Report of the Insolvency Law Committee: The New Way Forward
Report of the Insolvency Law Committee: The New Way Forward
On November 16, 2017, the Government of India constituted a committee to undertake a comprehensive review of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) in light of the experiences of various stakeholders during the past year. The Ministry of Corporate Affairs (‘MCA’) constituted the Insolvency Law Committee (‘ILC’) which comprises representatives from across the industry. Bahram N Vakil, a founding partner of AZB & Partners (‘Firm’) and a member of the Bankruptcy Law Reform Committee (the committee entrusted with drafting of the IBC in 2015) is one of the members of the ILC.
The MCA released ILC’s report on April 3, 2018 (‘Report’). The Report proposes various amendments to the IBC and the rules and regulations thereunder. The Parliament is likely to consider the Report in the near future to make the relevant legislative changes. Some of the major changes proposed by the Report are as below:
- Homebuyers upgraded
The IBC does not explicitly categorise homebuyers who have paid advances towards completion of real estate projects as financial or operational creditors in the corporate insolvency resolution process (‘CIRP’) of the real estate developer.The ILC took the view that advances paid by homebuyers are effectively used by real estate developers as working capital to finance the completion of projects thereby giving it the commercial effect of a borrowing and has proposed that homebuyers be treated as financial creditors. Note that their secured status depends on the nature of their contract with the developer and the bank providing the home loan. The ILC has also proposed that a large block of creditors be allowed to participate in meetings of the committee of creditors (‘CoC’) through an authorised representative.
- Interest clock on interim finance extended
Under the IBC, interim finance and any interest on it is classified as insolvency resolution process cost which receives the highest priority on any payout under a resolution plan. However, in the event of liquidation, though the principal amount of interim finance still retains its highest priority, the interest stops accruing from the date of the liquidation order.The ILC felt that the clog on accrual of interest in liquidation was affecting liquidity and raising the coupon on interim finance. The ILC has proposed that interest on interim finance shall continue to accrue for up to one year from the liquidation commencement date. Note that the Insolvency and Bankruptcy Board of India (‘IBBI’) has already made necessary changes to this effect in the IBBI (Liquidation Process) Regulations, 2016.
- Disqualification for bidders – revisited again
Section 29A of the IBC was introduced to address concerns that persons who by their conduct had contributed to the financial distress of the corporate debtor or are otherwise deemed not to be fit and proper to gain control over distressed assets, should be disqualified from being resolution applicants. However, the market felt that the range of disqualifications and the affected persons was too large. To address this issue, the ILC has made several proposals, some of which are set out below:
i. Section 29A of the IBC lays down eligibility criteria vis-à-vis the resolution applicant as well as any person acting jointly or in concert with the applicant. The term ‘acting jointly or in concert’ is not defined in the IBC and causes market participants to rely on the definition contained in the Securities and Exchange Board of India (‘SEBI’) (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. This results in inclusion of an extremely broad range of persons, including even those who are involved in the resolution plan in an ancillary way. The ILC proposes to restrict the eligibility test only to the applicant and its connected persons. Additionally, any person acting with a common objective of acquiring voting rights or control over the company would also have to pass the eligibility test.
ii. Section 29A(c) of the IBC bars persons who have been in control of a non-performing asset (‘NPA’) for more than one year. However, this provision effectively disqualified several ‘pure play’ financial investors who are in the business of investing in companies across the credit spectrum. For instance, asset reconstruction companies, private equity and distressed debt funds are quite likely to have some distressed assets in their portfolios. The ILC has proposed that the test under Section 29A(c) of the IBC should not apply to such pure play financial entities.
iii. Section 29(A)(d) of the IBC bars persons who have been convicted of a criminal offence punishable with imprisonment for more than two years. This disqualification was thought to be very expansive and would disqualify applicants for offences, the commission of which have no nexus to the ability of the person to run the corporate debtor successfully. The ILC has proposed that the nature of offences, the commission of which will incur the disqualification should be economic in nature and a schedule listing such specific crimes be provided. Additionally, the disqualification should also not apply in case a stay against the conviction has been obtained from a higher court.
iv. Section 29A(h) of the IBC disqualifies persons who have executed an enforceable guarantee in favour of a corporate debtor currently undergoing CIRP. The ILC felt that the scope of the disqualification is overreaching since it bars guarantors solely on account of issuing an enforceable guarantee. The ILC has proposed that the disqualification should only apply against guarantors against whom the underlying guarantee has been invoked by the creditor and remains unpaid.
- Curious case of guarantors’ liability – now resolved
Section 14 of the IBC imposes a stay on any recovery action against the corporate debtor and the enforcement of any security interest created by a corporate debtor over its assets during the CIRP period. However, a few recent judicial pronouncements have suggested that the moratorium in an ongoing CIRP will also stay enforcement of guarantees or security interest from promoters and group companies of the corporate debtor since it is not feasible to determine the liability of the relevant third party until the CIRP is concluded.The committee felt that the scope of the moratorium is very clear and should not be interpreted broadly. The intent of law could not have been to deprive creditors of contractually negotiated remedies against third parties as long as the corporate debtor’s assets remain unaffected. The ILC proposes that an explanation be added to Section 14 of the IBC to clarify that the moratorium does not apply to any recovery action that does not impact the assets of the corporate debtor.
- CoC voting thresholds reduced
The IBC provides that all decisions by the CoC be taken by vote of 75% of the CoC, by value. The ILC felt that effectively granting minority lenders constituting 25% of the CoC a veto right to any proposed resolution plan could cause many companies to be liquidated. To ensure that there is a higher likelihood of resolving a distressed company as a going concern under the IBC, the ILC has proposed that the voting threshold for important matters during the CIRP including voting on resolution plans be reduced to 66% of the CoC. Additionally, for other routine decisions that the CoC is required to take during the CIRP, the voting threshold should be reduced to 51% to assist the resolution professional in ease of conducting day to day operations.
- IBC trigger threshold now ten times
To keep debt recovery actions from small operational creditors at bay, the ILC recommended that the minimum amount to trigger the IBC be raised to Rs. 10 lakh (approx. US$ 15,000). This may reduce pressure on the NCLT – as statistics suggest that many small creditors used the IBC to coerce recovery. But what of the small creditor? Back to the long queues in the debt recovery tribunals? Perhaps small creditors can accumulate their debt and then trigger IBC.
- In and out with ninety percent
Currently, once an IBC case is admitted, the law does not permit withdrawal of the same without the consent of all creditors. This is consistent with the philosophy that this is a collective and representative process for all creditors and settlement with the ‘filing creditor’ should not permit withdrawal. The Supreme Court has thought otherwise and has permitted withdrawal post admission. The ILC reiterated the aforesaid philosophy but saw merit in permitting withdrawal post admission if 90% of the committee of creditors deem fit. Would this have been of use in the Binani Cement saga?
- Regulatory approvals window
An immediate issue for acquirers in the IBC process is obtaining governmental and regulatory consents, dispensations and permits. Should the bidders bear this risk or the CoC live with the uncertainty? Today, negotiations resolve this tug-of-war to some extent while bidders draft their resolution plans treating the NCLT as a single window clearance. The ILC observed that single window clearance was not the intent of the IBC. This is a critical observation for bidders. Some solutions were debated but a comprehensive solution remained elusive. Instead, the ILC has recommended that a requirement be placed to obtain consents, dispensations and permits within a maximum of one year. It’s unclear how this will impact the fine balance currently trying to be achieved in practice by bidders.
- Competition approval fast tracked
In a welcome development, the ILC has been informed that the Competition Commission of India will clear notifications for combinations arising out of the IBC within 30 days, with an extension of 30 days for exceptional cases. This is already being borne out in practice and echoes the collaborative effort being taken by Indian regulators to make the IBC work.
- Liquidation waterfall and priority of security
Concerns had been raised that the language in the IBC liquidation waterfall may override inter se ranking of security amongst creditors; i.e., in liquidation, a secured creditor with a first charge over an asset may receive the same amount as another with a second charge over such asset. After reviewing the language, related laws and relevant case law, the ILC felt confident that any such interpretation would be incorrect and valid subordination agreements should not be disregarded by the IBC and so no change has been proposed.
- MSME promoters get a breather
Micro, small and medium enterprises are thought to be the bed rock of the Indian economy. When such companies go through the IBC process, keeping their incumbent promoters out of the bidding process has raised concerns of mass liquidation of such companies leading to potentially significant job losses. The ILC has recommended that promoters of such companies be permitted to bid for their companies in the IBC process (despite Section 29A disqualifications) unless they are willful defaulters. In balancing the opposing forces involved, this seems to be the socially appropriate decision.
- Limitation now uncomplicated
Lenders benefited from judicial decisions which indicated that the Indian limitation legislation did not apply to an application under the IBC (although doctrine of laches might still apply). But this was yet to be confirmed by the Supreme Court, which had declined to comment on this issue in one matter. The ILC has recommended that limitation should apply to IBC applications other than those made by a corporate debtor itself.
- No man’s land now occupied
A resolution plan is approved by the CoC and submitted to the NCLT for confirmation. At this stage, the role of the resolution professional ends and the CoC ceases to exist. But the NCLT order may take weeks or months. Who runs the company during this time and what duties, powers and protections apply to such person? The ILC has recommended that the resolution professional be statutorily required to continue during this period, presumably with the same duties, powers and protections as during the CIRP.
For queries, please email firstname.lastname@example.org, email@example.com, firstname.lastname@example.org, email@example.com or firstname.lastname@example.org. Bahram N Vakil, one of the founding partners of the Firm, leads the Restructuring and IBC Practice Group at the Firm. Ashwin Ramanathan, Piyush Mishra and Nilang Desai are partners and Suharsh Sinha is a senior associate in the Restructuring and IBC Practice Group at the Firm.
The Dirty Dozen – first off the block
The Dirty Dozen – first off the block
Electrosteel Steels Limited was one of the twelve large stressed accounts directed by the Reserve Bank of India (‘RBI’) to be placed into the corporate insolvency resolution process of the Insolvency and Bankruptcy Code and has now become the first to be resolved under that process. The National Company Law Tribunal yesterday (i.e. April 17, 2018) approved the resolution plan submitted by Vedanta Limited. News reports suggest that the haircut taken by lenders is in the region of 55%. Vedanta awaits clearance from the Competition Commission of India before it can complete the acquisition. Many of the other ‘dirty-dozen’ are in the closing stages of their corporate insolvency resolution process and the next few weeks will see more resolutions and in some cases objections and litigation. The litigation in this space may settle some of the issues that lenders and acquirers fret about.
Ministry of Corporate Affairs does away with the 30 day deadline for notifying combinations
In a welcome development, on 29 June 2017 the Ministry of Corporate Affairs (MCA) issued a Notification (Notification) that does away with the requirement to necessarily notify a combination within 30 calendar days of the trigger event. The measure has been taken to alleviate the concerns of stakeholders who felt constrained by the deadline stipulated under the Competition Act, 2002 (“Act”). Please find attached a copy of the Notification. We set out key takeaways from the Notification below.
Prior to the Notification, the merger notification requirement under the Act contained the following aspects:
i. Mandatory 30-day filing requirement: Section 6(2) of the Competition Act required that any proposed transaction that qualifies as a combination on the basis of the asset/turnover thresholds under Section 5 of the Competition Act should be mandatorily notified to the CCI within 30 days of the execution of definitive documents or a public announcement or the final board resolution approving a merger or amalgamation between parties;
ii. Suspensory requirement: Section 6(2A) required that a transaction could not be closed until the CCI has approved the transaction or until 210 days have passed from the date of filing the notification with the CCI; and
iii. Penalties for belated filing: Section 43A of the Competition Act penalizes enterprises for not filing a notice under Section 6(2) of the Competition Act and such penalty could extend upto 1 percent of the total turnover or the assets, whichever is higher, of such combination.
The Notification does away with the 30-day filing requirement and provides parties the flexibility to file combinations when they are ready to file a notice with the CCI. Importantly, the Notification puts an end to the possibility of penalties for delayed filing. Transaction parties will no longer be constrained to decide on the strategy, collect information and make the filing within the short window of 30 calendar days. Parties to global transactions requiring notification in multiple jurisdictions can now make the filing in India contemporaneous with other jurisdictions. The notification will not only help the parties align their strategy but also help the CCI align its review timelines with other jurisdictions.
Notably, the requirement to file a notice with the CCI is still mandatory and the suspensory regime (i.e., requirement to receive CCI approval prior to closing) still applies. Accordingly, any breach of these requirements will still lead to penalties under Section 43A of the Act (set out above). However, removal of a 30-day deadline makes it significantly easier for businesses to comply with the merger notification requirement in India and is in line with international best practices in merger control.
The Competition Commission of India Amends Lesser Penalty Regulations
On 22 August 2017, the Competition Commission of India (‘CCI’) introduced certain amendments to the Competition Commission of India (Lesser Penalty) Regulations, 2009 (‘Lesser Penalty Regulations’) (‘Amendment’)1. The Amendment will impact multiple ongoing, as well as fresh cartel proceedings initiated by the CCI. Broadly, the Amendment expands the scope of the Lesser Penalty Regulations by allowing individuals to approach the CCI with evidence on collusion; abolishing the earlier upper limit on the number of leniency applicants who could benefit from the penalty waiver (i.e. three), and significantly changing the provisions on confidentiality and file inspections. Below, we provide a brief background of the leniency program in India, a summary of the changes introduced by the CCI, and their possible implications on the cartel proceedings in India.2
A. Brief Background
The Competition Act, 2002 (‘Competition Act’) allows the CCI to impose lesser penalty on any member of a cartel, alleged to have contravened Section 3 of the Competition Act. In applying these provisions, the CCI follows the “first come-first serve approach” – i.e., the first member to approach the CCI who fulfills the requirements laid down by the Lesser Penalty Regulations may be eligible for a waiver of penalty up to 100%. Successful applicants who subsequently contact the CCI are also eligible for penalty waivers up to 50% and 30% respectively only if they provide additional valuable information which was previously unknown to the CCI.
B. Individuals can now approach the CCI under the Lesser Penalty Regulations
Section 46 of the Competition Act allows, “any producer, seller, distributor, trader or service provider included in any cartel, which is alleged to have violated Section 3” to apply for imposition of lesser penalties. The Lesser Penalty Regulations, until now, only permitted an “enterprise” to disclose anti- competitive conduct, and seek the benefit of lesser penalty under Section 46.
The Amendment now allows even an “individual” to approach the CCI to seek benefit of the Lesser Penalty Regulations – thereby expanding the reach of the leniency program to individual whistleblowers – who could be employees, or even former employees involved in such anti-competitive conduct on behalf of the enterprise. Allowing individuals to come forward to the CCI with incriminating evidence of collusion will allow the CCI to strengthen its leniency program and effectively identify more cartels, with better quality of evidence and expending lesser amount of resources.
C. Enterprises seeking the benefit of the Lesser Penalty Regulations will now additionally need to submit details of individuals involved in the cartel
The Lesser Penalty Regulations, until now, required an applicant seeking to benefit from the provisions of leniency provision, to: (a) provide vital disclosure in respect of the contravention; (b) provide all relevant information, documents and evidence as required by the CCI; (c) co-operate with the CCI throughout the proceedings; and (d) not conceal, destroy, manipulate or remove documents which are relevant to the proceedings, and may contribute to establishment of a cartel.
The Amendment, by insertion of Clause 1A, to Regulation 3, brings an additional requirement for enterprises applying for leniency to also furnish details of individuals who have been involved in the cartel on behalf of such enterprise, and for whom lesser penalty is sought. Consequently, even Regulation 4, which is the operative regulation for lessening the penalty applicable, has been extended to individuals. By implication, therefore, while filing a leniency application, the applicant enterprises will also be allowed to seek immunity for their employees, and former employees who may have been involved in a cartel.
Earlier, lack of clarity on whether individual employees could benefit from the leniency regime was one of the reasons why enterprises were not forthcoming in seeking the benefit of the Lesser Penalty Regulations. The Amendment marks a welcome development, and now, enterprises will be able to seek lesser penalties for itself, as well as for the individuals who may have contributed to a cartel.
However, since the Amendment makes it mandatory for enterprises to provide details of individuals involved in the collusive conduct, the applicant enterprises will now be subject to the onerous requirement of interviewing employees, and former employees in respect of conduct – which, in many instances, could even go back to many years in the past, and subject them to proceedings under Section 48 of the Competition Act, albeit with full or partial immunity from penalty.
D. No cap on the number of applicants who may benefit from the Lesser Penalty Regulations
Earlier, the Lesser Penalty Regulation capped the number of applicant who were eligible to secure immunity to three. The Amendment now expressly allows the CCI to accept (and grant immunity to) more than three applicants. The third, and any subsequent applicant will be eligible for a penalty waiver for up to 30%. From CCI’s perspective, this amendment is aimed at encouraging all cartel participants to come forward and seek leniency.
E. Confidentiality on identity of the applicant, and the confidential information submitted under Regulation 6 of the Lesser Penalty Regulations diluted: the Director General may now disclose such information to other parties subject to certain checks.
Until now, the identity of an applicant seeking immunity, as well as the evidence submitted by it under the Lesser Penalty Regulation was not permitted to be disclosed by the Director General or the CCI – unless such disclosure was required by law, was consented by the applicant, or such information was publicized by the applicant itself. The Amendment dilutes this provision, and grants the Director General the flexibility to disclose such information to other parties on an additional ground. We clarify the revised position on confidentiality below:
· What can be claimed as confidential? The identity of the applicant, and the information, documents and evidence furnished by it can be claimed as confidential under the Lesser Penalty Regulations.
· Can confidential information be disclosed? Information which has been claimed as confidential under the Lesser Penalty Regulations can be disclosed if (a) the disclosure is required by law; (b) the applicant has agreed to such disclosure in writing; or (c) there has been a public disclosure by the applicant. While there has been no change to these grounds, the following bullet explains the proviso which has now been inserted.
· Can the Director General disclose the confidential information to other parties? Yes. The Amendment allows the Director General to disclose such confidential information to “any party” for the purposes of investigation if it “deems necessary”. However, if the applicant does not consent to such disclosure, the Director General will have to necessarily (a) record its reasoning for disclosure in writing; and (b) seek the approval of the CCI.
· What will guide the Director General’s, or the CCI’s discretion in making such disclosure? The Amendment does not clarify this. This Amendment appears to be intended to (a) ensure that the parties against whom a negative finding may be made are afforded a fair opportunity to controvert evidence; and (b) allow the Director General to test such evidence (or collect further evidence) by putting it to other parties. Therefore, the Director General may be guided by these factors while evaluating the need to make such a disclosure. Notably, an opportunity to rebut evidence is also available to the parties before the CCI – after the report of the Director General is forwarded to the parties.
· Will the applicant be allowed to contest disclosure? The Amendment does not clarify this. Principles of natural justice may, however, require the CCI to allow the parties whose identity and information is being disclosed to make a representation to the CCI. It remains to be seen whether the CCI will indeed allow such an opportunity.
· Will confidentiality under the Lesser Penalty Regulations be lifted after the Director General completes its investigation? The Amendment also introduces Regulation 6A which extends the provisions of the Competition Commission of India (General) Regulations, 2009 (‘General Regulations’) relating to file inspection by parties, to the information submitted by the applicants under the Lesser Penalty Regulations. Notably, this overrides the confidentiality provision of the Lesser Penalty Regulations.
With this, after the CCI forwards the report of the Director General to the parties concerned, the “non-confidential” version of the report of the Director General shall become available to inspection to the parties. It appears that the reference to “non-confidential” version refers to the version which redacts non-public, commercially sensitive information and business secrets which have been allowed confidential treatment under Regulation 35 of the General Regulations, read with Section 57 of the Competition Act. Resultantly, the identity of the applicant, and the evidence and documents furnished by is likely to be revealed in the Report of the Director General which is available to inspection to parties.
· Does this impact confidentiality sought, or granted, over commercially sensitive information, business secrets etc.? No. The Amendment only governs confidential treatment under the Lesser Penalty Regulations. Therefore, if confidentiality has been claimed, or allowed under the General Regulations read with Section 57 of the Competition Act (which are the key provisions governing confidentiality over commercially sensitive information), the Amendment is unlikely to have an impact on such confidential treatment.
F. Limiting the information requirement in respect of volume of business affected by the alleged cartel to India
The Schedule to the Lesser Penalty Regulations enlisted the items which each application for lesser penalty must contain.3 One of the items that the CCI required earlier was to furnish an estimate of the
Volume of business affected by the alleged cartel. The Amendment limits this requirement to furnishing this estimate to the volume of affected business in India.
