Introduction

The treatment of trade associations and their activities has been a topic of keen interest for antitrust practitioners and regulators. Trade associations face a difficult challenge of balancing their legitimate goals of addressing industry issues on the one hand and ensuring there is no anti-competitive information exchange between its members on the other. There have been a plethora of cases from competition authorities including the Competition Commission of India (‘CCI’) investigating trade associations’ role in cartel cases, including price fixing, allocation of customers or territories and bid-rigging. However, there are not many cases where trade associations have been investigated for abusing their dominant position. The CCI in its recent order in Air Cargo Agents Association of India (‘IATA’) v. International Air Transport Association  (‘IATA Case’)^[1] has considered the applicability of abuse of dominant position provisions under the Competition Act, 2002 (‘Act’) to trade associations^[2]. In the IATA Case, the CCI analysed the activities of IATA and since some of the services provided by IATA and IATA India were based on payment of fees, IATA was held to be an ‘enterprise’ and therefore open to an examination for abuse of dominance. In this article, we analyse the CCI’s cases on trade associations and assess whether its approach of assessing trade associations for abuse of dominance is merited. We conclude with the key takeaways from the CCI’s decisions for trade associations.

Enterprises and Economic Activity

Under the Act, only an ‘enterprise’ can abuse its dominant position^[3] and an enterprise is defined^[4] as any firm or person engaged in activities relating to production, storage, supply, distribution, and acquisition etc., of goods or provision of services^[5]. Therefore, the starting point of assessing whether trade association can be held liable for abuse of dominance is to determine if it can be characterized as an enterprise.

The CCI has observed^[6] that for any entity to be an enterprise, it is necessary to be engaged in an activity which is clearly ‘economic’ and ‘commercial’ in nature. Further, the CCI^[7] and the Supreme Court^[8] have clarified that in order to constitute an economic activity, the entity has to be engaged in offering products in some market where there are some buyers and sellers regardless of whether the activities are intended to earn a profit or not.

Functional Approach of Assessing the Economic Activities

The CCI has held that the analysis of the economic activities of a trade association should be done based on the functional aspects and not the institutional aspects. This is because the same legal entity may be acting as an enterprise when it is carrying one activity and not when carrying any other. The European Union (‘EU’) also follows a ‘functional approach’ in determining whether an entity’s activity can be regarded as the one performed by an undertaking^[9] under the competition rules. The Court of Justice in Motosykletistiki Omospondia Ellados NPID (MOTOE) v Elliniko Dimosio^[10] observed that ‘The classification as an activity falling within the exercise of public powers or as an economic activity must be carried out separately for each activity exercised by a given entity’. The CCI has held that if the role of the trade association is limited to being a platform for its members to discuss common issues and it does not undertake any commercial activities on its own then it will not be termed as an enterprise.^[11] However, this functional approach has resulted in different outcomes in similar circumstances for the CCI.

In Santuka Associates Pvt. Ltd. v. All India Organization of Chemists and Druggists^[12], the informant alleged that All India Organization of Chemist and Druggist (‘AIOCD’) was limiting/denying market access to stockists and distributors of pharmaceutical products and also abusing its dominant position. While assessing the allegation of abuse, the CCI held that the constituent members of the trade association may be enterprises but since AIOCD didn’t have any independent business activities, it was not an enterprise and was consequently only liable for the cartel conduct.

On the other hand, in Shivam Enterprises v. Kiratpur Truck Operators^[13] (‘Kiratpur Case’) the CCI agreed with the informant’s submission that Kiratpur Sahib Co-operative Transport Society (‘Transport Society’) was an ‘enterprise’ by examining the ‘functional aspects’ of the Transport Society. It observed that the Transport Society was engaged in activities relating to provision of services of freight transport by trucks because (i) the Transport Society got the contracts and executed them through its members; and (ii) the contracts were handled through internal procedures and the customers had limited ability to change them^[14]. Further, since only the Transport Society was providing transport services in the Kiratpur area, the CCI held that it was dominant in the market for ‘provision of services of goods transportation by trucks in and around Kiratpur area in Punjab’. The CCI also held that it was abusing its dominant position in this market.  Additionally, the CCI also penalized the Transport Society for collusive conduct.

