefs.

CCI’s Decisional Practice

In a case involving allegations of abuse of dominance and other anticompetitive conduct by Mahyco Monsanto Biotech (India) Ltd. and its affiliates (‘Monsanto’), CCI found it appropriate to grant interim relief to the informants.[4] CCI noted that Monsanto proposed to implement certain post termination obligations of the licensing agreement with the informants, to ensure that the informants do not sell the seeds with Monsanto’s patented technology. CCI followed the principles set out in the SAIL Case and observed that in absence of an interim relief in favour of the informant: (a) the informant would be required to destroy the seeds (which have a long gestation period of 5 (five) to 7 (seven) years for development); (b) there would be shortage in supply of seeds due to their exclusion; and (c) there would be an adverse impact on the ecosystem of cotton cultivation in the areas where the informant was supplying to, thereby causing irreparable damage. CCI further observed that if it were to conclude in favour of Monsanto, the interim relief would have only caused financial loss to Monsanto at that stage. Moreover, in absence of an interim relief, Monsanto would effectively have invoked the same clauses that CCI had prima facie found to be in contravention of the Act. Evidently, before intervening, CCI found the balance of convenience in favour of the informant, examined the necessity of granting the interim relief and the potential irreparable impact on the market.

More recently, on March 9, 2021, CCI granted interim relief to 2 (two) franchising service providers against MakeMyTrip India Pvt. Ltd. and Ibibo Group Pvt. Ltd. (collectively referred as ‘MMT-Go’).[5] By way of background, Rubtub Solutions Pvt. Ltd. (‘Treebo’) and Casa2 Stays Pvt. Ltd. (‘FabHotels’) in separate instances, inter alia, alleged that the exclusive agreement between MMT-Go and OravStays Pvt. Ltd. (‘OYO’) had caused the delisting of Treebo’s and FabHotels’ hotels from MMT-Go’s website, i.e., an anti-competitive conduct by MMT-Go and OYO. Such delisting has allegedly caused significant financial losses, impeded growth and therefore, reduced investors’ confidence in Treebo and FabHotels. Notably, CCI found the balance of convenience in favour of Treebo and FabHotels since: (a) non-accessibility could have significantly hampered their online visibility as well as the services being availed by their respective associated hotels; and (b) re-listing Treebo and FabHotels did not seem to cause any significant comparative hardship to MMT-Go.

Further, CCI noted that: (a) online platforms have emerged as key access routes for service providers to reach consumers during the pandemic; and (b) the mutually beneficial but exclusionary agreement between MMT-Go and OYO denied Treebo and FabHotels access to an important distribution channel that would result in irreparable damage to competition in the downstream market of franchisee service providers. While interim measures have typically been granted to maintain the status quo, in MMT-Go’s case, CCI has taken this a notch above by providing the remedy in the form of an interim relief, thereby pre-empting potential damage to competition. Interestingly, on June 14, 2021, a division bench of the High Court of Gujarat set aside the interim order issued by CCI and asked CCI to provide OYO a chance to be heard and consequently issue a fresh order.

The most recent order of CCI issuing an interim relief was in the case of Confederation of Professional Baseball Softball Clubs v. Amateur Baseball Federation of India.[6] The Confederation of Professional Baseball Softball Clubs (‘CPBSC’) had scheduled to organize a tournament in Hyderabad to enable the best baseball clubs to compete with each other and encourage new players to play professional baseball. Amateur Baseball Federation of India (‘ABFI’) was alleged to be a dominant entity that: (a) sent communications to State Baseball Associations prohibiting them to deal with bodies not recognized by ABFI (by effect, impacting CPBSC); and (b) restricted access of baseball players to CPBSC by restricting such players from participating in tournaments/private professional leagues not recognized by ABFI. Importantly, CCI held that an interim relief in favour of CPBSC was necessary in this case for the following reasons: (a) Given ABFI’s importance in the baseball ecosystem in India, it was dominant in market for organization of baseball leagues/events/ tournaments in India; (b) the alleged conduct of ABFI was brazenly in contravention of the Act; and (c) “any delay in issuing an interim relief would irretrievably damage the interests of other federations and the players”.

Conclusion

In conclusion, the power to grant or refuse an interim relief should be used judiciously after careful examination of facts and circumstances, including the prevalent market conditions. Judicial delays and undue continuation of interim relief orders have the propensity to adversely affect the free market economy. Since interim measures have the power to avoid undermining the effectiveness of a final decision, such measures are recommended to be used sparingly in line with best international practices. However, during times of crisis (such as the COVID-19 pandemic), competitive conditions may be impacted by the exit of market incumbents resulting in increased market power of the remaining incumbents. In such times, those firms with deep pockets can take advantage of the fragility of competitors and there is a heightened risk of exclusionary behaviours, such as predatory pricing and other exclusionary strategies.’[7]

The increased possibility of relatively stronger market incumbents to take advantage of such market conditions by indulging in exclusionary practices, may require an increased intervention by CCI by way of granting interim reliefs to avoid any lasting harm to competition. In such cases, timely intervention can be critical, else the alleged anti-competitive conduct can result in absolute frustration of the claimant’s case.

 

[1] Section 33 of the Competition Act, 2002.

[2] Regulation 31(2) of the CCI (General) Regulations, 2009 (as amended).

[3] CCI v. Steel Authority of India Ltd., (2010) 10 SCC 744.

[4] M/s Nuziveedu Seeds Ltd. & Ors. v. Mahyco Monsanto Biotech (India) Ltd. & Ors., Case No. 107 of 2015.

[5] In Federation of Hotel and Restaurant Associations of India & Anr. v. MakeMyTrip India Pvt. Ltd. & Ors.  (Case No. 14 of 2009) clubbed with Rubtub Solutions Pvt. Ltd. v. MakeMyTrip India Pvt. Ltd. & Anr. (Case No. 1 of 2020).

[6] Case No. 3 of 2021.

[7]OECD (2020), The role of competition policy in promoting economic recovery, www.oecd.org/daf/competition/the-role-of-competition-policy-in-promoting-economic-recovery-2020.pdf

Published In:Inter Alia Special Edition - Competition Law - September 2021 [ English
Date: September 16, 2021