This is a significant development, and brings the requirement of furnishing the affected volumes in consonance with Section 32 of the Competition Act, which allows the CCI to have jurisdiction over extra- territorial conduct having an appreciable adverse effect on competition in India.
Leniency programs are among the most effective tools used by competition authorities to collect high quality evidence in establishing cartels. Given that cartels are typically very difficult to detect, the CCI’s extension of India’s leniency program to individuals will significantly strengthen the regime, and allow the CCI to get additional evidence on cartels. Reportedly, there are many leniency cases pending investigation. While the change to the confidentiality provisions brings much needed clarification on the temporal and scope of disclosure permissible, allowing the Director General to disclose such information during the course of the enquiry could be of some concern. It remains to be seen how frequently, and on what legal grounds, will the Director General invoke this provision.
1 The Amendment is dated 8 August 2017, but was published in the Gazette of India on 22 August 2017.
2 AZB, in its “Inter Alia…” edition of March, 2017 had published a broad overview of the leniency regime in India titled “Leniency Programs: What can India do to Achieve the World’s Best Practice?”.
3 The application for lesser penalty shall, inter-alia, include the following, namely;- (a) name and address of the applicant or its authorized representative as well as of all other enterprises in the cartel; (b) in case the applicant is based outside India, the address of the applicant in India for communication including the telephone numbers and the e- mail address, etc. ; (c) a detailed description of the alleged cartel arrangement, including its aims and objectives and the details of activities and functions carried out for securing such aims and objectives; (d) the goods or services involved; (e) the geographic market covered; (f) the commencement and duration of the cartel; (g) the estimated volume of business affected in India by the alleged cartel; (h) the names, positions, office locations and, wherever necessary, home addresses of all individuals who, in the knowledge of the applicant, are or have been associated with the alleged cartel, including those individuals which have been involved on behalf of the applicant ; (i) the details of other Competition Authorities, forums or courts, if any, which have been approached or are intended to be approached in relation to the alleged cartel; (j) a descriptive list of evidence regarding the nature and content of evidence provided in support of the application for lesser penalty; and (k) any other material information as may be directed by the Commission.
NCLAT Overturns CCI’s Penalty on Hyundai
1. On September 19, 2018, the National Company Law Appellate Tribunal (‘NCLAT’) issued a decision setting aside an order of the Competition Commission of India (‘CCI’) against Hyundai Motor India Limited (‘Hyundai’) (FX Enterprise Solutions India Pvt. Ltd. & St. Antony’s Cars Pvt. Ltd. v. Hyundai Motor India Limited, Case Nos. 36 & 82 of 2014). This decision has interesting ramifications for the decision-making procedure, and evidentiary standards, followed by CCI while assessing allegations of infringement. The NCLAT’s decision is also specifically relevant for businesses which are reliant on distribution-channels. However, unfortunately, the decision misses out an opportunity to clarify the substantive law on anticompetitive vertical restraints under Section 3(4) of the Competition Act, 2002 (‘Competition Act’).
2. CCI had imposed a penalty of Rs 870 million on Hyundai for imposing: (i) resale price maintenance (‘RPM’) by setting and implementing a ‘Discount Control Mechanism’ on its dealers, and (ii) “tie-in” agreements which mandated that its dealers use recommended lubricants (‘CCI Order’).
Analysis of relevant market
3. The NCLAT has not discussed CCI’s substantive findings against Hyundai on RPM and tie-in agreements in detail and also avoided a substantive review of the market definition relied on by the CCI (CCI had defined an upstream market for sale of all brands of passenger cars in India, and a downstream market for the dealership and distribution of Hyundai cars in India). Rather, the NCLAT, relying on the decision of the Supreme Court in Competition Commission of India v. Coordination Committee of Artistes and Technicians of West Bengal Film and Television and Ors. ((2017) 5 SCC 17), found fault with the methodology followed by the Director General (‘DG’) and CCI while defining the relevant markets. According to NCLAT, while defining relevant markets, both DG and CCI had failed to properly consider factors they were statutorily obliged to, namely: (i) the factors under Section 19(6) of the Competition Act, including regulatory trade barriers, local specification requirements, in determining the relevant geographic market; and (ii) factors under Section 19(7) of the Competition Act, including the physical characteristics and end-use of goods, and consumer preferences, in determining the relevant product market.
CCI’s assessment of the DG’s Report
4. Interestingly, the NCLAT went on to hold that CCI cannot merely rely on the findings in the DG’s report to establish a contravention under Section 27 of the Competition Act; rather, it is required to make an independent analysis of the evidence available on record. The NCLAT further noted that the CCI Order was self-contradictory, reflecting a non-application of mind by CCI, and even went on to point out certain examples of such contradictions. For example, at paragraph 108 of the CCI Order, CCI stated that the cancellation of warranty upon use of non-recommended oils / lubricants does not amount to a contravention of Section 3(4)(a) of the Competition Act (which deals with tie-in arrangements). However, it went on to conclude (at paragraph 116) that Hyundai contravened the tie-in provision of the Competition Act in mandating that its dealers use recommended lubricants / oils and in penalising them for use of non-recommended lubricants and oils. NCLAT also noted CCI’s and DG’s failure to support the conclusion that Hyundai had penalized its dealers for not acting in accordance with the tie-in agreement, and further observed that CCI and DG had failed to consider that it is normal for car dealers of all companies to recommend the use of a particular quality of lubricant and oil based on vehicle-type.
5. While it does not contain a substantial ruling on the assessment of anticompetitive vertical restraints in India, this is nevertheless a significant decision – especially, as it clarifies CCI’s proper role while adjudicating infringement allegations, which is to objectively assess the evidence presented in the DG’s investigation report and carry out its own independent analysis before arriving at any conclusions.
Open Market Transactions by Competitors in India – A Feasibility Study
India follows a mandatory merger control regime under the Competition Act, 2002 (‘Competition Act’) with suspensory effect, i.e. transacting parties are required not to ‘give effect’ to any part of the notifiable transaction, during the period of review by the Competition Commission of India (‘CCI’) or else they run the risk of ‘gun jumping’ and likely penalties for the same.
Parties to every notifiable transaction, which satisfies the statutory thresholds, must not take steps towards operationalization during CCI’s review period, barring a few statutory exceptions which do not require prior notification. While most notifiable transactions are structured to account for such a period of review by CCI, the purchase of shares in a publicly listed company on a stock market is inherently bound to create gun-jumping risks because of the time-bound nature of such transactions. Short delivery and settlement periods of such publicly traded securities often make it unfeasible to secure CCI approval in advance of purchasing such shares. Further, the acquisition by a competitor of even a minority, non-controlling interest i.e. less than 25% of the equity share capital of the target, is not eligible for an exemption since they are considered ‘strategic’ in nature and are not exempt from notification or the ‘standstill’ requirement.
Given the inherent (and systemic) difficulties in completing a public market acquisition transaction without tripping the CCI’s gun-jumping rules, this article examines whether and how parties can proceed with such transactions.
CCI is empowered to impose significant penalties on parties for gun-jumping as a disincentive from consummating all or any part of a transaction before the completion of the merger review process. Equally, CCI has the power to ‘unscramble the egg’ for up to one year after its completion and it can block the combination if it were to conclude that it would result in an appreciable adverse effect on competition (‘AAEC’).
Takeover bids for listed companies, by competitors, are increasingly commonplace and occur in real-time when bulk/block trades become available on the market. When such trades do become available, a potential acquirer has to make a choice of whether to purchase the shares that have become available and risk penalties for gun-jumping, or apply for merger approval from CCI, which could take up to 30 business days and risk missing the window of opportunity. A further complication is that the notification by an acquirer to CCI prior to purchasing shares would be made public and likely result in the increase of the price of such shares. Simply put, CCI filing and approval process would make the acquisition of shares in a publicly traded target company challenging.
Since it cannot be the objective of a market regulator to close all avenues for such public acquisitions, other competition regulators have developed mechanisms to facilitate acquisitions of minority ‘non-controlling’ shareholdings on the stock exchange without review even in transactions where the purchaser and the target were competitors. CCI has not yet permitted any exemptions in this regard, and has precluded such acquisitions being made during the pendency of its review, even where the acquirer has surrendered its right to vote such stock by placing such shares in an ‘escrow’ and the Supreme Court (‘SC’) in the SCM case has now upheld this position.
Finding middle ground
The SC appears to have taken a somewhat simplistic approach to the issue of holding shares in escrow, pending CCI approval, by noting that transferring consideration for shares held in escrow is ‘gun-jumping’ since the Competition Act does not contemplate post facto notice, as this would defeat CCI’s opportunity to assess whether the proposed combination could cause any appreciable adverse effect on competition. However, if all acquisitions of publicly traded companies through market purchases are not to be entirely disallowed, then the regulator must find middle ground – between its mandate to review all notifiable combinations without having parties complete them, and accommodating the time-bound nature of open market acquisitions. If the central concern of the regulator is that by allowing purchasers to make such an acquisition, the suspensory effect of the CCI’s merger review is being lost and the acquisition is irreversible, then the guidance provided in the General Court and UK Competition Commission’s decision in Ryanair/Aer Lingusmay be a useful example of how accumulation of shareholding could be reversible in a transaction, should it subsequently fail to receive competition approval.
However, if CCI considers the acquisition of such shares as untidy, if not impossible to unwind, then it may also consider introducing a mechanism which takes away from the beneficial owner the voting rights attached to such shares and places them in an escrow until such time CCI post-facto approves the transaction. Should CCI ultimately decide not to approve the combination, the escrow agent could be empowered to sell the shares in the open market. CCI already has a similar mechanism for divestitures supervised by a divestiture trustee, and a similar mechanism may be used in such an escrow mechanism. This could balance the need of the CCI to prevent the premature consummation of a public market transaction with the corresponding need to provide some mechanism which facilitates such deals.
Minority Acquisitions: Trends in CCI Merger Decisions
The Competition Act, 2002 (‘Act’) requires the Competition Commission of India (‘CCI’) to review all domestic and international mergers, acquisitions, and other types of ‘combinations’ that exceed certain asset or turnover thresholds. Transacting parties are obligated to notify CCI and observe the applicable waiting period until approval from CCI, before taking any steps towards consummating their transactions. Given the twin objective of preserving competition and protecting consumers, CCI realized that a litmus test of financial thresholds alone could bring within the fray transactions that do not necessarily require prior review and approval.
In this context, a set of combinations were identified in CCI (Procedure in regard to the Transaction of Business relating to Combinations) Regulations, 2011 (‘Combination Regulations’), that are less likely to raise competition concerns and hence “need not normally” be notified. Minority acquisitions (which entitle the acquirer to hold less than 25% of the total shares or voting rights in the target enterprise) are included in this list and are therefore exempt, to the extent they are made ‘solely as an investment’ or ‘in the ordinary course of business’, and do not lead to acquisition of ‘control’ (‘Minority Acquisition Exemption’). The Minority Acquisition Exemption is of particular use to financial investors that make routine and frequent investments without assimilating a significant market position.
The Act provides no guidance on what may constitute, ‘solely as an investment’ or ‘in the ordinary course of business’. Whilst the Act defines the term ‘control’ to include “control- ling the affairs or management by: (i) one or more enterprises, either jointly or singly, over another enterprise or group; (ii) one or more groups, either jointly or singly, over another group or enterprise”, the concept of ‘control’ continues to be a vexed issue. In this regard, a string of CCI decisions have made certain noteworthy observations regarding the applicability of the Minority Acquisition Exemption.
1. CCI has taken the view that minority investments (i.e., less than 25%) by an acquirer in a target enterprise where there are horizontal or vertical overlaps between the business activities of the target and the acquirer (including the controlled portfolio entities of the acquirer) may be construed as being strategic, and there- fore cannot ordinarily be treated to be ‘solely as an investment’ or ‘in the ordinary course of business’. For example, in Copper Technology/ANI Technologies, the acquisition of 9.57% stake in the target along with the right to appoint a director on the board of the target was notified to CCI. CCI observed that while the acquirer and target were not involved in the production and supply of any substitutable goods or services in India, one of the portfolio companies of the acquirer in India had an overlap with the target in the mobile wallet segment. Whilst CCI in its approval order does not comment on the applicability of the Minority Acquisition Exemption, it appears that the transaction was notified because it may have been construed as being strategic.
2. CCI seems to be of the view that ‘control’ could arise from holding certain strategic affirmative voting rights in the target enterprise.
By way of amendments to the Combination Regulations in January, 2016, an explanation was inserted to the Minority Acquisition Exemption in relation to investments of less than ten percent of the total shares or voting rights in the target enterprise (‘Deeming Provision’). The Deeming Provision states that every transaction involving an acquisition of less than ten per- cent shall be ‘solely as an investment’, if the following conditions are satisfied:the acquirer gets only those rights that are exercisable by ordinary shareholders of the target enterprise, to the extent of their shareholding; the acquirer is not a member on the board of directors of the target nor has the right or intention to appoint a board member or to nominate one; and the acquirer does not intend to participate in the management or affairs of the target.
II. CCI Guidance on ‘Solely as an Investment’
In interpreting the term ‘solely as an investment’, CCI’s decisions hold that the Minority Acquisition Exemption does not apply to private equity transactions where there are overlaps between the activities of the target and the controlled portfolio entities of the acquirer.
A strict reading of the Minority Acquisition Exemption would bring one to the conclusion that an acquisition not leading to ‘control’ would not be required to be notified, if the acquisition is either solely for investment purposes or in the ordinary course of business. The Deeming Provision states that an acquisition of less than ten percent will be considered as ‘solely as an investment’, if the other conditions laid down thereunder are satisfied.
A combined reading of the Minority Acquisition Exemption and the Deeming Provision gives rise to two propositions as set out below:
1. In the absence of control conferring rights, the Deeming Provision should also exempt transactions involving competitor-to-competitor acquisitions, if the trans- action in question satisfies the thresholds specified under the Deeming Provision.
2. Arguably, the inapplicability of the Deeming Provision should not automatically render a transaction ineligible for the Minority Acquisition Exemption that has been made solely as an investment or in the ordinary course of business.
Having said that, in Manta Holdings LP and Thomas Bravo Funds XII LP, CCI appears to have interpreted the Deeming Provision to guide the assessment of the applicability of the Minority Acquisition Exemption. In this case, CCI held that the right to appoint a single director on the board of the target will itself mean that the Minority Acquisition Exemption will not apply. However, from a review of the said decision, it is clear that: (i) the Deeming Provision was inapplicable due to the ability of the acquirer to appoint one director; and (ii) there were overlaps between the activities of the target and one of the controlled portfolio companies of the acquirer which made the Minority Acquisition Exemption inapplicable to the transaction in any event. To the best of our knowledge, this conflation of the Deeming Pro- vision and the Minority Acquisition Exemption has not yet been tested in appeal. In certain other cases, CCI has considered acquisitions involving less than 10% shareholding where the acquirer also had a right to nominate a director and there were no overlaps between the activities of the parties. However, CCI has not made any specific observations in these cases on why the Minority Acquisition Exemption did not apply.
III. Existing Jurisprudence on ‘Ordinary Course of Business’
The term “ordinary course of business” while not specifically defined, has been widely interpreted to apply to those acquisitions which are not strategic in nature and are made by an entity which usually makes such investments as a part of its ongoing business. While there is limited guidance from CCI on what constitutes “ordinary course of business”, the meaning of this phrase has been examined by various courts in India and offer some guidance. “Ordinary course of business” has been defined to imply “a certain degree of routine in business practice”. The expression “‘in the ordinary course of business’ is susceptible of one meaning viz., that there should be a series of transactions as distinguished from one transaction…A stray transaction may not be said to constitute an ordinary course of business”.
Further, CCI has observed that minority acquisitions of less than 25% shares in the target, where there are overlaps between the acquirer and target, may not be considered as being in the “ordinary course of business” and would generally be construed to be strategic in nature (Abbott/Mylan and Zuari Fertilizers).
IV. CCI’s Perspective on ‘Control’ Conferring Rights
The final step in analyzing whether the Minority Acquisition Exemption applies to a given transaction is to ascertain whether the acquirer is also acquiring any control over the target. The concept of what constitutes ‘control’ has been examined by various regulators in India including CCI. Although there are no bright-line tests available, in order to make an assessment in relation to what would constitute the acquisition of control, in the past, CCI has provided an indication of the nature of affirmative voting / consent rights that may result in conferring control in favour of an acquirer. “Control” has been defined merely as ‘control’ over the affairs and management of another enterprise and no substantive test for “control” has been laid out under the Act. Certain rights that have been considered as conferring control as per certain decisions of CCI are veto rights over: (i) approval of the business plan/annual operating plan including budget; (ii) discontinuing an existing line or commencing a new line of business; (iii) setting up new offices in other cities or expanding to new cities; (iv) appointment of key managerial personnel including key terms of their employment and compensation; and(v) material terms of employee benefit plans.In interpreting “control”, CCI has, in the past, examined the entire bundle of rights secured by the acquirer and their bearing on the strategic commercial decisions of the target enterprise. The European Commission’s (‘EC’) Consolidated Jurisdictional Notice under Council Regulation No. 139/2004 on the control of concentrations between undertakings (2008/C 95/01) (‘EC Jurisdictional Notice’), states that control is acquired where minority shareholders have additional rights which allow them to veto decisions which are essential for strategic commercial behavior of the joint venture. These veto rights must be related to the strategic decisions on the business policy of the joint venture. They must go beyond the veto rights normally accorded to minority shareholders in order to protect their financial interests as investors in the joint venture.
Based on a review of CCI decisions and the EC law, it appears that to assess whether the affirmative rights available to an investor may be said to confer control, it is essential to examine the rights as a whole and ascertain whether they could be said to confer control over the strategic business decisions of the company in question.
It is possible that certain competitor-to-competitor minority acquisitions may reduce the minority shareholder’s incentive to compete with the target. For example, if the benefits through dividends (flowing from minority shareholding) outweigh the costs associated with market expansion attempts in the target’s geography, the minority shareholder may well desist from making such efforts. Second, a minority stake is sometimes enough to secure access to business sensitive information, which could reduce competitive uncertainty between two competitors which must otherwise compete with each other. These concerns appear to inform conservative outcomes in the current trend of CCI decisions. However, these concerns should be weighed against the very objective of introducing the Minority Acquisition Exemption, i.e., exempting minority acquisitions made routinely that do not lead to any strategic influence over the activities of the target and do not raise the concerns highlighted above. Applying a conservative lens to such situations is likely to result in ‘false positives’ where scarce regulatory resources are expended in assessing transactions which have not likely to have any effect on the competitive dynamics of the market. Although the jurisprudence on this issue will continue to evolve, it would benefit all stakeholders if CCI were to issue any formal guidance on the applicability of the Minority Acquisition Exemption.
CCI dismisses a complaint relating to delay in delivery of possession of an apartment and unfair clauses in an agreement*
On November 14, 2017, CCI dismissed the information filed by R. Ramkumar alleging violation of Section 4 of the Act against Akshaya Private Ltd. (‘Akshaya’). R. Ramkumar alleged that he had booked a residential apartment in a project developed by Akshaya, the delivery of which has been unduly delayed and the agreement entered into between them contains unfair clauses in favour of Akshaya.
While defining the relevant product market to be ‘provision of services for development and sale of residential apartments/flats’, CCI noted that a plot of land and commercial space cannot be considered as substitutes for residential apartments because of differences in price, characteristics, and intended use. CCI limited the relevant geographic market to Old Mahabalipuram Road also known as the information technology (‘IT’) corridor in the State of Tamil Nadu, since the conditions of competition for supply and demand for development and sale of residential flats were considered as homogenous and distinguishable from other neighbouring areas in terms of factors like price, land availability, distance and commuting facilities, proximity and connectivity, presence of multinational companies, state of infrastructure, and regional and personal preferences. In light of several other real estate developers operating in the relevant market, CCI found that Akshaya was not in a dominant position. Accordingly, CCI held that ab- sent dominance, no question of abuse of dominant position under Section 4 could arise.
CCI dismisses allegations against NIIT*
On November 28, 2017, CCI dismissed allegations of anti-competitive conduct and abuse of dominance against skill and talent development firm, NIIT Limited (‘NIIT’), with respect to franchise agreements.