In the IATA Case, the informant alleged that IATA was involved in collusive conduct as well as for abuse of dominance. The CCI and the Director General analysed and exonerated IATA from the allegation of cartelization but did not assess the informant’s allegation of abuse of dominance. However, when the Appellate Tribunal directed the CCI to analyse the allegation of abuse of dominance, the CCI assessed IATA’s activities^[15] and observed that IATA India had been established for rendering advisory and other services in relation to the aviation industry in general and to act as a representative of IATA in India. Further, some of IATA’s activities, particularly provision of account settlement services were based on payment of fee. ^[16] IATA reported its income under three heads (i) sales of products and services; (ii) interest income and; (iii) share of profit in a joint venture. Accordingly, the CCI found IATA as an ‘enterprise’ operating in the market ‘for account settlement services in respect of air cargo segment in India’. However, the CCI did not find IATA to be dominant in the relevant market.

Conclusion

The CCI’s approach in the IATA and Kiratpur cases raise questions over the treatment of the trade associations for antitrust analysis. Our view is that the CCI’s functional approach to determine if a trade association is an enterprise is formalistic and may result in false positives. In the Kiratpur Case, the Transport Society was executing a contract in its own name and was receiving payments from customers which was then passed on to its members after retaining some commission. However, in the IATA Case, the economic activity that led to its characterization as an enterprise was provision of account settlement services for the cargo agents. The CCI rejected IATA’s submission that its account settlement service was merely a platform to simplify the billing and settling of accounts between airlines and freight forwarders/cargo agents. Providing a common platform that simplifies and makes the processes efficient for the industry is a classic function of a trade association and it is debatable whether such function could be construed as an economic activity for the trade association’s own benefit. If a trade association is engaged in price fixing or creates barriers to a new entrant, it can be held liable under the anti-cartel provisions under the Act since its members will be presumed to be colluding through the trade association.

By the same token, holding trade associations potentially liable for abuse of dominance would, by extension, amount to finding members liable for abuse collectively since the trade association acts at the behest of its members for their benefit. The CCI has held in several cases that the concept of collective dominance is not available under the Act. However, investigating against trade associations under abuse of dominance provisions may be viewed as recognizing the concept of collective dominance under the Act. This may also place a difficult burden on the CCI to segregate each activity of a trade association as an economic or non-economic activity.

In any event, the IATA Case indicates that there may be enhanced scrutiny of trade association activities since they may now be scrutinized under cartel and abuse of dominance provisions. To avoid a potential abuse of dominance issue, trade associations may have to review their activities closely to ensure that they are not used as a platform and be seen as themselves providing economic activities like payment of any fees for accessing any service or negotiating and executing contracts on behalf its members, charging administrative fees for organizing any industry-wide function such as maintaining industry data, operating platforms for commercial transactions, etc. It may also be useful for trade associations to seek guidance on whether they are likely to be regarded as dominant in any commercial activity they are currently involved in.

[1] Please refer below for further details on the IATA Case.

[2] Case No. 79 of 2012

[3] Section 4 of the Act.

[4] Section 2(h) of the Act.

[5] The term ‘services’ is defined under Section 2(u) of the Act and includes sectors such as such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, conveyancing of news or information and advertising, etc.

[6] Shubham Srivastava v DIPP, Case no 39 of 2013 (Minority Order).

[7] Surinder Singh Barmi v. BCCI, Case no 61 of 2010.

[8] Competition Commission of India v. Coordination committee of artists and technicians of W.B. Film and Television, Civil Appeal No. 6691/2014 

 [10] Case C-49/07 [2008] ECR 1-4863

[11] Reliance Big Entertainment Limited and Others v. Karnataka Film Chamber of Commerce, Cases 25, 41, 45, 47, 48, 50, 58 and 69 of  2010 

[12] Case 20 of 2011

[13] Case No 43 of 2013

[14] The customer makes payment for the services to the Transport Society and it in turn passes the payment to the concerned members of the transport society after retaining its commission/administrative charges.

[15] Services like, intelligence and statistics, financial services, consulting, advertising, advocacy, liasioning with aviation industry among other things.

[16] The Director General found that IATA’s main source of income was from sale of products and services and contribution of member airlines for billing and settlement plan operations which facilitates remittances from cargo agents to various airlines.