Separate complaints were filed by NIIT’s three Hyderabad-based franchisees (‘Franchisees’), which were engaged in the business of provision of computer education and training services. Since all the three complaints were against NIIT involving ‘substantially similar’ allegations, CCI passed a common order. The Franchisees alleged inter alia: (i) that contrary to the terms agreed in the franchisee agreement, NIIT was directly approaching schools located within the territories of the Franchisees and undercutting them by offering the same courses at highly discounted prices; (ii) that NIIT follows a differential pricing pattern for its consumers in metro and non-metro areas; and (iii) a differential revenue sharing model for franchisees located in metro and non-metro areas.
In this instant case, CCI defined the relevant market to be ‘market for the provision of computer education and training services in India’ since computer and IT skill training requires special knowledge on the subject as compared to skill training services in other professional and non-professional areas in terms of its characteristics, prices, and end use, as well as such training courses could be availed across India.
With respect to the issue of abuse of dominance, CCI held that apart from NIIT, there are many other companies operating in the relevant market offering similar courses, and thus NIIT was not a dominant player and therefore could not violate Section 4 of the Act.While dismissing allegations of anti-competitive conduct under Section 3 of the Act, CCI noted that the prevailing competition has compelled NIIT to venture into online mode of delivery through its online learning portals. It further noted that the differential pricing for metro and non-metro areas was not arbitrary and could be explained on the basis of various factors like lower awareness and lack of affordability by students in non-metro areas, differences in marketing responsibility, and job placements.
CCI dismisses complaint alleging cartelisation and anticompetitive practices against certain Registration Plates Manufacturers*
On November 14, 2017, CCI dismissed the information filed under Section 19(1)(a) of the Act by the Association of Registration Plates Manufacturers of India (‘Association’) against Shimnit UTSCH India Private Limited (‘Shimnit’), Real Mazon India Private Limited (‘Real’), and TEST Security License Plates Private Limited (‘TEST’) (Shimnit, Real, and TEST collectively referred to as the ‘Registration Plates Manufacturers’).
The Association had alleged that the Registration Plates Manufacturers had formed a cartel to engage in collusive bidding in various States to get High Security Registration Plates (‘HSRP’) contracts by conniving with the officials of the Transport Departments. The Association further alleged that the rates quoted by the Registration Plates Manufacturers in the bids used to be very high and later when open Notice Inviting Tenders (‘NITs’) were floated by the States and tender conditions were eased, the Registration Plates Manufacturers abuse their dominant position through predatory pricing.
CCI observed that the Association failed to establish any specific case of bid rigging in any State tender post-2009 and that no conduct nor any evidence supporting collusion among the Registration Plates Manufacturers post-2009 was detailed in the information.
CCI dismisses allegations of abuse of dominance against Maharashtra State Power Generation Company*
On November 30, 2017, CCI dismissed the allegations of abuse of dominance against Maharashtra State Power Generation Company (‘MAHAGENCO’) with respect to the qualification criteria provided by MAHAGENCO for the bidders in its tender.
Shri Vijay Menon filed the information before CCI against MAHAGENCO alleging that MA- HAGENCO has abused its dominant position by putting a qualifying requirement in its tender floated in the month of September, 2017 for coal liaisoning services, whereby it disqualified bidders against whom an inquiry was pending before CCI or who have already been penalized by CCI. While holding the issue as purely administrative in nature, CCI recognized the discretion a consumer should have to exercise choice and to frame terms and conditions of tender documents so as to best secure an optimal outcome. CCI was, however, cautious to further point out that consumer discretion should be allowed so long as it does not restrict market entry and allows vendors to freely compete in the procurement process. It also remarked that competition concerns could arise in rare cases where a monopoly buyer exercises the option in an anti- competitive manner. CCI found no case of contravention established against MAHAGENCO, and thereby it closed the matter under Section 26(2) of the Act.
CCI again slams penalty of ₹52.24 crores on BCCI for abusive conduct*
In case of Surinder Singh Barmi v. Board of Control for Cricket in India (‘BCCI’) decided on November 29, 2017, CCI reaffirmed its decision taken in the earlier order dated February 8, 2013, whereby CCI had issued a penalty of ₹52.24 crores (approx. US$ 8.2 million) on BCCI for abusing its dominance. The CCI order dated February 8, 2013 was set aside by the erstwhile Competition Appellate Tribunal (‘COMPAT’) vide order dated February 23, 2015 in an appeal filed by BCCI on grounds of violation of principles of natural justice, thereby remitting the matter to CCI for fresh disposal.
While dismissing BCCI’s argument that it is not an enterprise under Section 2(h) of the Act, CCI observed that BCCI by organizing matches and tournaments, granting media rights to broadcasters, entering into franchisee arrangements with business houses, raising sponsorship, etc. engages in economic activity and motive to earn profit is irrelevant for defining an entity as an enterprise.
CCI then defined the relevant market to be the market for organisation of professional domestic cricket leagues/events in India and held it to be not substitutable with other formats of cricket, other sports, and general entertainment programmes telecasted on television. While limiting the relevant market to be so, CCI noted a number of factors, inter alia: (i) that there is no evidence of price competition and cross elasticity of demand between domestic cricket leagues like Indian Premier League (‘IPL’) and the alternatives suggested by BCCI; (ii) that other formats of cricket like international and domestic cricket differed on account of selection of the team; (iii) that the different formats of cricket have different objectives and commercial exploitation; and (iv) BCCI’s own understanding about the different formats. CCI also stated that applying the ‘small but significant non-transitory increase in price’ test conceptually, given the characteristics and consumer preferences for cricket/IPL in India, not significant consumers would substitute IPL with any other form of entertainment e.g., films, television shows, or any other sporting event, thereby making a five to ten percent increase in price unprofitable. Within the relevant market, CCI found BCCI to be dominant because of its status as a de facto regulator of cricket in India having the exclusive right to sanction or approve cricket events in India by virtue of its endorsement by the International Cricket Council.
The CCI then examined whether the alleged abusive representation and warranty given by BCCI under Clause 9.1(c)(i) in the IPL Media Rights Agreement entered with the broadcasters of IPL that ‘it shall not organize, sanction, recognize, or support during the Rights period another professional domestic Indian T20 competition that is competitive to the league [IPL]’ for a period of 10 years is in contravention of Section 4(2)(c) of the Act. CCI observed that viewed in light of Rules 28(b) and 28(d) of BCCI Rules and Regulations, the representation and warranty created insurmountable entry barriers and left no scope for conducting any kind of professional domestic cricket other than by BCCI or its members. CCI further stated that BCCI has not provided any reasonable or regulatory justification, as also failed to substantiate its claims of nascency, limited time for recoupment, and the need for the self-imposed restriction running for a sustained period of 10 years. CCI thus held that BCCI had foreclosed the market for organization of professional domestic cricket leagues/events in India under Section 4(2)(c) of the Act. Accordingly, CCI directed BCCI to cease and desist from the abusive conduct, precluded it from placing blanket restrictions on organisation of professional domestic cricket league/ events by non-
members, and imposed a penalty of ₹52.24 crores (approx. US$ 8.2 million), which was about 4.48% of BCCI’s average revenue from organisation of professional domestic cricket leagues in India during the last three preceding financial years.
CCI dismisses the reference filed by the Rail Coach Factory, Kapurthala alleging collusive bidding against certain Roof Mounted AC Package Unit Manufacturers*
On November 28, 2017, CCI dismissed the reference filed under Section 19(1)(b) of the Act by Shri D. K. Shrivastava, chief material manager, Rail Coach Factory, Kapurthala against M/s Daulat Ram Engg & Services P. Ltd., Madhya Pradesh (‘Daulat Ram Engg’), M/s Daulat Ram Industries (‘Daulat Ram Industries’), M/s Amit Engineers (‘Amit’), M/s Fedders Lloyd Corpo- ration (‘Fedders’), M/s Intec Corporation (‘Intec’), M/s Lloyd Electric and Engg. Ltd. (‘Lloyd’), M/s Sidwal Refrigeration Industries Ltd. (‘Sidwal’), M/s Stesalit Ltd. (‘Stesalit’) and M/s Ess Ess Kay Engg. Co. P. Ltd. (‘Ess’) (Daulat Ram Engg, Daulat Ram Industries, Amit, Fedders, Intec, Lloyd, Sidwal, Stesalit, and Ess collectively referred to as the ‘RMPU Manufacturers’) alleging inter alia contravention of the provisions of Section 3 of the Act.
Shri D. K. Shrivastava alleged that the RMPU Manufacturers have formed cartel and rigged the tenders floated by the Rail Coach Factory, Kapurthala, other Zonal Railways and the Indian Railways (on pan-India basis) for Roof Mounted AC Package Units (‘RMPUs’), which was evident from the collective increase and decrease in the rates quoted by the RMPU Manufacturers during the period of 2011 to 2014, the increase in rates observed in tenders opened in or after June 2013, and instances of identical or similar pricing between several subsets of the RMPU Manufacturers, which contravened the provisions of Sections 3(3)(a) and 3(3)(d) read with Section 3(1) of the Act.
CCI, having found a prima facie case, directed the Director General (‘DG’) to investigate the matter. The DG, upon the completion of its investigation, concluded that Amit, Fedders, Intec, Lloyd, and Sidwal had contravened Sections 3(3)(a) and 3(3)(d) of the Act. The matter was then considered by CCI. CCI noted that there was collective increase and decrease in the rates quoted by the RMPU Manufacturers, but mere price parallelism, without some conclusive evidence of agreement or arrangement among the RMPU Manufacturers, is not sufficient to conclude that the price parallelism was an outcome of collusion. In sum, CCI acknowledged that parallel behaviour of competitors can be a result of intelligent market adaptation in an oligopolistic market and to arrive at a finding of contravention merely on the basis of suspicion resulting from identical or similar pricing with evidence of possibility of exchange of information is fraught with its own pitfalls. In light of no direct evidence nor even persuasive circumstantial evidence to establish that the RMPU Manufacturers tacitly colluded, CCI held that no case of contravention of Sections 3(3)(a) and 3(3)(d) read with Section 3(1) of the Act was established.
CCI approves the acquisition of shares of DCCDL by Reco Diamond*
On November 3, 2017, CCI approved the acquisition of 33.34% of the total equity shares of Diamond and DLF Cyber City Developers Limited (‘DCCDL’) held by Rajdhani Investments & Agencies Private Limited, Buland Consultants and Investments Private Limited and Sidhant Housing and Development Company by Reco Diamond Private Limited (‘Reco Diamond/Acquirer’; together with DCCDL referred to as ‘Parties’) (‘Proposed Combination’).
DCCDL, incorporated in India is a subsidiary of DLF Limited (‘DLF’), which is the holding company of the DLF group of companies. DCCDL, along with its subsidiaries, is engaged in construction, development and leasing of commercial properties in India. Reco Diamond, on the other hand, is incorporated as a private limited company in Singapore and is a wholly owned subsidiary of Recosia Private Ltd, which in turn, is a wholly owned subsidiary of GIC (Realty) Pte Ltd (‘GIC Realty’). GIC Realty, incorporated as a private company with limited liability under the laws of Singapore, holds real estate investments made on behalf of the Government of Singapore.
CCI considered the market for leasing of commercial real estate as the relevant product market and noted that the activities of DCCDL and those of the portfolio companies of GIC Realty overlap in the cities of Delhi, Gurgaon, Chennai, and Hyderabad. It held that the Proposed Combination is unlikely to cause an appreciable adverse effect on competition in any of the potential markets and thus, decided to leave the exact delineation of relevant market open. CCI further noted that the overlaps between the Parties in terms of current inventory and projects under construction are limited and the Proposed Combination is unlikely to change the competition dynamics in the real estate market and approved the Proposed Combination.
CCI approves the acquisition of Tata CMB by Airtel*
On November 16, 2017, CCI approved the acquisition of 100% of the consumer mobile business of Tata Teleservices Limited (‘TTSL’) and Tata Teleservices (Maharashtra) Limited (‘TTML’) (‘Tata CMB’) by Bharti Airtel Limited (‘Airtel’) (Tata CMB together with Airtel referred to as the ‘Parties’) (‘Proposed Combination’).
Airtel, a part of Bharti Enterprises group (‘Bharti Group’), is a publicly traded global telecommunications corporation while TTSL, a part of the Tata Group, is a telecom service provider in a number of telecom circles in India. TTML is an associate company of TTSL and provides telecom service in Maharashtra.
CCI opined that the concerned relevant product market of retail mobile telephony services can be classified on the basis of various criteria such as type of service and customer, but in view of the Proposed Combination not likely to result in appreciable adverse effect on competition, it left the exact determination of the relevant product market open. CCI held the geographical market to be the 19 telecom circles where the activities of the Parties overlapped.
In its competition assessment, CCI was concerned that the telecom market is highly concentrated with high Herfindahl-Hirschman Index (‘HHI’) figures and that the change in HHI post the Proposed Combination would also be significant in many of the overlapping circles. How- ever, in view of the limited product offering of Tata CMB, negligible diversion ratio from Airtel to Tata CMB, and the steady decline in the market share of Tata CMB, CCI observed that Tata CMB neither seems to be a close nor an effective competitor to Airtel going forward. It further noted that spectrum holding is fairly distributed among the Telecom Service Provider (‘TSPs’) in the overlapping circles and there is a significant quantity of unsold spectrum in each telecom circle which would likely obviate any access issues. CCI also took into account the significant constraint exerted from the buyer side by virtue of multi-SIMing, ease of substitution due to the option of mobile number portability, and significant churn rates, and that there would be five TSPs in all the telecom circles post the Proposed Combination. Having regard to the fact that the competitors were in a position to exercise adequate competitive constraints on the Parties, CCI held the Proposed Combination not likely to raise any substantial competition concerns, and therefore, approved it under Section 31(1) of the Act.
CCI approves the acquisition of shares of Indus by VIL Shareholders*
On November 16, 2017, CCI approved the acquisition of equity shares of Indus Towers Limited (‘Indus’) by: (i) Al-Amin Investments Ltd.; (ii) Asian Telecommunication Investments (Mauritius) Ltd.; (iii) CCII (Mauritius) Inc; (iv) Euro Pacific Securities Ltd.; (v) Vodafone Telecommunications (India) Ltd.; (vi) Mobilvest; (vii) Prime Metals Ltd.; (viii) Trans Crystal Ltd.; (ix) Omega Telecom Holdings Private Limited; (x) Telecom Investments India Private Limited; (xi) Jaykay Finholding (India) Private Limited; and (xii) Usha Martin Telematics Limited (‘VIL Shareholders/Acquirers’). The acquisition of shares by the Acquirers in Indus was proposed to be pro rata to their shareholding in Vodafone India Limited (‘VIL’) (‘Proposed Combination’).
CCI noted that the Acquirers are shareholders of VIL and wholly owned indirect subsidiaies of Vodafone Group Plc (‘Vodafone’), and that they do not hold interests in any other company. VIL is a licensed telecom service provider (‘TSP’) and provides a range of telecommunication services in India. Indus, on the other hand, is a joint venture inter alia between the entities of Bharti Infratel Limited, VIL, and Idea Cellular Limited (‘Idea’), and is engaged in the provision of passive telecommunications infrastructure to TSPs in 15 telecom circles in India.
Given that the Proposed Combination merely envisaged exit of VIL from Indus Towers and its replacement with the VIL Shareholders, CCI opined that the ultimate control of Indus is not undergoing any change. In view of the approved merger of telecommunication services of VIL and Idea, CCI noted that VIL Shareholders will, however, continue to exercise joint control in Indus along with other shareholders of Indus. Despite that, CCI observed that both Idea and Vodafone have insignificant presence in the passive infrastructure market with less than five percent market share in terms of standalone towers and/ or number of tenancies. Having said so, it also noted that competition assessment would not change significantly even if Idea’s or VIL’s share in towers/tenancies of Indus is considered. Considering this, CCI held the Proposed Combination unlikely to result in an appreciable adverse effect in market for provision of passive infrastructure services through telecom towers in India, and thus approved it.
CCI’s Approach to ‘Indirect’ Acquisitions in Merger Control
The Competition Commission of India (‘CCI’) has made rapid strides in the development of its merger control regime in six short years. Despite facing a significant increase in the volume of notified transactions (almost 150% from 2013-14 (43) to 2016-17 (111)), CCI has cleared more than 450 transactions in a timely fashion.
However, CCI’s decisions on the acquisition of minority, non-controlling shareholding appear to have created some uncertainty in respect of the notification assessment under Section 6(2) of the Competition Act, 2002 (‘Act’).
In Alfa Laval and TPG Manta, CCI appears to have taken an expansive view of indirect acquisitions. In Alfa Laval, CCI treated the acquisition of shares in the offshore holding company (Alfa Laval) as an acquisition of shares in the indirect Indian subsidiary, Alfa Laval India. In this case, Tetra Laval had raised its shareholding in Alfa Laval from 18.83% to 26.1%, still a minority non-controlling stake (as recognized by CCI itself in the approval order), which was interpreted by CCI to mean that Tetra Laval had acquired an indirect 23.1% stake in Alfa Laval’s indirect Indian subsidiary, Alfa Laval India.
Similarly, and more recently, in TPG Manta, GIC and Thoma Bravo had acquired certain non-controlling shareholding in TPG Manta (acquirer/immediate target) pursuant to a co-investment agreement. In the meantime, TPG Manta sought to acquire 51% of the shareholding of another entity, FTW (target) and notified its proposed acquisition of shares in FTW to CCI. In its decision, CCI expressly acknowledged that neither GIC nor Thoma Bravo would acquire any shares or voting rights in FTW. Yet, CCI held that as a result of its shareholding in TPG Manta, Thoma Bravo would acquire “economic interest” in FTW commensurate with its shareholding. CCI observed that Thoma Bravo received “economic interest” in FTW along with the right to appoint a director on the board of FTW. Based on this perceived ‘acquisition’ of an ‘economic interest’, CCI went on to review the applicability of the specific exemption available for minority non-controlling acquisitions under Item I, Schedule I of CCI (Procedure in regard to the trans- action of Business relating to Combinations) Regulations, 2011 (‘Minority Acquisition Exemption’). CCI then concluded that despite there being no acquisition of shares, voting rights (or as- sets or control) in FTW, Thoma Bravo’s acquisition of ‘economic interest’ did not benefit from the Minority Acquisition Exemption.
In light of CCI’s decisions in TPG Manta and Alfa Laval, we examine more closely the concerns that arise with CCI’s interpretation of indirect acquisitions, particularly in the context of the Minority Acquisition Exemption.
Consider the following example: Immediate Target Co. (‘IT’) holds a 55% stake in Target Subsidiary (‘TS’). Acquirer Co. (‘A’) subsequently proposes to acquire a 20% non-controlling stake in IT. To what extent can it then be argued that A has ‘acquired’ an indirect stake in TS under the Act, such that it now needs to carry out a notification assessment not only with respect to the acquisition of shares in IT, but also in TS.
Section 2(a) of the Act defines an ‘acquisition’ as “directly or indirectly, acquiring or agreeing to acquire – (i) shares, voting rights or assets of any enterprise; or (ii) control over management or control over assets of any enterprise.” Applying this definition to the illustration above: while A may have directly acquired shares (and attendant voting rights) in IT, may it equally be said that A has acquired ‘shares’ or ‘voting rights’ in TS? Or per the definition of ‘acquisition’ above, has A arguably indirectly ‘acquired’ shares, or voting rights, in TS?
Notably, the Securities and Exchange Board of India (‘SEBI’) does not follow a pro-rata approach when examining a party’s obligation to make an open offer under the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011 (‘Takeover Code’) for indirect share acquisitions. Under the Takeover Code, investments that confer upon the acquirer, control over the immediate target company would qualify as an indirect acquisition of all the shares held by the immediate target company in the ultimate target. However, a non-controlling investment in the immediate target by the acquirer does not imply an indirect acquisition of a pro- rated percentage of shares in the ultimate target company. Similar treatment can be found in the
merger control provisions in the United States. Per the Hart–Scott–Rodino Antitrust Improvements Act of 1976 (‘HSR’) – only controlling investments in a company would constitute indirect acquisitions of the shares held by the immediate target in the ultimate target company
The argument that A may have made an ‘indirect’ acquisition of shares in TS may not be in consonance with the spirit and purpose of the definition of ‘acquisition’ under Section 2(a) of the Act. Reference to ‘indirect’ acquisition is more likely to include those acquisitions where an ultimate acquirer uses a controlled intermediate corporate vehicle to carry out the intended acquisition, e.g. a special purpose vehicle set up for an acquisition. In such a case, an acquisition by the otherwise inconsequential controlled entity may effectively be viewed as an acquisition by the controlling holding entity. To go beyond this, as in the example above, raises several uncertainties for businesses while assessing the notification requirements for acquisitions.
The first uncertainty arises while assessing the applicability of the target based (de minimis) exemption. Even if the intended/immediate target, IT satisfies the de minimis asset or turnover thresholds in India, the indirect, unintended target, TS, may not benefit from the target based (de minimis) exemption.
The second set of uncertainty arises on account of CCI’s fairly conservative view on ‘strategic acquisitions.’ Apart from the limited carve-out provided under the Minority Acquisition Exemption,  CCI appears to have taken the position that any acquisition of shares in a competitor will likely be viewed as a ‘strategic’ acquisition i.e. neither in the ‘ordinary course of business’, nor made ‘solely as an investment.’ Accordingly, besides the very narrow exception provided for in the explanation to the Minority Acquisition Exemption, acquisition of minority, non-controlling shares in inter-competitor transactions engaged in the same or similar business is unlikely to benefit from the Minority Acquisition Exemption.
The difficulty with this interpretation is illustrated below using the example above. Assume that A (acquirer) and T (ultimate target) are engaged in the same business, but IT (immediate target company) is neither a competitor to A nor T. If A is viewed as having indirectly acquired a 14% shareholding in T, by way of its acquisition in IT, A’s acquisition in IT would result in a separately notifiable transaction, on account of A being unable to benefit from the Minority Acquisition Exemption (since, A and T are engaged in similar businesses).
Extending CCI’s reasoning further, in the example above, consider a situation where A holds 50% or more of the shareholding of IT and IT is engaged in a similar business as T. If IT were to acquire a minority stake (5%) in T such that ‘it is viewed as triggering an indirect acquisition by A in T, then, in light of CCI’s expansive definition of ‘strategic acquisitions,’ T will once again be unable to benefit from the Minority Acquisition Exemption (having an indirect horizontal overlap with T (on account of IT’s shareholding in T). As a result, even though A is not actually acquiring shares in T and has no overlaps with T, it will nonetheless be subject to a notification requirement.
The situations contemplated above create a great deal of uncertainty, particularly when assessing the notifiability of non-controlling acquisitions. The uncertainty means that potential acquirers would need to assess notification requirements in all such companies where their in- tended target company may have a shareholding.
The uncertainty with this interpretation is exacerbated on account of CCI’s selective application of its interpretation of ‘indirect acquisition.’ In several other cases, CCI has not always followed or at the very least expressed in writing, its expansive interpretation of what it consider as an indirect acquisition.
An overly broad interpretation of ‘indirect’ acquisition may create additional difficulties for non-controlling shareholders. Take the same example as above, and assume that once A has acquired the 20% non-controlling stake in IT, which then subsequently decides to acquire a 55% stake in A’s competitor, C. Now, as a minority, non-controlling shareholder in IT,A may not have any meaningful ability to control such a decision by IT. Yet, owing to its minority shareholding in IT, A may nevertheless be subjected to notification requirements before CCI, on account of it having acquired an indirect stake in a competing concern. Thus, even though the acquisition was not contemplated by A, and could not therefore have been a ‘strategic’ investment, this acquisition would still be unable to benefit from the Minority Acquisition Exemption.
CCI’s approach for implementation of indirect acquisitions is inconsistent with the practice followed by other jurisdictions (e.g,, European Union, United States,Australia, Canada, etc.). CCI has in the past been proactive in addressing similar problematic provisions and interpretations within merger control. We look forward to receiving definitive guidance from CCI to address the ambiguities associated with its selective interpretation of ‘indirect acquisitions’.
 Alfa Laval and Tetra Laval (C-2012/02/40)
 Manta Holdings LP and Thomas Bravo Funds XII LP (C-2016/10/439)
 Paragraph 11, Alfa Laval and Tetra Laval (C-2012/02/40)
 From the approval order published by CCI, the shareholding in TPG Manta by Thoma Bravo and GIC is not clear
 CCI acknowledged that Thoma Bravo had only the right to appoint one director on the board of FTW. Accordingly, suchpurely investor protection rights may not reasonably be regarded as an “acquisition of control”
 See,https://www.sebi.gov.in/sebi_data/faqfiles/aug 2017/1503313163982.pdf. As the SEBI website explains, if A ac- quires 40 per cent shares of IT along with majority control of IT which, in turn, holds 70 per cent shares of TS, a listed company, along with majority control of TS, then A, in effect, acquires control over 70 per cent shares of TS held by IT.
 Any transaction where the ‘target’ enterprise (i.e. the enterprise whose shares, voting rights, assets or control are being acquired or are being merged/amalgamated, and including such enterprise’s subsidiaries) either has assetsnot exceeding ¤ 3,500 million (approx. US$ 54.4 million) in India, OR has a turnover not exceeding ¤ 10,000 million (approx. US$ 155.3 million) in India, are currently exempt from the mandatory notification requirement.
 Per the explanation to the Minority Acquisition Exemption, acquisition of shares of less than 10 per cent, subject to the satisfaction of certain additional conditions (no board seat, acquisition of ordinary shareholder rights, no intention to nominate board seat or participate in the management of the target), would be deemed to be as “solely as an investment” and absent any acquisition of control, would be eligible for the Minority Acquisition Exemption
 Copper Technology/ ANI Technologies, C-2017/08/525. Abbott/ Mylan – C-2014/08/202
 See Alibaba/Singapore, C-2015/08/301; Tencent/Flipkart, C-2017/04/501
 In this example, as well as in the others, we assume that the parties satisfy all jurisdictional thresholds
CCI slams penalty on chemists and druggists association in Gujarat for anti-competitive conduct*
On January 4, 2018, CCI levied a penalty of ₹1, 08,588 and ₹11,11,549 on the Chemists and Druggists Association of Baroda (‘CDAB’) and Federation of Gujarat State Chemists and Druggists Association (‘FGSCDA’) respectively. The penalty was calculated at 10% of the average annual income of financial years 2011-12, 2012-13 and 2013-14, for contravening Section 3 of the Act. The office bearers of CDAB and FGSCDA were also penalized for being actively responsible for engaging in anti-competitive conduct of their organizations.
The informant, Reliance Agency (‘Reliance’), alleged that CDAB and FGSCDA limited the supply of drugs and medicines by mandating issuance of no objection certificates (‘NOC’) from the concerned chemists and druggists association prior to the appointment of stockists for the supply of drugs and medicines. It was also alleged that Abbott India Ltd. (‘Abbott’) was an ac- tive participant in such anti-competitive practices along with other parties, as it willingly adhered to these directives.
It was observed by CCI that the allegation of ill-motives of Reliance in filing the above in- formation, made by CDAB and FGSCDA, has no relevance since the proceedings before CCI are inquisitorial in nature and therefore the locus of Reliance is not relevant in deciding whether the case filed before CCI should be entertained or not. Further, it was noted that as per the scheme of the Act, it is not necessary that there must be an informant to initiate an inquiry or investigation. Relying on the judgment passed by the Hon’ble Supreme Court in Competition Commission of India v. Steel Authority of India Limited, CCI held that given the inquisitorial nature of the proceedings before CCI, it is not required to confine the scope of inquiry to the parties whose names are mentioned in information. CCI observed that the scope of inquiry is much broader and it is not restricted in its inquiry to investigate only the parties arrayed in the information.
On the substantive allegations, further to the evidence collected by the Director General, CCI (‘DG’), which included statements of witnesses on cross-examination, CCI concluded that CDAB and FGSCDA had engaged in anti-competitive conduct and contravened Sections 3(3)(b) and 3(1) of the Act. It was observed that the requirement of an NOC posed a hindrance that dissuaded new and existing stockists from entering and expanding in the market and this practice amounted to an entry barrier for other pharmaceutical stockists.
CCI also reviewed allegations against the FGSCDA’s practice of mandatorily requiring payment of Product Information Service (‘PIS’) charge in order to introduce new products in the market. CCI dismissed arguments made by CDAB and FGSCDA that the PIS charge was beneficial to pharmaceutical companies and found that on account of PIS charge pharmaceutical companies were unable to launch new products without first paying for the publication of their products in the FGSCDA magazine. Accordingly, CCI held that the practice of imposing mandatory PIS charges by FGCDA and CDAB resulted in limiting supplies in the market in contravention of Section 3(3)(b) read with Section 3(1) of the Act. In respect of Abbott, the DG noted that it was the only distributor of Novo Nordisk (‘Novo’) products. CCI noted that Abbott was neither in a position to appoint Reliance (who was not an authorised wholesaler of Abbott) as a stockiest, nor as a supplier of Novo products since it had a limited role in the supply of Novo products. Therefore, CCI agreed with the findings of the DG that Abbott could not be faulted for returning the order and demand draft of Reliance and advising it to approach Novo for supplies.
With the exception of the Secretary of CDAB, CCI found that the respective presidents of CDAB and FGSCDA were responsible for the anti-competitive conduct of their respective associations, and accordingly imposed a penalty of 10 per cent of their average income under Sections 48(1) and (2) of the Act.
AZB & Partners successfully represented Abbott in these proceedings.
*Case No. 97 of 2013
 (2010) 10 SCC 744
CCI imposes penalty on Nair Coal Services Pvt. Ltd., Karam Chand Thapar & Bros. (CS) Ltd. and Naresh Kumar & Co. Pvt. Ltd. for engaging in collusive conduct*
By way of its order dated January 10, 2018, CCI imposed a penalty of ₹7,16,00,000, ₹16,92,00,000 and ₹111,60,00,000 on Nair Coal Services Pvt. Ltd. (‘NCSL’), Naresh Kumar & Co. Pvt. Ltd. (‘NKC’) and Karam Chand Thapar & Bros. (CS) Ltd. (‘KCT’) respectively for engaging in collusive bid rigging in contravention of Sections 3 and 4 of the Act. The information was filed by Shri Surendra Prasad (‘SP’), an advocate purportedly aggrieved by the sudden rise in electricity charges in the state of Maharashtra, against Maharashtra State Power Generation Co. Ltd. (‘MA- HAGENCO’), NCSL, KCT and NKC alleging collusive bid-rigging and geographical bid allocation under Section 3(3) and denial of market access under Section 4 of the Act.
MAHAGENCO is a state-owned company engaged in the business of generating power in the state of Maharashtra. It runs seven thermal power stations (‘TPS’) and obtains raw coal from various subsidiaries of Coal India Limited (‘CIL’) through liasoning agents, who are responsible for ensuring quality coal procurement. NCSL, KCT and NKC are all coal liasoning agents (collectively referred to as ‘CL Agents’).
CCI had originally dismissed the information under Section 26(2) of the Act by way of its order dated December 11, 2013. SP then appealed to the erstwhile Competition Appellate Tribunal (‘COMPAT’). By way of its order dated September 15, 2015, COMPAT then set aside CCI’s closure order and directed the DG to investigate the allegations raised by SP.
After considering the DG investigation report and the preliminary objections raised by the CL Agents, CCI stated that in the absence of a Section 26(1) order, the DG investigation was void. CCI held that once COMPAT had directed the DG to investigate, it could not sit in appeal over COM- PAT’s direction. It opined that doing so would constitute an act of judicial indiscipline that would border on contempt. CCI also considered the allegation that SP had approached CCI with unclean hands, as SP was associated with the advocates representing B.S.N. Joshi & Sons Ltd. (‘BSN’), a rival of the defendant CL Agents. It was noted that SP had fraudulently circulated a copy of the DG’s investigation report to BSN, who was not a party to the investigation. However, further to an apology tendered by SP’s advocate, CCI didn’t penalize SP for making fraudulent statements.
On the issue of illegal/unwarranted expansion of investigation by the DG, CCI agreed with the CL Agents that the DG had exceeded the scope of its investigation by considering the conduct of the CL Agents also in respect of tenders issued by various power generation companies other than MAHAGENCO. CCI noted that absent any material on record to prove that the CL Agents had cartelized in these tenders, the DG was wrong in drawing speculative and conjectural observations in respect of such other tenders. On this basis, CCI did not consider evidence relating to tenders in the DG Report that were not issued by MAHAGENCO.
CCI then examined several factors to conclude that the CL agents had entered into an arrangement in respect of the tenders floated by MAHAGENCO and had rigged the bid: (i) identical basic rates quoted by both NCSL and NKC; (ii) a pattern of geographical allocation of TPS in response to the tenders floated by MAHAGENCO; (iii) purchasing of the tender documents by NCSL and NKC on the same day; (iv) NCSL and NKC were engaged in discussions with each other at every stage of tendering process through exchange of letters/pre-bid queries for MAHAGENCO tenders; (v) NCSL and NKC had various financial transactions which were done to share profits or make payments for cover bids; and (vi) bogus expenses shown by NCSL and NKC in order to show less profits arising out of the MAHAGENCO tenders. As apparent from the above, apart from price parallelism, CCI also referred to the above factors to conclude that the parties had engaged in collusive bid rigging.
CCI noted the mitigating factors asserted by NKC: (i) NKC had a very limited role to play; (ii) no appreciable adverse effect on the competition (‘AAEC’) as a result of the cartel agreement; (iii) NKC was a small and medium enterprise company, and any penalty would ruin its viability; and (iv) NKC was engaged in various other businesses apart from coal liasoning services, and therefore, only the revenue pertaining to coal liasoning services should be considered for deter- mining the penalty. CCI was however of the opinion that the contention of NCSL and NKC that only the revenue generated from the impugned tender alone would constitute relevant turnover was not tenable. CCI then, without considering the mitigating factors, held that the CL Agents had engaged in market allocation and bid rigging in respect of MAHAGENCO tenders during the period between 2005 and 2013, amounting to hard core cartel, in violation of Sections 3(3)(c) and 3(3)(d) read with Section 3(1) of the Act. It thus directed them to cease and desist from the cartel activity. The present case is one of the rare cases (after the cement cartel case) where CCI ignored the mitigating factors and imposed a high penalty on the parties involved.
CCI was of opinion that the present case falls in the category of hard core cartels as NCSL and NKC reached an agreement to submit collusive tenders and to divide the markets. CCI also specifically noted that while the investigation was for the period between 2005 and 2013, the findings of CCI are limited to the conduct that occurred after 20 May 2009 to 2013. Further, it noted that “relevant turnover” did not mean the relevant turnover from the impugned tender alone, and in line with the Excel Crop decision of the Supreme Court, held that it was the total revenue generated from all coal liasoning services which should be considered as the “blemished product” and relevant for the purposes of calculating the turnover. Accordingly, CCI imposed a penalty at the rate of 2 times the profits of the CL Agents between 2010-11 and 2012-13.
* Case No. 61 of 2013
 Case No. 29 of 2010
 Appeal No. 79 of 2012
CCI orders investigation by DG against Star India Private Limited*
Further to information filed by Thiruvananthapuram Entertainment Network (P) Ltd. (‘TENL’) against Star India Pvt. Ltd.(‘Star’), CCI, on December 29, 2017 directed the DG to investigate into the matter and ascertain if there was a contravention of Section 4 (2) (a) (ii) of the Act by Star.
TENL supplies signals for telecasting various TV channels including Star’s channels to customers at different places. It has around 22,000 customers in the State of Kerala. Star is a broad- caster of satellite based television channels in India, including popular channels such as Star Plus, Star Sports and Star Gold. In its information filed under Section 19 (1) (a) of the Act, TENL alleged that Star was engaging in price discrimination with TENL, by consistently increasing its license fee to TENL from June 30, 2014, even though other larger distributors were not asked to pay higher license fees to Star for the same set of channels. TENL alleged that the license fee was increased once Star took over certain Malayalam channels in June 2014 and that such conduct contravened Sections 3 and 4 of the Act.
CCI held that the alleged conduct did not fall within the scope of Section 3(3) of the Act, which deals with competitor conduct. Since the scope of the agreements between Star and TENL did not fall within the specific clauses of Section 3(4) of the Act, CCI ruled out contravention of Section 3(4) of the Act as well.
For examining the alleged conduct under Section 4 of the Act, CCI identified the relevant market as the ‘market for provision of broadcasting services in the State of Kerala’. To assess Star’s market position CCI directed Star to provide the names and market share of its competitors in the state of Kerala. CCI noted that since Star provided a generic response (simply stating that 881 private channels were registered with the Ministry of Information and Broadcasting and Star competed with all 881), it was constrained to rely on information from the public do- main to complete its preliminary assessment. On the basis of publicly available data, namely, viewership data issued by the Broadcast Audience Research Council for April, 2017, CCI noted that Star was a leading player with approximately 40-50 % share of viewership in Kerala, with the next closest competitors enjoying a viewership share of 20%t and 10% respectively. Accordingly, CCI concluded that Star enjoyed a dominant position in the relevant market.
To examine whether Star had contravened Section 4 of the Act by engaging in price discrimination, CCI directed TENL and Star to provide details of actual rates charged from TENL’s larger competitors, i.e. Kerala Communicators Cable Limited (‘KCCL’), Asianet Cable Vision (‘ACV’) and DEN Networks Limited (‘DEN’). On the basis of information received from Star, CCI noted that Star provided incomplete, inconclusive and even contradictory information to it. Star con- tended that relevant regulations issued by the Telecom Regulatory Authority of India (‘TRAI’) required it to treat similarly placed customers equally. To the extent that TENL had a much smaller subscriber base than other multi system operators (‘MSO’), it was not similarly placed. However, CCI noted that Star failed to provide relevant details of the size of the subscriber base of other similarly placed MSO’s or the prices it charged to MSOs with a larger subscriber base.
In response to CCI’s queries on market share information, TENL sought to withdraw the information filed with CCI stating that its dispute with Star was resolved, as Star had agreed to reconsider its tariff rates. CCI rejected TENL’s request for withdrawal on the grounds that a settlement between an informant and the alleged contravening entity cannot be the basis for terminating proceedings before it and that, in any event, the alleged contravention needed to be examined in relation to the market in general, and not only from TENL’s perspective. CCI accordingly found that (i) Star’s inability to provide any reliable evidence to refute the allegations of price discrimination; (ii) price discrimination brought out in the information; and (iii) Star’s speedy resolution of the infomant’s grievance followed by an evasive reply to CCI, prima facie] indicated that Star was is acting in contravention of the provisions of the Act and directed the DG to conduct an investigation under Section 4(2)(a)(ii) of the Act.
In its order, CCI noted that its jurisdiction was complementary to and in addition to that of TRAI and specifically observed that its powers and functions under the Act appeared to be distinct in terms of investigation process, inquiry and remedies from that of TRAI under the TRAI Act, 1997.
CCI dismisses allegations of abuse of dominance against Viacom 18, UFO Movies, E-City Digital Cinema, Real Image Media Technology, United Media Works, K Sera Sera Digital Cinema and The Film and T.V. Producers Guild of India.*
On December 29, 2017, CCI dismissed information filed against Viacom 18, Aditya Chowksey, UFO Movies India Ltd., E-City Digital Cinema Pvt. Ltd., Real Image Media Technology Pvt. Ltd., United Media Works Pvt. Ltd., K Sera Sera Digital Cinema Pvt. Ltd. (‘KSS’) and the Film & T.V. Producers Guild of India Ltd. (‘the Guild’) (collectively referred to as ‘Cinema Operators’) by the sole proprietor ‘M/s Prakash Cinema’ in Madhya Pradesh by way of an order under Section 26(2) of the Act.
Cinema Operators are in the business of supplying necessary digital cinema equipment (‘DC Equipment’) used to capture signals of films to be exhibited in the cinema hall. The Guild is the parent body of all the producer associations.
It was alleged that KSS wrongly terminated its agreement with the Mr. Arjun (the Informant) and proceeded to remove DC Equipment from Arjun’s premises, preventing Arjun from carrying on its business. It was also alleged that the Guild, the parent body of all producers’ associations to which most producers were affiliated, issued a directive to all producers not to exhibit their movies in the Arjun, the Informant’s cinema. Accordingly, it is alleged that by failing to provide DC Equipment to Arjun, the Cinema Operators together and, KSS in particular, abused their dominant position under Section 4 of the Act. Similarly, the Guild had contravened Section 4 of the Act by preventing film producers from exhibiting movies in the Informant’s cinema.
CCI dismissed allegations against the Cinema Operators on the ground that the scheme of the Act does not provide for ‘collective dominance.’ CCI also observed that since Cinema Operators weren’t engaged in same line of business, their conduct could not be scrutinized under Section 3(3) read with Section 3(1) of the Act for concerted/collusive action. To examine allegations of abuse of dominance against KSS, CCI defined the relevant market as the “provision of DCE services for the purpose of screening/exhibiting films in India.” However, CCI observed that various other players offered DC Equipment from whom Arjun could procure necessary equipment, thus demonstrating that the relevant market was competitive. Absent dominance, no case for abuse of dominance was made out against KSS. In any event, CCI held that the agreement between Mr. Arjun, Informant and KSS did not appear to be onerous or one-sided and allegations of wrongful termination was not a competition concern, and appeared to be in the nature of a contractual breach.
CCI equally dismissed allegations of abuse of dominance against the Guild as Arjun failed to provide any material to substantiate that the Guild had, in fact, issued any oral or written directions to its producer members not to exhibit their films in Arjun’s cinemas.
CCI dismisses complaint against Kerala State Electricity Board Limited*
On December 29, 2017, CCI dismissed information filed by the proprietor of Paulson Park Hotel (‘Proprietor’) in Kerala against the Kerala State Electricity Board Limited (‘KSEBL’) alleging the contravention of Section 4 of the Act by way of an order under Section 26(2) of the Act.
The Proprietor’s primary grievance related to the application of an incorrect tariff by KSEBL in its supply of electricity to its hotel. The Proprietor alleged that its hotel was entitled to the supply of electricity at industrial tariff rates as it had been classified as a star hotel by the Tour- ism Department from August 1, 1988 for a period of three years. While the Proprietor’s application for renewal of star classification was pending, KSEBL raised a bill charging the Proprietor’s hotel at a higher tariff under LT-VII category instead of the applicable LT-IV category.
CCI noted that the Proprietor had challenged KSEBL’s conduct before the Kerala High Court who had issued decisions in its favour. However, despite the Kerala High Court issuing an order in favour of the Proprietor, KSEBL continued to raise excessive charges on the Proprietor’s hotel for the supply of electricity. When the Proprietor failed to pay the bill in light of the decision of the Kerala High Court, KSEBL disconnected the power supply and refused to reinstate the supply despite the Proprietor’s request for re-connection. KSEBL’s conduct was alleged by the Proprietor to be unfair and discriminatory and in contravention of Section 4 of the Act.
On the basis of the information filed by the Proprietor, CCI held that there did not appear to be any competition law issue at hand. CCI also observed that the information appeared to be a case of forum shopping by the Proprietor, and accordingly closed the matter.
CCI dismisses allegations of cartelization and price fixation against Wave Distilleries & Breweries Ltd. and 8 other country liquor manufacturers*
On December 29, 2017, CCI dismissed information filed by Dwarikesh Sugar Industries Ltd. (‘DSI’), manufacturer of crystal sugars, against several manufacturers of country liquor based in Uttar Pradesh, namely, Wave Distilleries & Breweries Ltd., National Industrial Corporation Ltd., Unnao Distilleries & Breweries Ltd., Lord Distillery Ltd., Superior Industries Ltd., Sir Shadilal Distillery & Chemical Works, Radico Khaitan Ltd., Brijnathpur Distillery Division and Simbhaoli Sugars Ltd. (collectively, ‘Liquor Manufacturers’) the determination of the purchase price of molasses at unreasonably low rates.
Molasses, a natural by-product of the sugar manufacturing process, serves as a basic raw material for potable liquor. The supply and distribution of molasses is governed by the U.P. Sheera Niyantram Adhiniyam 1964 and the Molasses Policy (‘Policy’) issued by the Controller of Molasses, Uttar Pradesh (‘U.P.’) and requires sugar mills (like DSI) to supply a certain percentage of their molasses to manufacturers of country liquor (reserved molasses) in U.P. with the remaining molasses free to be sold in the open market (unreserved molasses). Owing to this Policy, DSI has alleged that Liquor Manufacturers abuse their dominant position by dictating the price of reserved molasses, which is significantly lower than the unreserved section (approximately 9 to 10 times lower), as these prices aren’t regulated by the Policy but driven by what Liquor Manufacturers are willing to offer.
CCI initiated a formal inquiry by way of its prima facie order dated September 1, 2014 under Section 26(1) of the Act and directed the DG to investigate the possibility of a cartel to fix prices of reserved molasses in contravention of Sections 3(1) and 3(3) of the Act. The DG report found the existence of two distinct markets for reserved and unreserved molasses and suggested a competition impact assessment of the existing Policy, but did not find any contravention under the Act.
CCI agreed with the report of the DG. CCI examined the scope of the Policy and found that in the interests of fair market competition, there should neither be any reservation nor any dispatch ratio. Market forces should be allowed to discover the price of molasses without getting impacted by any policy constraints. While acknowledging that the Supreme Court had upheld the legal validity of the notification and the provisions of the accompanying legislation, CCI nevertheless observed that market allocations or any form of quantitative restrictions on by- products of sugarcane is detrimental for competition in the country.
However, CCI did not find any evidence of price parallelism or any form of price fixing between the Liquor Manufacturers for reserved molasses. CCI observed that there was no fixed pattern in the movement of prices for reserved or unreserved molasses and the prices appeared to be an outcome of independently negotiated prices at market determined rates. Accordingly, CCI concluded that there was no contravention of Sections 3 (3) (a) of the Act and closed the investigation.
CCI penalizes Dumper Owners Association for failing to comply with its order under Section 42 of the Act*
In January 2015, CCI passed an order under Section 27 of the Act directing the Dumper Owners’ Association (‘DOA’) to cease and desist from engaging in conduct which it found to be in contravention of Section 3 of the Act (‘Final Order’). Subsequent to the Final Order being passed, Seaways Shipping and Logistics Limited (‘SSLL’) and Paradip Port Trust filed applications be- fore CCI stating that by failing to provide dumpers despite repeated requests, the DOA was in violation of the Final Order. These applications were registered as applications under Section 42 of the Act (‘Applications’). CCI directed the DG to submit an investigation report on the veracity of the statements in the Applications. In its report, the DG concluded that the DOA had, in fact, contravened the Final Order (‘DG Report on the Applications’).
CCI considered the Applications and the DG Report on the Applications, and issued an order under Section 42 of the Act against the DOA for failure to comply with the Final Order. CCI also imposed a penalty of ₹20,000 on DOA for each day of non-compliance – beginning from the date of the Final Order up to the date on which the DG completed its investigation on the Applications, amounting to ₹1,17,40,000. CCI then imposed a penalty of ¤5,000 on two of the office bearers for non-compliance of the Final Order for each day of non-compliance starting from the date of passing the Final Order to the date on which the DG completed its investigation on the Applications. This amounted to ₹29,35,000 on each of the office-bearers.
In reaching its decision, CCI noted that even during the DG investigation, DOA failed to co- operate with the DG, resulting in a recommendation from the DG to initiate non-cooperation proceedings against DOA under Section 43 of the Act. CCI did not adhere to the DG’s recommendation, being of the view that in case of proceedings involving anti-competitive conduct, if the party investigated did not respond despite sufficient opportunities being granted, the DG was entitled to prepare the report on the basis of information on record. Even after the DG Re- port on the Applications was submitted to CCI, DOA failed to provide any responses, despite several extensions been granted by CCI. Instead, DOA preferred a writ before High Court of Odisha (‘Odisha HC’) against CCI order directing investigation for non-compliance of the Final Order and the DG Report on the Applications. The High Court observed that DOA may file an application before CCI seeking adjournment of the proceedings. Several requests for adjournment were accommodated by CCI on the ground that the writ was pending before the Odisha HC. Finally on August 22, 2017, CCI rejected DOA’s request to adjourn proceedings (once again citing the pendency of its writ petition before the Odisha HC), as no stay order had been issued by the Court thus far. CCI also clarified that it had given a final opportunity to DOA to submit its response to the DG Report on the Applications and listed the matter for hearing on October 31, 2017. CCI noted that despite several such opportunities to be heard, DOA failed to submit any response to the DG Report on the Applications. DOA’s counsel submitted that he had no submissions to make on behalf of DOA.
CCI observed that the DG Report on the Applications clearly established that despite repeated requests and even advance payments by SSLL to DOA to provide dumpers for unloading cargo, DOA failed to supply dumpers to SSLL and disallowed SSLL to use dumpers of third par- ties. Accordingly, CCI concluded that the DOA had not complied with the Final Order.
CCI approves acquisition amongst Mr. Sanjit Bakshi, GE Equity International Mauritius, and Oriental Structural Engineers Private Limited*
On October 30, 2017, CCI approved an acquisition of 5.615% shares in Oriental Structural Engineers Private Limited (‘OSE’) by Mr. Sanjit Bakshi (‘SB’) from GE Equity International Mauritius (‘GE’) (‘Proposed Combination’).
SB is an individual director and promoter in OSE and also holds shares and directorship positions in several companies owned by the promoters of OSE. Prior to the Proposed Combination, SB held 3.78% of the shares of OSE in his individual capacity and 9.27% of the shares of OSE through his Hindu Undivided Family (‘HUF’). Further to the Proposed Combination, his personal shareholding would increase to around 9% and would hold a further 9.27% shares by way of his HUF. OSE, a private company incorporated in India, is inter- alia, engaged in the business of road construction, mining of coal and minerals in India.
CCI noted that since an existing shareholder, who is also a director and promoter in OSE, would acquire shares of an exiting shareholder, i.e. GE, the Proposed Combination does not appear to change competition dynamics in the markets in which OSE is engaged. On this basis, CCI approved the Proposed Combination under sub-section (1) of Section 31 of the Act.
CCI approves acquisition of 16.33 percent of equity share capital of ReNew Power Ventures Private Limited by Canada Pension Plan Investment Board*
By way of its order dated January 9, 2018, CCI approved the acquisition of approximately 16.33 per cent of the fully diluted equity share capital of ReNew Power Ventures Private Limited (‘Re- New’) by Canada Pension Plan Investment Board (‘CPPIB’) (‘Proposed Combination’), which comprised of the following steps: (i) acquisition of approximately 6.33 per cent shares in ReNew by CPPIB from Asian Development Bank (‘ADB’), together with substantially all the rights, title, interest and benefits attached or attributable to such shares from the closing of the sale and purchase transaction between ADB and CPPIB (‘Secondary Acquisition’); and (ii) acquisition of compulsorily convertible preference shares of ReNew by CPPIB that will mandatorily convert into equity shares amounting to not more than 10% of the equity share capital of ReNew (on a fully diluted basis) (‘Primary Acquisition’).
CPPIB, incorporated as a Crown Corporation under the Canada Pension Plan Investment Board Act of Canada, is a professional investment management organization responsible for investing funds of the Canada Pension Plan. CPPIB has investments in various sectors such as infrastructure, real estate and financial services in India. ReNew is an Indian energy company engaged in the business of power generation through renewable energy sources – namely wind and solar, as well as incidental management consultancy services and engineering, pro- curement and construction services. It has operations and clean energy projects across several states in India viz., Andhra Pradesh, Madhya Pradesh, Gujarat, Karnataka, Rajasthan, Telangana, Haryana and Maharashtra.
Having noted that neither CPPIB nor any of its investee companies (‘Portfolio Companies’) have any horizontal overlaps in India and no significant vertical overlaps (one of CPPIB’s Indian Portfolio Companies had a vertical relationship with an indirect subsidiary of ReNew), CCI held that the Proposed Combination is unlikely to have any AAEC in India in any of the relevant market(s). On this basis, CCI approved the Proposed Combination under sub-section (1) of Section 31 of the Act.
CCI approves amalgamation of IndusInd Bank Limited and Bharat Financial Inclusion Limited*
On December 19, 2017, CCI approved the amalgamation of Bharat Financial Inclusion Limited (‘BFIL’) into IndusInd Bank Limited (‘IBL’) (‘Proposed Combination’) by way of the following steps: (i) amalgamation of BFIL into IBL (‘Amalgamation’) in which shares of IBL would be issued to shareholders of BFIL in accordance with the share entitlement ratio as set out in the Scheme of Arrangement under Sections 230-232 of the Companies Act, 2013; (ii) preferential allotment of share warrants convertible into one share of IBL to IndusInd International Holdings Limited (‘IIHL’) and IndusInd Limited (‘IL’) (collectively, ‘IBL Promoters’), such that IBL Promoters would hold up to 15% (on an aggregate basis) of the total expanded issued and paid up equity share capital of IBL on a fully diluted basis; and (iii) post the Amalgamation, the transfer of IBL’s Business Correspondent Business, as a going concern, to its wholly owned subsidiary (‘Subsidiary’) by way of a slump exchange, in consideration for which the Subsidiary would issue its equity shares to IBL. BFIL and IBL are together referred to as (‘Parties’).
IBL is a private sector bank engaged in the provision of a range of banking and financial services to individual consumers, corporate and commercial entities as well as the provision of affordable financial services in under-served areas through business correspondent arrangements with non-banking financial company – micro finance institutions (‘NBFC-MFIs’). BFIL is a listed public company, registered with the Reserve Bank of India as a NBFC-MFI. It is primarily engaged in providing small value loans and certain other basic financial services to women, prominently in rural areas in India.
CCI noted the existence of horizontal overlaps between the Parties on account of both entities being engaged in the provision microfinance services. However, CCI noted the existence of different institutional sources for micro finance loans in India as well as the presence of several unorganized/individual lenders. Accordingly, from a supply side perspective, customers had the choice to avail micro financing servicing from several alternatives. CCI reviewed horizontal overlaps between the Parties in the market for provision of micro finance loans, by organized financial institutions as well as by the unorganized sector i.e. non-institutional lenders and concluded that the combined market share of the Parties in all such markets is insignificant to raise any competition concerns as such. On this basis, CCI approved the Proposed Combination under sub-section (1) of Section 31 of the Act.
Ministry of Corporate Affairs Extends Competition Law Exemption to Vessel Sharing Agreements
On July 4, 2018, the Ministry of Corporate Affairs (‘MCA’) issued a notification granting an additional extension of three years to Vessel Sharing Agreements (‘VSAs’) of Liner Shipping Industry from the provision of Section 3 of the Competition Act. VSAs are entered into by liner shipping companies to share a specific number of load carrying vessels on popular routes. However, all VSAs will be subjected to monitoring by the Directorate General of Shipping. The exemption is in line with the government’s initiative to increase the ease of doing business in India, and in sync with international best practices, which include not indulging in anti-competitive practices, including price fixing, limitation of capacity or sale, and allocation of markets or customers.
CCI Invites Comments on Proposed Amendment to Combination Regulations
CCI invited comments from stakeholders on the proposed draft for amendments to Combination Regulations. Some of the key highlights of the proposed amendments include the introduction of provisions that allow parties to offer voluntary remedies before CCI’s forms its prima facie opinion. CCI has also replacing the current Explanation on ‘solely for investment purposes’ Item 1 of Schedule I with a proviso.
CCI initiates an investigation into alleged abuse of dominance by the BCCI*
On June 1, 2018, CCI passed an order under Section 26(1) of the Competition Act, directing the Director General (‘DG’) to initiate an investigation into the conduct of the Board of Cricket Control in India (‘BCCI’) with respect to the organization of professional cricket leagues in India, and the auction of media rights of the Indian Premier League (‘IPL’).
The informant, a company which was a promoter of the Indian Cricket league (‘ICL’), alleged that BCCI held a dominant position in the relevant market of ‘organization of private professional league cricket in India’ and had abused its dominant position by indulging in conduct which led to denial of market access to the ICL, a rival league to the BCCI’s IPL. The informant further alleged that the BCCI, through its coercive tactics, forced players to opt out of their ICL contracts, and also used its persuasive power at the International Cricket Council (‘ICC’) (the governing body for the sport of cricket), to promote the IPL and give it the regulatory sanction. It was alleged that these factors along with the decision in the Surinder Singh Barmi case, gave impetus to the fact that BCCI has abused its dominance and contravened Section 4(2)(c) and 4(2)(e) of the Competition Act. It was further alleged that the BCCI had consistently, and with malafide intention, blacklisted the informant from participating in the bids for allocation of broadcast rights for IPL by issuing a set of highly targeted eligibility criterion for the same, including the non-involvement in any sort of litigation proceedings against the BCCI. The informant, who was involved in prolonged litigation due to the BCCI’s sanctioning of the rival ICL league thus automatically stood disqualified from the IPL bidding process.
CCI determined the relevant market to be ‘organization of professional domestic leagues/events in India’. Further, CCI took into consideration the regulatory control of the BCCI, the powers vested in it by the ICC to approve private cricket leagues and the indisputable market share of the BCCI, to form a prima facie opinion that the BCCI was dominant in this relevant market. With regard to abuse, CCI observed that the virtual blacklisting of the informant by the BCCI through its exclusionary clause preventing bids for the IPL media right by entities who are involved in litigation with the BCCI – IPL, amounted to denial of market access. This, along with the ability of the BCCI to sanction private cricket leagues, was cumulatively observed to be abusive. CCI noted that sports federations engaged in the organization of tournaments/ leagues are put to an advantage if they also possess the authority to grant approval for the organization of similar events by others and set conditions for such organization, and that the BCCI seemed to have taken advantage of such a situation.
In light of the above, CCI concluded that a prima facie case of abuse of dominant position within the meaning of Section 4(2)(c) of the Competition Act had been made out against the BCCI and directed an investigation by the DG.
*Case No.91 of 2013.
 Case No. 61 of 2010
CCI directs DG to investigate alleged unfair conditions by ONCC in its offshore service provider agreements*
On June 12, 2018, CCI passed an order under Section 26(1) of the Competition Act directing the DG to initiate an investigation into the alleged imposition of unfair and unreasonable terms of contract by the Oil and Natural Gas Company (‘ONGC’) in its charter hire agreements (‘CHAs’) for offshore support vessels (‘OSVs’).
The informant, the Indian National Shipowners’ Association, is an association of shipping companies which inter alia provides offshore oilfield services including OSVs. ONGC is a Public Sector Undertaking (‘PSU’) of the Government of India.
The informant alleged that ONGC was the dominant enterprise in the market for hiring of OSVs in the Indian Exclusive Economic zone (‘EEZ’). It was alleged that ONGC, a vertically integrated PSU, hired the largest number of OSVs in the Indian EEZ i.e. 69 OSV’s out of 84 contractually committed/operational OSVs in India as on January 11, 2018, amounting to around 82% of the relevant market. It was further alleged that ONGC had abused this position of dominance by imposing one sided and unreasonable terms of contract in its CHAs for OSVs, specifically, unilateral right of termination of contract, unilateral termination in case of force majeure, and appointment of arbitrators. It was alleged that ONGC used these clauses as a bargaining chip to demand a reduction in service charges by the members of the informant, and had invoked the unilateral termination clause to terminate service contracts of the several of the shipping companies.
CCI observed that to determine the relevant market and the dominance of ONGC within it, it was necessary to determine if the providers of OSVs could switch to alternate buyers/hirers of such services without much difficulty. CCI determined the relevant market to be the ‘market for charter hire of OSV’s in the Indian EEZ’, and given the number of OSVs hired by ONGC, held that it was prima facie dominant in this relevant market.
On the question of abuse, CCI opined that the unilateral right to terminate the contract was invoked by ONGC to pressurize the Informants into reducing the rates and was prima facie abuse of dominance. With respect to the force majeure and arbitration clauses, however, CCI observed there are sufficient safeguards to protect the interest of the informant, and thus they did not appear to be abusive. In light of above, CCI concluded that a prima facie case of abuse of dominant position within the meaning of Section 4(2)(a)(i) of the Competition Act had been made out against ONGC and directed an investigation by the DG.
Competition Commission of India examines Google’s Products in India
After an inquiry spanning over six years, Competition Commission of India (‘CCI’) has examined a number of Google products offered in India – ranging from its search designs and ads platform to its syndication agreements and trademark policies, and issued its decision pursuant to such examination on February 8, 2018. Continuing with its recent enforcement trend in the technological sector, CCI has acknowledged that intervention in technological markets should be limited, and recognized that Google has been instrumental in revolutionizing the manner in which users access information on the internet. In its decision, CCI has endorsed most of Google’s products and practices in India that it reviewed – including some of Google’s popular products like Google maps, ad platforms, OneBox, etc.
On three counts, however, majority composition of CCI (i.e. four out of six commissioners who examined the case) (‘Majority Commissioners’) has identified certain concerns with three components of Google’s services in India – (a) Google’s historic (i.e. pre-2010) display of universal results; (b) labeling of Google’s flight units; and (c) one clause in Google’s direct search intermediation agreement which Google negotiates with publishers who wish to have Google’s search functionality on their website. The two dissenting commissioners (‘Minority Commissioners’) did not agree with the Majority Commissioner’s views on the three infringement counts noted above, observing that much of what the Majority Commissioners had held was entirely hypothetical and called for an effects-based analysis in abuse of dominance cases rather than applying the per se rule. The key findings of CCI are summarized below.
On examining Google’s internet search products, CCI defined two separate relevant markets, i.e. the market for ‘Online General Web Search Services in India’ and for ‘Online Search Advertising in India’. On the former, which relates to the display of free search results, CCI noted that users offer ‘indirect consideration’ to Google in the form of their attention and personal information. CCI then departed from the findings of contravention of the Director General (‘DG’), and held that: (a) it was not necessary for the ‘More Results’ link on Google’s universal results to lead to third-party service providers since doing so would confuse users, rather than serve any useful purpose; (b) the display of Google Maps alongside a search query enhances user-experience; and (c) the information contained in Google OneBox are focused on providing the most relevant result to a user.
Although CCI found no concerns with Google’s existing search results designs, the Majority Commissioners found that prior to October 2010 (i.e. well before the commencement of CCI’s investigation against Google), Google’s search design displayed universal results at certain ‘fixed’ positions on its search page. Despite noting Google’s submission that it did not have requisite technology at the time to carry out relevant comparison for positions on the result page, CCI held that the display of ‘fixed positions’ back in October 2010, on account of these ‘fixed positions’ raised concerns as to its relevance. The Minority Commissioners disagreed with the Majority Commissioners and noted that the conduct itself was historical and the harm caused purely speculative, since limiting the display of universal results to fixed positions did not, by itself, mean that they were any less relevant. The Minority Commissioners further noted that Google’s voluntary transition to the fully-floating regime well before the initiation of CCI’s inquiry obviates the need for any regulatory intervention.
Commercial Units are result types that Google sets apart in ad space and distinguishes from search results with a “Sponsored” label. CCI considered whether Google’s display of commercial units in India (i.e. for shopping and flights) misled users. Majority Commissioners observed that Google’s flight unit (but not shopping), which allows users to compare flights from various airlines, mislead users. Finding that flight units were appropriately labelled as being ‘Sponsored’, the Majority Commissioners nevertheless found that flight units are prominently placed on Google’s results page, take up a disproportionate space, and contain a link which leads to a ‘Google’s Flights page’ as opposed to a third-party website. Accordingly, the Majority Commissioners found the flights unit to be ‘misleading’ and directed Google to indicate that the ‘Search Flights’ link leads to Google’s Flights page and not that of a third-party service provider.
The Minority Commissioners pointed out that an examination into Google’s flight unit and the apprehension that it was misleading users, ought to have been carried out after analyzing actual user behavior, user preferences, flow of user traffic, etc. The Minority Commissioners noted from review of data on file that: (i) Google’s users are able to distinguish between free and paid results (as Google’s top-ads do not attract maximum clicks, but generic search results do); (ii) users clicked far less on the Google Flights results page as compared to clicks that went through to leading travel and flight comparison sites such as Makemytrip, Goibibio, Cleartrip, etc. Absent evidence of foreclosure or users being misled, the Minority Commissioners did not find Google flights unit to be anti-competitive.
Google’s advertising platform and policies
Google’s AdWords enables advertisers to bid for ads that appear alongside search results. The primary complaint of Bharat Matrimony.com, one of the complainants in this case, was against Google’s AdWords platform and policies, alleging them to be anti-competitive. However, after examining Google’s AdWords platform in the market for ‘Online Search Advertising in India’, CCI held AdWords Platform (and related policies) to be fully compliant with the Competition Act, 2002 (‘Competition Act’). In doing so, CCI noted that Google’s keyword bidding policy that permits advertisers to bid on keywords, including those that may be trademarked, along with its trademark policy, do not infringe provisions of the Competition Act. CCI also found no fault with Google’s terms and conditions for the use of its ‘AdWords Application Programming Interface’ (which allows advertisers and third-party developers to use automatic ad campaign management tools). CCI noted that advertisers had several tools that allow them to export their AdWords campaign data.
Google’s distribution and syndication agreements
CCI also examined a range of clauses in Google’s agreements with its distribution and syndication partners. Google’s distribution agreements allow web browser providers to incorporate ‘Google search’ functionality into their web browsers. CCI found that Google being the ‘default search engine’ on web browsers such as Apple’s Safari and Mozilla Firefox does not result in exclusivity since partners were free to provide their users with other search options. Further, Google’s intermediation agreements permitted website owners to incorporate Google’s search and ad technologies on their websites. CCI found no exclusivity concerns with a range of clauses that it examined in (a) Google’s online intermediation agreements; and (b) Google’s search ad intermediation agreements. It also rejected other allegations against Google’s agreements in relation to disclosure of revenue share and providing arbitration outside India, as they presented no antitrust concerns.
CCI did however find exclusivity concerns with one template clause in Google’s online direct search intermediation agreement as per which publishers were not to implement search technologies on their sites that are “same or substantially similar” to Google’s. On this finding too, the Minority Commissioners pointed out inter alia that the Majority Commissioners had not defined a relevant market for search syndication services, and therefore a finding of anti-competitive leveraging was not sustainable. Minority Commissioners also noted the lack of any testimony or evidence that suggests that this clause hindered competition or was “imposed” by Google on any partner.
 Universal Results group results for a specific type of information such as news, images, local businesses etc.
CCI orders investigation against Gujarat State Load Dispatch Centre for abuse of dominance*
On January 31, 2018, CCI directed investigation against Gujarat Energy Transmission Corporation Limited (‘GETCO’), State Load Dispatch Centre, GETCO Gujarat (‘SLDC-GETCO’), and Paschim Gujarat Vij Company Limited (‘PGVCL’) based on an information filed by HPCL-Mittal Pipelines Limited (‘HPCL’) alleging abuse of dominance under Section 4 of the Competition Act.
HPCL, an industrial electricity consumer, had sought permission from SLDC-GETCO to procure electricity through ‘open access mechanism’ as provided for under the Electricity Act, 2003 (‘Electricity Act’). The open access mechanism allows large users of electricity to purchase cheaper power from a source other than the distribution licensee licensed to supply power to a particular area. Pursuant to the Electricity Act, SLDC-GETCO is the sole authority entrusted with the power to approve or disapprove open access requests. It was alleged by HPCL that SLDC-GETCO indiscriminately rejected its requests for open access transmission on 12 different occasions, even though HPCL had satisfied all the pre-requisites, on various grounds that were unfair, unreasoned and reflected non-application of mind. Further, HPCL alleged that the requests were rejected by SLDC-GETCO in order to ensure that HPCL only sourced its demand of electricity through PGVCL, a subsidiary of SLDC-GETCO, engaged in the downstream market for distribution and retail sale of electricity. HPCL alleged that SLDC-GETCO imposed unfair and discriminatory conditions by denying open access permission and thereby restricting the production of electricity, denying market access to the power generators, and manipulating the downstream distribution market in favor of its subsidiary (i.e. PGVCL).
CCI delineated the relevant market as the ‘market for services relating to use of transmission facility for availing open access electricity in the State of Gujarat’. It observed that SLDC-GETCO held 100% market share in this market, being the nodal agency having the sole prerogative to allow open access permission. Therefore, SLDC-GETCO was held to be in a dominant position in the relevant market.
CCI found irregularities and lack of a justifiable cause in SLDC-GETCO’s conduct. CCI was of the prima facie view that SLDC-GETCO had leveraged its dominant position in the relevant market for use of transmission facility to adversely affect the competition in the downstream market, where it was present through its group entity PGVCL. CCI found that such unreasonable and exclusionary conduct warranted investigation under Section 4 of the Competition Act.
CCI dismisses allegations of abuse of dominance filed by plot owner against real estate developer in Bengaluru*
On January 4, 2018, CCI dismissed an information filed against DS-Max Properties Private Limited (‘DS-Max’) by Mr. Induhar M. Patil. The informant alleged the contravention of Section 4 of the Competition Act by DS-Max.
Mr. Patil had purchased a plot of land under the ‘Charming Heights’ project of DS-Max in Bengaluru for a total consideration of ₹ 14,92,500, of which ₹ 10,00,000 had to be paid in cash as DS-Max had refused to take this amount by way of a cheque. CCI noted that Mr. Patil was aggrieved with the fraudulent sale of land as a residential plot by DS-Max, which was originally allotted by the Karnataka Government to Scheduled Castes/Scheduled Tribes free of cost. DS-Max allegedly misled the buyers into purchasing the residential plots by promising to provide various amenities on this land and, subsequently, did not provide the concerned services which rendered the plot unlivable for Mr. Patil.
CCI opined that though the agreement and the sale deed were entered into in 2006-2007 (before the relevant provisions of the Competition Act came into effect), the effects of the agreement and the sale deed were continuing, and the same could therefore be examined under the Competition Act. CCI opined that the case related to money laundering, corruption, and unfair practices, and did not raise any competition concerns. Moreover, no case under Competition Act could be made out since DS-Max was not in a position of dominance in the relevant market of ‘provision of services for development and sale of residential plots in Bengaluru’. Within this relevant market, there were several other real estate developers, selling residential plots, along with many plot owners selling their property through dealers or on online platforms, such as magicbricks.com and 99acres.com. In the presence of a number of players in the relevant market, DS-Max was held not to be dominant.
CCI dismisses allegations of abuse of dominance against SKF India Limited*
On January 24, 2018, CCI dismissed an information filed by Asmi Metal Private Limited (‘Asmi’) against SKF India Limited (‘SKF’), alleging abuse of dominance under Section 4 of the Competition Act. Asmi was inter alia engaged in the business of supplying customized bearings to SKF as per its specific requirements, which SKF further sold in the market for automobiles and electrical products. It was alleged that SKF forced Asmi to make irrelevant expenditures on expansion of manufacturing facilities based upon assurances of refunds and subsequently defaulted on these payments. Further, it was alleged that SKF induced Asmi into undertaking various commitments at its behest and thereafter indiscriminately, denied any liability towards the losses incurred by the Asmi. The entire chain of events occurred over a period of time spanning from 2004 until 2017.
CCI noted that most of the instances of the alleged abuse of dominance took place before the Competition Act came into effect in the year 2009 and therefore, only assessed the conducts that either continued or took place post 20 May 2009.
CCI referred to its earlier decisions to define the market as the ‘market for industrial bearings in India’ without further distinguishing between various classes of such bearings. In its examination of the key players in the relevant market, CCI noted that while there were three top companies in the relevant market, including SKF, none of the players enjoyed a position of strength for a long duration. Further, CCI also noted that imports accounted for around 44.8% of the market for mechanical bearings and posed competitive constraint on domestic manufacturers’ ability to raise prices. Accordingly, CCI held that SKF was not in a dominant position and therefore, its conduct could not be examined under Section 4 of the Competition Act.
CCI dismisses allegations of bid-rigging in UP electricity tender*
On January 24, 2018, CCI dismissed an information filed by Mr. Arun Mishra, against 17 individuals and companies (‘OPs’), for participation in an alleged bid rigging in contravention of Section 3(3)(d) of the Competition Act. The alleged bid rigging related to a tender floated by UP Power Corporation Limited (‘UP Power Corp’) in 2013 for procurement of 6000 MW of electricity. OPs No. 1 to 4 were the erstwhile government officials of various government departments or companies in the State of Uttar Pradesh, whereas OPs No. 5 – 17 were the companies that participated in the tender and engaged in the business of power generation.
It was contended that OPs No. 1 to 4 colluded with OPs No. 5-17 in accepting a new higher tariff of ₹ 5.90/- per unit, against the previously decided tariff of ₹ 5.09/- per unit. It was further alleged that such increase in the tariff was achieved on account of collusion between the bidders.
As also in the case involving GETCO discussed above, the OPs raised the objection that CCI had no jurisdiction in the instant matter as the issues fell within the purview of Electricity Act, where the Uttar Pradesh Electricity Regulatory Commission was the concerned authority. CCI took the view that it had the jurisdiction to proceed with issues that pertained to anti-competitive conduct and proceeded on this basis.
As regards the collusion alleged between OPs No. 1-4 and OPs No. 5-17, CCI held that OPs No. 1-4 were only government officials and were not engaged in the same business as that of OPs No. 5-17. As such, Section 3(3)(d) of the Competition Act covers an anti-competitive agreement between parties that are engaged in the same trade or area of practice. Further, as regards the alleged collusion between OPs No. 5 – 17, CCI held that the only evidence provided by the informant related to a meeting in Hotel Leela, Gurgaon, but the said meeting was only attended by officials of one enterprise i.e. OP No. 6 and therefore, could not be viewed as an evidence of meeting with competitors for fixing bid prices. Therefore, CCI held that no substantiating evidence was brought on record to prove even a prima facie indication of an agreement and passed a closure order under Section 26(2) of the Competition Act.
CCI dismisses information by Industries and Commerce Association against coal companies*
On February 6, 2018, CCI dismissed an information filed by the Industries and Commerce Association (‘ICA’), comprising of 72 small scale industries that are involved in the manufacture and sale of hard coke, against Coal India Limited (‘CIL’), its subsidiary Bharat Coking Coal Limited (‘BCCL’), and the Ministry of Coal (‘MoC’) alleging contravention of Section 4 of the Competition Act.
By way of background, National Coal Distribution Policy, 2008 (‘NCDP’) was introduced by the MoC basis which the ICA was required to procure coal through following mechanism: 75% of its total requirement through Fuel Supply Agreements (‘FSAs’) at notified prices to be fixed / declared by CIL, and the remaining 25% through e-auction / imports. More recently, the MoC issued guidelines in 2016 (‘2016 Guidelines’) addressed to CIL, directing that none of the existing FSAs would be renewed and the members of ICA would be required to procure coal through e-auction process post expiry of the existing FSA.
The ICA challenged various terms of the existing FSAs that were due to expire in 2018 (‘Existing FSAs’), relating to calculation of the price of coking coal, deemed delivery quantity, renewal terms, and security deposits, as being unfair. The ICA challenged the e-auction process (through which it procured 25% of its requirement) as being (i) unfair in imposing 10%-20% higher prices on coal and (ii) discriminatory between those purchasers who procure coal by way of FSAs and those who don’t. The ICA also alleged that the proposed 2016 Guidelines which required ICA to procure its entire requirement through e-auction is unfair and would lead to excessive pricing of coal, given that CIL is a monopolist. The ICA further challenged the certain terms of the model FSA proposed to be entered into as part of the e-auction as per the 2016 Guidelines.
In order to bring the above challenge to 2016 Guidelines within the purview of the Competition Act, ICA alleged that MoC is an ‘enterprise’ within the meaning of Competition Act and the purpose of 2016 Guidelines was to generate supra-normal profits by generating profits through companies under its control. Further, ICA alleged that BCCL, CIL and MoC formed a part of same group under the provisions of the Competition Act.
As regards the allegation pertaining to unfair condition under the Existing FSAs, CCI was of the view that the ICA, which had entered into two consecutive FSAs since the introduction of the NCDP in 2013, had filed the information at a belated stage i.e. at the time only when the second FSA was expiring. CCI noted that the actual trigger for the information was the update in the policy as per the 2016 Guidelines.
Further, CCI rejected ICA’s contention that the MoC is an ‘enterprise’ under the provisions of the Competition Act, reasoning that the policy making function of MoC did not fall within the category of economic activity in order to satisfy the definition of the term ‘enterprise’. In view of the above, ICA’s contention that CIL, BCCL, and the MoC constituted a ‘group’ was categorically dismissed. CCI held that the challenge to the 2016 Guidelines was speculative and premature since the e- auction had not yet taken place, the model FSA was not yet implemented and, therefore, the allegations did not merit an investigation.
NCLAT dismisses allegations of abuse of dominance against Lucknow Developers for lack of substantial evidence*
On January 22, 2018, the NCLAT dismissed an appeal filed by Ms. Usha Roy against an order of CCI dismissing the information filed against ANS Developers Private Limited (‘ANS’) and Shalimar Corporation Limited (‘Shalimar’). Ms. Roy had raised similar allegations against ANS and Shalimar in a previous case that was closed by CCI as no prima facie case was made out. Ms. Roy argued that CCI’s decision to dismiss the present information was incorrect since the present decision was based entirely on the reasoning of the previous case, and new evidence brought on record in the present case was not considered.
Ms. Roy alleged that the agreement entered into with ANS for the purchase of residential property had certain anti-competitive clauses, which placed excessive liabilities on Ms. Roy for delays in payment, whereas the ANS had no liability to pay interest for any delay on its part. It was also alleged that the agreement by ANS and Shalimar to use their position as the developer of the integrated township to enter into the market of providing medical facilities was anti-competitive. However, CCI opined that there were several significant and major real estate developers in the relevant market, and ANS and Shalimar could not be held to be in a dominant position.
The NCLAT took the view that the instant case was not maintainable merely on the ground that certain new information was provided as no new facts or substantial evidence for the same set of allegations had been brought to the notice of CCI that could differentiate the instant case from the previous one.
NCLAT dismisses appeal of real estate buyers alleging abuse of dominance by Earth Infrastructure Private Limited*
On January 23, 2018, the NCLAT dismissed an appeal filed by Ms. Nikunj Sisondia and Ms. Rashmi Raj against an order of CCI dismissing an information alleging abuse of dominant position by Earth Infrastructure Private Limited (‘Earth Infrastructure’). Ms. Sisondia and Ms. Raj had booked retail shops in a commercial project of Earth Infrastructure, wherein Earth Infrastructure had agreed to pay an interest of 12% every month till the possession of the retail shops was given. Ms. Sisondia and Ms. Raj alleged that Earth Infrastructure had defaulted on the aforementioned promise and had not made any interest payment since October, 2015.
CCI, while delineating the relevant product market, referred to its previous orders, wherein a distinction had been drawn between residential and commercial real estate as the intention and considerations are different when buying a commercial property when compared with buying a residential property. The relevant geographic market was held to be ‘Noida and Greater Noida’. The relevant market was thus delineated as the market for ‘provisions of services of development and sale of commercial space in Noida and Greater Noida’. CCI had noted that no data has been provided to support the assertion that Earth Infrastructure was in a dominant position and found that no prima facie case was made out in this case.
The NCLAT agreed with the opinion of CCI and held that no evidence was brought on record to assert that Earth Infrastructure was indeed in a position of dominance in the relevant market.
NCLAT dismisses appeal against M/s Concept Horizons Infra Private Limited alleging abuse of dominance*
On January 23, 2018, the NCLAT dismissed an appeal filed by Wing Commander Jai Kishan and Ms. Nikunj Sisondia (‘Buyers’), against an order of CCI dismissing an information alleging abuse of dominant position by M/s Concept Horizons Infra Private Limited (‘Concept Horizons’). As in the case against Earth Infrastructure discussed above, it was alleged that Concept Horizons was liable to pay an interest of 12% per month to the Buyers but had stopped making these payments since July, 2016. CCI found that in the market for ‘residential properties’ in the relevant geographic market of ‘Noida and Greater Noida’, Concept Horizons was not in a position of dominance and that the Buyers had failed to bring on record any evidence to support the same. CCI noted that there were several established large real estate developers in this market and Concept Horizons did not possess market power to act independently of the competitive forces or have the ability to affect its competitors or consumers in the relevant market in its favour.
The NCLAT agreed with the reasoning of CCI and dismissed the instant appeal.
NCLAT sets aside CCI penalty against D.V. Rajasekhar for non-compliance with DG’s investigation*
On January 29, 2018, the NCLAT allowed an appeal filed by D.V. Rajasekhar against an order of CCI imposing a penalty of ₹ 5,00,000 imposed on him for non-cooperation with the investigation of the Director General (‘DG’). It was alleged that Mr. Rajasekhar had shown aggressive behavior, delayed his scheduled appearance before the DG, failed to provide documents to the DG as promised, and denied access to his emails. CCI accepted the DG’s request to initiate proceedings against Mr. Rajasekhar under Section 43 of the Competition Act and found that Mr. Rajasekhar was attempting to further deny access to the emails. In appeal to the NCLAT, Mr. Rajasekhar was given the opportunity to file an undertaking to provide access to the DG to the disputed documents. The undertaking was filed by Mr. Rajasekhar, and the NCLAT held that subject to compliance to the undertaking, the penalty would be quashed. Taking cognizance that the investigation report had already been filed by the DG, the NCLAT allowed for a supplementary report to be filed by the DG if the new information provided further details.
Supreme Court passes its judgment in CCI v M/s Fast Way Transmission Private Limited & Ors*
On January 24, 2018, the Hon’ble Supreme Court of India (‘Supreme Court’) quashed the decision of the Competition Appellate Tribunal (‘COMPAT’) which overturned the order passed by CCI against Fast Way Transmission Private Limited (‘Fast Way’).
On August 1, 2010, the broadcasters of the news channel ‘Day & Night News’ (‘Broadcasters’) entered into a channel placement agreement with the Multi System Operators (‘MSOs’), forming part of the Fast Way group, for a period of one year. A notice of termination was served on the Broadcasters, which was alleged to be an act of abuse of dominant position by the MSOs in denying market access to the Broadcasters.
In its order, CCI found that the MSOs were dominant in the relevant market, having 85% of the total subscriber share. CCI opined that the MSOs’ reason for termination, that the Broadcasters had low television rating points (‘TRP’), and that the MSOs were facing spectrum constraint, were insufficient and mere afterthoughts put forth by the MSOs. Accordingly, a penalty of ₹ 8,40,01,141 was imposed by CCI on the MSOs.
In appeal before the COMPAT, CCI’s order was reversed. The COMPAT held that a broadcaster cannot be said to be a competitor of MSOs, and denial of market access can be caused only by one competitor to another.
The Supreme Court observed that CCI has a positive duty to eliminate all practices that lead to an adverse effect on competition. Distinguishing from the opinion of the COMPAT, the Supreme Court held that for there to be an abuse of dominant position, once dominance is made out, it becomes irrelevant whether the parties are competitors or not. The Supreme Court observed that Section 4(2)(c) of the Competition Act would be applicable for the simple reason that the Broadcasters were denied market access due to an unlawful termination of the agreement between the Broadcasters and MSOs. The Supreme Court noted that the position of dominance of the MSOs was clearly made out, owing to subscriber share of 85% enjoyed by the MSOs in the relevant market of ‘Cable TV market in Punjab and Chandigarh’ and held that the MSOs acted in breach of Section 4(2)(c) by terminating the agreement, but found that the reasons for termination provided by the MSOs were justified, and therefore quashed the penalty imposed by CCI.
CCI approves acquisition of shares by Dai-ichi Life Holdings Inc. in Union Asset Management Company Private Limited*
On December 19, 2017, CCI approved an acquisition of 39.62% of shares in Union Asset Management Company Private Limited (‘UAMPCL’) by Dai-ichi Life Holdings Inc. (‘Dai-ichi’).
Dai-ichi is a financial services holding company incorporated in Japan, and carries out insurance and non-insurance businesses both in Japan as well as overseas. Dai-ichi has a presence in India by way of Star Union Dai-ichi Life Co. Limited, its joint venture with Bank of India and Union Bank of India. UAMPCL is a wholly-owned subsidiary of Union Bank of India.
CCI, without providing any description of the facts relating to non-compete, observed that the non-compete covenant, to the extent it relates to the scope of products or services of the proposed combination, is beyond what is necessary for the implementation of the proposed combination and therefore, is not ancillary to the proposed combination.
CCI noted that there were no horizontal or vertical overlaps between Dai-ichi and UAMPCL. CCI therefore opined that the proposed combination was not likely to have an appreciable adverse effect on competition in India and issued its approval.
Jurisdictional Conflicts: Reconciling the Mandates of the Telecom Regulator and the Competition Commission
Introduction and Background
The commercial landscape in India is characterised by the presence of several regulators, each tasked with regulating different types of conduct or different sectors. The mandates of regulators have led to jurisdictional conflicts that have resulted in protracted legal proceedings, evidenced by the ongoing tussle between two regulators – the Competition Commission of India (‘CCI’) and the Telecom Regulatory Authority of India (‘TRAI’) – on regulation of the telecom sector in India.
CCI is a sector-agnostic regulator tasked with preserving and promoting competition in India. In carrying out its mandate, CCI regulates conduct in sectors that are characterised by specialized sector-specific regulators, such as the telecom sector. TRAI is a sectoral regulator tasked with regulating telecom services, and promoting and ensuring orderly growth of the telecom sector in India.
The debate on the appropriate authority to regulate competition in the telecom sector has often been discussed, but has become the subject of some debate recently. In February 2017, when TRAI issued a Consultation Paper on Regulatory Principles of Tariff Assessment (‘TRAI Consultation Paper’) seeking stakeholders’ opinion on various issues such as transparency in tariff offers, non-discriminatory offers and predatory pricing by operators, the Chairman of CCI wrote in response that it was the CCI’s domain to assess market dominance and predatory pricing and that CCI alone had the “technical capacity and the supporting statutory framework” to delineate the relevant market and assess abuse of dominant position.
The tension between the two regulators escalated when the Bombay High Court set aside the order of CCI directing a probe against Bharti Airtel Limited, Vodafone India Limited and Idea Cellular Limited on the basis of complaints of cartelization made by Reliance Jio, alleging that the three telecom operators were preventing Reliance Jio from building its customer base. The Bombay High Court ruled that CCI had no jurisdiction to interpret contract conditions or policies of the telecom sector, which was governed by the Telecom Regulatory Authority of India Act, 1997 (‘TRAI Act’).
CCI moved the Supreme Court of India (‘SC’) in December 2017, claiming that any dispute pertaining to anti-competitive practice or abuse of a dominant position in the market fell within its exclusive domain, regardless of the existence of a sectoral regulator. TRAI then filed an application of intervention before the SC to oppose attempts by CCI to secure exclusive jurisdiction in matters of competition law even in the telecom sector.
Further, on February 16, 2018, TRAI issued a tariff order on predatory pricing (‘TRAI Tariff Order’), which imposed a penalty of ₹ 50,00,000 (approx. US$ 75,000) per circle for each tariff plan that was deemed predatory and changed the definition of significant market power (‘SMP’), giving pricing flexibility only to operators with less than 30% of the market’s subscribers or revenue and scrapping volume of traffic and network capacity as criteria.
Roles of CCI and TRAI
The mandate of CCI, as set out in the preamble of the Competition Act, 2002 (‘Competition Act’), specifies that it must prevent practices having an adverse effect on competition and promote and sustain competition in markets. CCI is a market referee and not a sectoral regulator. An important distinction between a market referee and a sectoral regulator is that CCI’s intervention is usually ex-post, while a sectoral regulator is entrusted with the function of regulating the market ex-ante to ensure that the sector functions efficiently.
The TRAI Act explicitly excludes the jurisdiction of TRAI in relation to matters relating to monopolistic and restrictive practices that fell under the jurisdiction of the erstwhile Monopolies and Restrictive Trade Practices Commission. However, after the enactment of Competition Act in 2009, the TRAI Act has not been amended in relation to anti-competitive agreements and abuse of dominant position. Notably, the Competition Act prescribes for voluntary consultation between CCI and the sectoral regulator, but the opinion of CCI is not binding on the sectoral regulator, and vice versa. It is relevant to note that Section 60 of the Competition Act clarifies that the provisions of the Competition Act should have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Further, per Section 62 of the Competition Act, the provisions of the Competition Act are in addition to, and not in derogation of, the provisions of any other law for the time being in force.
Flaws in TRAI’s approach to market regulation
The TRAI Tariff Order reflects adherence to the market-share model in examining allegations of predatory pricing. While the Competition Act allows for the possibility of a new entrant with deep pockets distorting the market, as a result of the TRAI Tariff Order, only an incumbent telecom operator who enjoys SMP can distort the market. TRAI’s observation that a telecom operator will be considered to have SMP only if it has a minimum of 30% share in a relevant market, means that it will not investigate a new entrant for predatory pricing even if it offers its services for free, since the new entrant will not have a minimum of 30% share of the relevant market. This also means that the actions of other more established incumbents, can be investigated for predatory pricing for matching the tariffs of new entrants.
Anti-trust regulators in other jurisdictions have been able to resolve similar conflicts between sectoral regulators and competition authorities by crafting specific exemptions in areas of conflict between sectoral regulators and competition authorities. India can benefit from the experience of other regimes by conducting a comprehensive review of the mandate of TRAI and CCI, and identify potential areas of conflict in the legislations underlying TRAI and CCI. This would ensure minimum friction between the sectoral regulators and CCI, and the reconciliation of the mandates of CCI and TRAI. The Competition Act, in its current form, allows CCI to make a reference to a statutory authority (and vice versa) in case any decision of CCI is on an issue entrusted to a statutory body (and vice versa). Indeed, the Bombay High Court, while setting aside the order of CCI directing a probe against Bharti Airtel Limited, Vodafone India Limited and Idea Cellular Limited on the basis of complaints of cartelization made by Reliance Jio, noted that CCI ought to have invoked the reference power under the Competition Act and consulted TRAI.
Further, the SC’s consideration of the conflicting mandates of CCI and TRAI will result in a conclusive determination of the roles of CCI and TRAI in regulating the telecom market, paving the way for effective utilization of CCI and TRAI’s resources and expertise.
 Order dated 21 February, 2017 in Writ Petition No. 8594 of 2017
 On 24 April 2018, the Telecom Disputes Settlement and Appellate Tribunal (‘TDSAT’) passed an interim stay order on the TRAI Tariff Order. On appeal by TRAI to the Delhi High Court, the Delhi High Court vide its order dated May 4, 2018 upheld the interim stay order passed by TDSAT.
CCI Grants Relief of Lesser Penalty in the case of Cartelization for Zinc-Carbon Dry Cell Batteries in India
On April 19, 2018, CCI imposed a penalty on Eveready Industries India Limited (‘Eveready’), Indo National Limited (‘Nippo’), Panasonic Energy India Company Limited (‘Panasonic’) and their Association of Indian Dry Cell Manufacturers (‘AIDCM’) for colluding to fix prices of zinc-carbon dry cell batteries in India in violation of Section 3 of the Competition Act.
In an application dated May 25, 2016, made under Regulation 5 of the CCI (Lesser Penalty) Regulations, 2009 (‘Lesser Penalty Regulations’) read with Section 46 of the Competition Act (‘Leniency Application’), Panasonic admitted to the existence of a cartel arrangement with Eveready and Nippo to control the distribution and price of zinc-carbon dry cell batteries through AIDCM, which facilitated transparency between them by collating and disseminating data pertaining to sales and production of each manufacturer. On the basis of the Leniency Application, CCI directed the Director General (‘DG’) to conduct an investigation into the matter and submit a report. DG was also directed to investigate the role of officers who were in-charge of and responsible for the conduct of business at the time of contravention. During the course of investigation conducted by the DG, pursuant to the issue of a search warrant from the Chief Metropolitan Magistrate, Delhi, the DG carried out simultaneous search and seizure operations at the premises of Eveready, Nippo and Panasonic, and seized incriminating material. Subsequently, Eveready and Nippo also filed Leniency Applications with CCI. The DG also obtained statements on oath of certain officers of the companies.
From the evidence gathered in the case, the DG found that Eveready, Nippo and Panasonic had an arrangement whereby they exchanged commercially sensitive information among themselves for the purpose of price coordination, and that this arrangement was in effect since 2008 until August 23, 2016, i.e., the date of search and seizure operations. Based on the DG’s investigation report along with the Leniency Applications filed in the matter, CCI noted that the manufacturers had admitted to cartelization. In order to increase prices, they mutually agreed on implementation modalities of maximum retail prices (‘MRP’). The price coordination among them encompassed not only the increase in MRP but also the exclusion of price competition at all levels in the distribution chain of zinc-carbon dry cell batteries to ensure implementation of the agreement to increase price. Further, they also agreed to control supply in the market to establish higher prices and indulged in market allocation by requesting each other to withdraw their products from certain markets. CCI found that individual officers of the companies regularly discussed and agreed on when to give effect to price increases during personal meetings as well as in meetings under the aegis of AIDCM, wherein senior management discussed various aspects of coordination. Further, there were several email/ fax communications among these individuals to show their friendly relations and deep commitment to adhere to the cartel arrangement.
On the question of penalties, after considering the aggravating and mitigating factors in the case, CCI imposed a penalty of 1.25 times the profits of the companies for each year of the duration of the cartel. CCI was of the view that the Leniency Application filed by Panasonic was crucial in identifying significant details regarding the cartel activities including the market structure, manner of information exchanges, as well as names, locations and email accounts of key persons of the companies actively involved in the cartel activities. Panasonic was therefore granted 100% immunity and a nil penalty for full disclosure of information and continuous cooperation during the investigation. In relation to the Leniency Applications filed by Eveready and Nippo, CCI acknowledged that while these did not result in significant value addition, there was full and true disclosure of information as well as continuous and expeditious cooperation during the investigation. Accordingly, Eveready, which was second in filing the Leniency Application, was granted 30% reduction with a penalty of ₹ 171.55 crore (approx. US$ 26 million) and Nippo, which was third in filing the Leniency Application, was granted 20% reduction with a penalty of ₹ 42.26 crore (approx. US$ 6.3 million). In case of AICDM, CCI imposed a penalty at the rate of 10% of the average of its gross receipts for the last preceding three financial years, amounting to approximately ₹ 1,85,000 (approx. US$ 3,000). CCI also imposed a penalty on individual officers at the rate of 10% of their average income and reduced their penalties in proportion to leniency shown to the respective company.
 Suo Motu Case No. 02 of 2016.
CCI Directs Investigation into the Conduct of Department of Town and Country Planning, Government of Haryana and Haryana Urban Development Authority relating to Sohna Master Plan 2013
On April 6, 2018, CCI directed an investigation into the complaint filed under Section 19(1)(a) of the Competition Act by Confederation of Real Estate Developers Association of India – NCR (‘CREDAI-NCR’) against Department of Town and Country Planning, Government of Haryana (‘DTCP’) and Haryana Urban Development Authority (‘HUDA’) alleging that DTCP and HUDA have imposed unfair and unilateral terms and conditions in the agreements relating to the development of Group Housing Colony in the revenue estate of Tehsil Sohna, Gurugram district in Haryana, and thereby contravened provisions of Section 4 of the Competition Act.
CREDAI-NCR is the National Capital Region chapter of Confederation of Real Estate Developers Association of India, which is an organisation representing around 12,000 real estate developers spread across 23 States. DTCP is a department of the Government of Haryana empowered to regulate urban development in the State of Haryana, while HUDA is an authority created under the Haryana Urban Development Authority Act, 1977 (‘HUDA Act’), which has been delegated the task of planned development of urban areas in Haryana.
CCI defined the relevant product market as the ‘market for issue of licenses and development of infrastructure for residential plotted/ group housing/ commercial colonies’. With respect to the relevant geographic market, CCI opined that the jurisdiction of DTCP and HUDA covers all the urban areas of Haryana and, therefore, cannot be restricted to a particular tehsil, and thereby defined it as the State of Haryana. Having defined the relevant market, CCI noted that DTCP and HUDA, being the sole statutory authorities under the Haryana Development and Regulation of Urban Areas Development Act, 1976 and the HUDA Act for issue of licenses and development of infrastructure in the State of Haryana, are prima facie in a dominant position.
CREDAI-NCR alleged that some of the terms and conditions of the licenses issued to the developers, letter of intent and agreements executed between the developers and DTCP are one-sided, unfair and discriminatory. For example: (i) External Development Charges (‘EDC’) are subject to revision as per the actual charges incurred, including any enhanced land acquisition charges, and are to be paid on demand; (ii) exorbitant interest rates are levied on delayed payment of EDC and Internal Development Charges (‘IDC’); (iii) and charges and interest continue to be imposed despite no activity being undertaken by DTCP and HUDA in relation to infrastructure development.
DTCP and HUDA resisted the allegations both on preliminary grounds of jurisdiction regarding maintainability of the complaint as well as on substantive grounds. On the preliminary issue of jurisdiction, CCI rejected the assertion of DTCP and HUDA that they are not enterprises under Section 2(h) of the Competition Act and held that even if issuance of license were to be construed as exercise of sovereign power, the levy of EDC/IDC on developers and ultimately, consumers has a direct economic/ commercial impact and thus DTCP and HUDA are indeed enterprises. CCI further held that the developers fall within the ambit of Section 2(f) of the Competition Act since consumers not only include end consumers but also intermediate consumers. As far as maintainability of the complaint in view of Special Leave Petitions (‘SLPs’) involving similar grounds pending before the SC was concerned, CCI noted that availability of remedies before any other forum or under any other law does not oust the jurisdiction of CCI. It relied on Sections 61 and 62 of the Competition Act to maintain that the proceedings before CCI can proceed simultaneously along with the proceedings before the SC. CCI also stated that the proceedings before the SC do not involve the issue of abuse of dominance under Section 4 of the Competition Act.
CCI further noted the justifications enumerated by DTCP and HUDA, that: (i) the developers did not raise the plea that the EDC should be linked to the execution of the external development works by the Government at the time of entering into agreements; (ii) several developers have not paid the EDC dues, as a result of which external development works could not be taken up in parts nor funds from other projects be diverted to the concerned project; (iii) the developers have the option to pay the charges within 30 days of grant of license without interest; and (iv) the agreement clauses are part of Haryana Development and Regulation of Urban Areas Development Rules, 1976 itself. CCI however observed that: (i) even though the terms of the agreements emanate largely from the statutory provisions, the terms of the documents prima facie appear to be one-sided and in favour of DTPC and HUDA; (ii) the alleged failure of DTPC and HUDA to adhere to their obligations under the Sohna Master Plan, 2013 in a time-bound manner while imposing onerous obligations on the developers to pay EDC/ IDC is prima facie abusive and; (iii) not undertaking any external development works is ultimately affecting the consumers. Therefore, CCI concluded that the conduct of DTCP and HUDA prima facie contravenes Section 4(a)(i) of the Competition Act and directed the DG to investigate the matter.
 Case No. 40 of 2017.
 Main SLP being SLP No. 5459 of 2016 titled Magnolia Propbuild Private Limited v. State of Haryana.
CCI Directs Investigation into the Conduct of Honda Motorcycle and Scooter India Private Limited
On March 14, 2018, CCI directed an investigation into the complaint filed by Mr. Vishal Pande against Honda Motorcycle and Scooter India Private Limited (‘Honda’), alleging contravention of several provisions of Sections 3 and 4 of the Competition Act through tie-in arrangements, resale price maintenance and maintaining a discount control mechanism with a standard dealership agreement. While defining the relevant market, CCI delineated two separate relevant product markets for motorcycles and scooters rather than defining the market to be that of two-wheelers. CCI reasoned that motorcycles and scooters are prima facie not substitutable in terms of characteristics and consumer preference. As regards the geographic market, CCI noted that the conditions of competition for sale of motorcycles and scooters are apparently homogenous across the Indian territory, and thereby defined the relevant markets as: (i) ‘market for manufacture and sale of motorcycles in India’; and (ii) ‘market for manufacture and sale of scooters in India’.
Upon defining the relevant market, based on the market share of Honda which varied between 7.14% and 12.63% during 2010-11 to 2016-17, CCI concluded that it did not appear to be in a dominant position in the market for the manufacture and sale of motorcycles in India and held that this did not merit investigation into any abuse.
However, since Honda’s market share ranged between 43.30% and 56.82% during 2010-11 to 2016-17, CCI held Honda to be dominant in the market for manufacture and sale of scooters in India. With respect to the issue of abuse of dominance, CCI noted inter alia the following factors: (i) the restriction imposed by Honda on dealers that they are required to source oil & lubricants, batteries, accessories, merchandise items and insurance and finance services only from designated sources are unfair and in contravention of Section 4(2)(a)(i) of the Competition Act; (ii) the condition for mandatory purchase of accessories, merchandise items, forceful billing of slow moving vehicles, compulsory deduction of advertising expenses, restrictions on insurance and finance options, making purchase of Annual Maintenance Contract (‘AMC’), Extended Warranty (‘EW’) and Road Side Assistance (‘RSA’) contingent upon purchase of booklets from Corporate India Warranties (I) Private Limited, termination of dealership without prior notice, and refusal for stock buyback, all appear to be unfair and prima facie in contravention of Section 4(2)(a)(i) of the Competition Act; and (iii) the dealership agreement were concluded with supplementary obligations which, by their nature or commercial usage, have no connection with the subject of the contract, and such conduct merits examination under Section 4(2)(d) of the Competition Act.
CCI then examined the allegations made under Section 3 of the Competition Act and noted that: (i) the mandatory requirement imposed by Honda on its dealers for purchase of oil and consumables, genuine accessories, AMC, EW and RSA, advertising services, merchandise items, batteries, insurance and finance options, from designated sources; (ii) resale price maintenance and discount control mechanism; (iii) allocation of any area or market for the disposal or sale of the goods; and (iv) exclusive supply agreement/refusal to deal, also appear to be in the nature of anticompetitive restraints covered under Section 3(4) of the Competition Act. In light of the above prima facie findings, CCI directed the DG to investigate into the complaint.
 Case No. 40 of 2017.
CCI Disposes of Information filed against Coal India Limited and its Subsidiaries
On March 16, 2018, CCI disposed of the information filed by Karnataka Power Corporation Limited (‘Karnataka Power’) alleging violation of Section 4 of the Competition Act against Coal India Limited (‘Coal India’) and its subsidiaries, Mahanadi Coalfields Limited (‘Mahanadi Coalfields’) and Western Coalfields Limited (‘Western Coalfields’). Karnataka Power, a government company, is engaged in the business of generating electric power in State of Karnataka and purchases coal from Mahanadi and Western Coalfields for power generation by way of Fuel Supply Agreements (‘FSAs’). Karnataka Power raised issues relating to lack of negotiations in drafting of FSAs entered into with Mahanadi and Western Coalfields, issues pertaining to qualities and quantities of coal supplied under FSAs, including those related to sampling procedure, grade slippage/ mis-declaration of grades, deemed delivery, lack of investments in coal mining and handling infrastructure.
In this case, based on the earlier coal cases, CCI defined the relevant market to be the ‘market for production and sale of non-coking coal to thermal power generators in India’ and held Coal India and its subsidiaries to be in a dominant position in the market. CCI then observed that the issues raised by Karnataka Power have been substantially dealt with in the previous coal cases, and as such, no further orders are required to be passed in the matter. As far as freight issue relating to alleged overloading of wagons at railway sidings was concerned, CCI noted that although Coal India has provided detailed reasons for overloading, yet it has not taken any steps to remedy the situation. In this regard, CCI took on record assertions made by Coal India and its subsidiaries that the relevant clause in the FSAs casts a positive obligation upon the seller to rectify any overloading issues and accordingly, CCI directed Coal India to take remedial measures immediately on being intimated by Karnataka Power. CCI further observed that the request of Karnataka Power to direct Coal India to compulsorily invest in coal mining and handling infrastructure do not raise any competition issues, and in these terms, disposed of the information.
 Case No. 11 of 2017.
 Case Nos. 03, 11 and 59 of 2012.
CCI Disposes of Information filed by Indian Motion Picture Producers’ Association against Federation of Western India Cine Employees and its Affiliates
On April 18, 2018, CCI disposed of the information filed by Indian Motion Picture Producers’ Association (‘IMPPA’) against Federation of Western India Cine Employees (‘FWICE’) and its affiliates alleging a violation of Sections 3 and 4 of the Competition Act. The members of IMPPA are engaged in the production of films and daily programmes for television channels. FWICE, which is registered under the Trade Unions Act, 1926, is a federation of different craft associations associated with the Mumbai based film & television industry and it is the parent body of all its affiliate associations.
IMPPA alleged that FWICE and its affiliates were compelling IMPPA to use their services by dictating certain terms and monopolizing the film production business and that without their consent, no producer could proceed to produce a film or television program. IMPPA alleged specific anti-competitive behavior by citing certain non-cooperative directives and imposing of compulsory holidays, thereby stalling the shooting and post-production activities of tele-serials/ films all over India.
CCI considered these allegations and found that the information in the case was filed when a similar matter, Shri Vipul A. Shah v. All India Film Employee Federation was pending before it involving similar issues against FWICE and its affiliates. CCI noted that the matter had been disposed of by passing a cease and desist order. Since IMPPA had made submissions in that case which overlapped with the instant case, CCI noted that the order which had already been passed settled its position on issues in the present complaint. Specifically, in relation to the issue of circulars directing producers to observe specific holidays, CCI held that in the previous case it had already observed that the fixing of holidays is not a matter within the domain of the Competition Act. Similarly, CCI observed that although prescribing wages has the effect of fixing the prices of services, such wages/ increments are also part of the conditions of labour/ terms of employment falling within the realm of legitimate trade union activities when duly negotiated by a registered trade union and are thus not anti-competitive. However, with regard to the issue of non-cooperation directives against members of IMPPA, as held in the previous case, CCI noted that this tends to disrupt competition in the market and amounts to limiting and controlling services in contravention of Section 3(3)(b) of the Competition Act. CCI concluded that its orders are in rem and not in personam and since it had already passed a cease and desist order after dealing with all the allegations, it is not expected to do so again by dealing with successive complaints for the same conduct against the same parties by separate orders. CCI nevertheless clarified that if the alleged conduct of FWICE and its affiliates continues in defiance of the previous order, IMPPA is at liberty to approach it for appropriate orders.
With regard to the allegations on the violation of Section 4 of the Competition Act, CCI held that no material was placed on record by IMPPA to suggest that FWICE and its affiliates are engaged in any economic activity in order to be considered as an ‘enterprise’ under the Competition Act and stated that no conclusion of abuse can be drawn on the basis of such allegations.
 Case No. 45 of 2017.
 Case No. 19 of 2014.
CCI Approves Acquisition of Signode Industrial Group Holdings (Bermuda) Limited by Crown Holdings, Inc.
On February 7, 2018, CCI approved the acquisition of all shares of Signode Industrial Group Holdings (Bermuda) Limited (‘Signode’) by Crown Holdings, Inc. (‘Crown’) (‘Proposed Combination’) through Cobra Merger Sub, Limited (‘Merger Sub’), whereby Merger Sub will cease to exist and Signode will become a wholly owned subsidiary of Crown.
Crown, a company incorporated in United States and listed on the New York Stock Exchange, is engaged in design, manufacture and sale of packaging products, for consumer goods, like steel and aluminum cans for food, beverage, household and other consumer products, glass bottles for beverage products, etc. It exports these products into India. Signode, a company incorporated in Bermuda, is engaged in providing transit and protective packaging systems and solutions, which consist of strap, protective, and stretch packaging consumables and equipment. Its products are used to contain, unitize, and protect goods during manufacturing, transport, and warehousing. In India, Signode is present through its wholly owned subsidiaries, namely: (i) Signode India Limited, which is engaged in transit and protective packaging sector, manufacture and sell products such as steel strap, plastic strap, specialty tape, etc.; and (ii) Stopak India Private Limited, a 100% export oriented unit, which is engaged in manufacture of cargo securing products.
In its competition assessment, CCI observed that although Crown and Signode are engaged in overall packaging industry, their activities pertain to different areas of operations. CCI further noted that while Crown purchases some transit and protective packaging consumables of the type supplied by Signode as an end consumer and uses them for logistics purposes, however, the total value of purchase made by Crown worldwide from Signode is insignificant. CCI also added that Signode has no purchase from Crown either in India or worldwide. Having regard to absence of any horizontal overlap and insignificant vertical relationship between the Crown and Signode, CCI held the proposed combination was not likely to raise any substantial competition concerns, and approved it under Section 31(1) of the Competition Act.
 Combination Registration No. C-2018/01/549.
CCI Approves Acquisition of Subsidiaries of Dilip Buildcon Limited by Chhatwal Group Trust
On February 19, 2018, CCI approved the acquisition of entire share capital of 23 special purpose vehicles and wholly owned subsidiaries (‘Target Entities’) of Dilip Buildcon Limited (‘DBL’) by Chhatwal Group Trust (‘CGT’) through Shrem Infraventure Private Limited (‘SIPL’) and/or Shrem Roadways Private Limited (‘SRPL’).
CGT is a family trust, which, through its group of companies known as Shrem Group, is engaged in making investments in various sectors such as hospitality, manufacturing, finance, healthcare, real estate, etc. SIPL and SRPL, both part of Shrem Group, are incorporated with the objective of investing in road projects. SIPL invests in hybrid annuity model projects while SRPL invests in toll projects. The Target Entities are special purpose vehicles incorporated for the purpose of construction, operation and maintenance of specific road projects.
CCI noted that the proposed combination relates to development of road projects in India. It then observed that while DBL, through its subsidiaries, is undertaking various road infrastructure projects, Shrem Group is present in this sector only through a joint venture with DBL in the State of Maharashtra. Given the insignificant overlap, CCI concluded that the transaction is unlikely to raise any competition concerns in India.
 Combination Registration No. C-2018/01/544.
CCI Approves Acquisition by Principal International India Limited from Punjab National Bank
On January 15, 2018, CCI approved the acquisition of 21.38% and 30% of the equity share capital of Principal PNB Asset Management Company Private Limited (‘Target AMC’) and Principal Trustee Company Private Limited (‘Target Trustee’), respectively by Principal International India Limited (‘Principal’) from Punjab National Bank (‘PNB’).
Principal, an investment company, is a wholly owned subsidiary of Principal Financial Services Asia Limited, which in turn is a subsidiary of Principal Financial Services Inc., USA (‘PFSI’), an entity belonging to Principal Financial Group, USA (‘Principal Financial Group’). Principal Financial Group is the sponsor of the Principal Mutual Fund (‘Target MF’). Principal Financial Group (Mauritius), a subsidiary of PFSI, already owns 78.62% and 70% of the equity share capital of the Target AMC and of Target Trustee respectively. Target AMC is an asset management company of Target MF and Target Trustee provides trustee services to Target MF. Both Target AMC and Target MF are joint ventures between the Principal Financial Group and PNB.
CCI observed that Target AMC and Target Trustee are under the joint control of the Principal Financial Group and PNB and post combination, they will be under the sole control of the Principal Financial Group. CCI also noted that there will not be any change in the market dynamics as a result of the acquisition, and accordingly, approved the combination.
 Combination Registration No. C-2018/01/543.
CCI Approves Acquisition of Brahmani River Pellets Limited by Thriveni Pellets Private Limited, JSW Techno Projects Management Limited and Mitsun Steels Private Limited
On January 22, 2018, CCI approved the acquisition of 100% equity shares of Brahmani River Pellets Limited (‘BRPL’) from its holding company, Aryan Mining and Trading Corporation Private Limited (‘AMTC’) by Thriveni Pellets Private Limited (‘TPPL’), JSW Techno Projects Management Limited (‘JTPML’) and Mitsun Steels Private Limited (‘MSPL’) in such a manner that TPPL and JTPML each would acquire 49% and MSPL would acquire 2% of BRPL’s shares. TPPL would be responsible for the day-to-day operation and management of BRPL.
TPPL is a subsidiary of Thriveni Earthmovers Private Limited (‘TEMPL’), which is engaged in the business of providing mining services and has mining operations relating to iron-ore, bauxite, barite, copper, coal, graphite, etc. Post the proposed combination, TPPL will be engaged in selling pellets produced by BRPL. JTPML is owned by the Sajjan Jindal family trust and is a part of the JSW group. JTPML is engaged in project management consultancy services, strategic investments and manufacture of industrial gases. MSPL is a distributor and dealer of various steel and structural products. BRPL is a wholly owned subsidiary of AMTC and is engaged in the business of producing and selling iron ore pellets. BRPL exports a majority of its production of iron ore pellets.
CCI noted that TPPL, JTPML, MSPL and BRPL are not engaged in the production and distribution of similar products. It also noted that JSW’s group entities are engaged in the production of iron ore pellets which are used for captive consumption only. CCI further acknowledged the potential vertical relationship between BRPL and JTPML where JTPML may supply BRPL’s iron ore pellets to JSW Steel Limited. However, after taking note of the total capacity and the actual production of iron ore pellets in India, CCI observed that the market share of BRPL is unlikely to raise any competition concerns in the market for iron ore pellets in India because of the presence of other significant players. In view of the absence of any competition concerns, CCI decided to leave the market definition open and passed an order approving the combination.
 Combination Registration No. C-2017/12/539.
SC Restores Penalty imposed by CCI on Thomas Cook (India) Limited, Thomas Cook Insurance Services (India) Limited and Sterling Holiday Resorts (India) Limited
On April 17, 2018, in the matter of CCI v. Thomas Cook (India) Limited, a division bench of SC passed its final decision by allowing the appeal filed by CCI against the order of the erstwhile Competition Appellate Tribunal (‘COMPAT’) and restored CCI’s order imposing penalty of ₹ 1 crore (US$ 0.15 million) on the ground of non-compliance with the provisions contained in Section 6(2) of the Competition Act, which requires advance notice of the proposal to enter into a combination before such combination takes effect.
In February 2014, Thomas Cook (India) Limited and Thomas Cook Insurance Services (India) Limited (collectively, ‘Thomas Cook’) entered into a part equity part merger deal with Sterling Holiday Resorts (India) Limited (‘Sterling’). This involved inter alia the purchase of 9.93% shares of Sterling on the Bombay Stock Exchange (‘Market Purchases’), as well as a composite scheme of demerger/amalgamation (‘Scheme’). Thomas Cook and Sterling notified only the Scheme which was the part of the multi-step transaction that qualified as a ‘combination’ under Section 5 of the Competition Act. Thomas Cook claimed that the remaining steps were all acquisitions of shares that could avail of the de minimis target based exemption as Sterling did not have turnover in excess of ₹ 750 crore (approx. US$ 112 million). CCI approved the Scheme after noting that it was unlikely to raise any competition concerns in India, as the parties were not engaged in similar businesses. However, it held that the Market Purchases and the Scheme were inter-connected and inter-dependent on each other and formed part of a ‘composite combination’ which ought to have been notified and imposed a penalty of ₹ 1 crore (approx. US$ 0.15 million) under Section 43A of the Competition Act. COMPAT set aside CCI’s order on appeal and aggrieved by this, CCI preferred an appeal to SC against COMPAT’s decision.
SC held that the Market Purchases in question were not independent and were intrinsically related to the Scheme. In coming to this finding, SC considered the following:
(i) Though the Market Purchases were not mentioned in the various transaction documents executed between the parties, the Scheme was prepared on the same day as the passing of the corresponding board resolutions and all other acquisitions were made on the same day.
(ii) If the Market Purchases were not part of the Scheme, they would not have been referred to in the notice filed with CCI, where it was mentioned that the parties have contemplated certain other transactions including substitution of equity shares, share purchase agreement, open offer and Market Purchases.
(iii) The Market Purchases were consummated before giving notice to CCI thereby suggesting that they would not have taken place in the absence of the Scheme.
(iv) The joint press release clearly indicated the share purchase agreement as an open offer and the board of directors of the parties authorized Market Purchases on the same day. Therefore, all the transactions form part of one viable business transaction.
(v) Market Purchases having been consummated almost after finalizing the composite combination clearly suggested that these purchases would not have taken place in the absence of the scheme and the other acquisitions.
(vi) SC held that while it is open for parties to structure their transactions in a particular way, the substance of the transactions would be more relevant to assess the effect on competition irrespective of whether such transactions are pursued through one or more steps. Structuring cannot be permitted in such a manner so as to avoid compliance with the provisions of the Competition Act. For ensuring compliance with the requirements of the Competition Act, it is open to consider whether the particular step was an individual transaction or part of the whole transaction.
(vii) Technical interpretation to isolate two different steps of transactions of a composite combination would be against the spirit and provisions of the Competition Act, therefore subsequent changes to Regulation 9(4) of the CCI (Procedure in Regard to the Transaction of Business Relating to Combinations) Regulations, 2011 do not take away from a substantive assessment of the Scheme.
(viii) Even on application of the ultimate objective test, SC held that the Market Purchases were connected to the scheme even if not expressly mentioned within the scheme forming part of the same transaction and as such, considering the substance of the transaction, subsequent change of law does not help the parties.
(ix) Lastly, SC held that an action may not be mala fide, however if there is a breach of the statutory provisions of civil law, a penalty is attracted simpliciter on its violation. There is no requirement of mens rea or an intentional breach under Section 43A of the Competition Act as an essential element for the levy of penalty.
In light of the above, SC set aside the order of the COMPAT, and restored the penalty imposed by CCI on the parties.
 Civil Appeal No. 13578 of 2015.
 By way of Ministry of Corporate Affairs Notification No. S.O. 482 (E), acquisitions where the assets or turnover of the target enterprise were below ₹ 250 crore (approx. US$ 37 million) in India or ₹ 750 crore (approx. US$ 112 million) in India, respectively were exempt from the provisions of Section 6 of the Competition Act.
 Regulation 9(4) of the Combination Regulations (prior to the amendment dated July 1, 2015), offered a facility allowing a single notice to be filed. This applied where the ultimate intended effect of a business transaction is achieved by way of a series of steps or smaller individual transactions, which are inter-connected or inter-dependent on each other, one or more of which may amount to a combination. In 2015, the Combinations Regulations were amended from “… a single notice, covering all transactions, may be filed …” to “… a single notice, covering all these transactions, shall be filed…”. Since 2016, the words “…or inter-dependent on each other” have also been omitted.
SC Upholds Decision to impose Penalty on SCM Solifert Limited and Deepak Fertilizers and Petrochemicals Limited
On April 17, 2018, in the matter of SCM Solifert Limited v. CCI, SC upheld COMPAT’s order which affirmed CCI’s decision imposing a penalty of ₹ 2 crore (approx. US$ 0.3 million) on SCM Solifert India Limited (‘SCM’) and Deepak Fertilizers and Petrochemicals Limited (‘DFPL’) under Section 43A of the Competition Act for failure to notify the acquisition of shares in Mangalore Chemicals and Fertilizers Limited (‘MCFL’).
On July 3, 2013, SCM along with DFPCL had purchased 24.46% of the share capital of MCFL on the Bombay Stock Exchange (‘First Acquisition’). This was followed by a press release on the same day by DFPCL, which was filed with the stock exchanges, in compliance with the requirements of the Listing Agreement (‘Press Release’). Thereafter on April 23, 2014, SCM and DFPCL made a purchase in the open market for 0.8% of the shares of MCFL (‘Second Acquisition’) and subsequently, an open offer was made for acquiring up to 26% of the shares of MCFL in terms of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (‘Public Announcement’).
SCM filed a notice disclosing details of the First Acquisition and notifying the Second Acquisition within 30 days of the Public Announcement. CCI passed an order approving the proposed combination. However, because SCI and DFPL did not seek approval prior to consummating the First Acquisition, CCI commenced proceedings for filing the belated notice. In this regard, SCM claimed that the First Acquisition was exempt, under Schedule 1 of the CCI (Procedure in regard to the Transaction of Business relating to Combinations) Regulations, 2011 (‘Combination Regulations’). SCM argued that the First Acquisition was as an acquisition of shares less than 25% in MCFL solely as an investment. On this basis, SCM assumed that the First Acquisition would qualify for the Item 1 exemption available under Schedule 1 of Combination Regulations. In any event, SCM submitted that a notice was filed within the 30 days of the Public Announcement made pursuant to the Second Acquisition. Further, it was submitted that with regard to the Second Acquisition, the shares were credited to an escrow account, created specifically to avoid consummation prior to CCI approval.
CCI dismissed SCM’s submissions after noting that the First Acquisition was notifiable. This was because the acquisition of shares was not made solely as an investment. By its own admission, SCM in the Press Release and the Public Announcement had claimed that the investment was ‘very strategic’. Further, CCI noted that MCFL was not very profitable, which further went to show that the First Acquisition could not be considered to be an investment by a prudent investor.
SC while agreeing with CCI’s rationale held that SCM had not complied with Section 6(2) of the Competition Act and there was a failure to file notice for the First Acquisition. In relation to the Second Acquisition, SC held that SCM ought to have notified the transaction prior to the acquisition and rejected SCM’s claim that it was enough to hold the shares in an escrow account, which could not be accessed prior to CCI approval. SC observed that the Competition Act does not contemplate post facto notice as this would defeat CCI’s opportunity to assess whether the propose combination could cause any appreciable adverse effect on competition. Accordingly, SCM was required to notify the proposed combination without giving effect to it prior to CCI approval or the end of the 210-day period, whichever is earlier.
On SCM’s submission that the violation, if any, was technical, not willful, deliberate or mala fide, SC observed that CCI had already imposed a nominal penalty of ₹ 2 crore (approx. US$ 0.3 million) (even though it had the discretion to go up to 1% of the value of the transaction, which would have been ₹ 33.22 crore (approx. US$ 5 million) in the instant case). SC further observed that CCI approval of a transaction cannot by itself condone gun-jumping violations. SC also held that CCI was not required to demonstrate mens rea or intentional breach as an essential element for imposing penalty as this was not a requirement in case of violation of the civil statutory provision. On this basis, SC concluded that the order passed by CCI as affirmed by COMPAT, is in accordance with the law and dismissed SCM’s appeal as being devoid of any merit.
 Civil Appeal No. 10678 of 2016.
CCI Dismisses Complaints Alleging Abuse of Dominant Position by way of Non-Delivery of Goods to Cement Dealer
On February 28, 2018, CCI dismissed the information filed by Mr. Ramachandra V. (‘Ramachandran’) under Section 19(1)(a) of the Competition Act against JSW Cements Limited (‘JSWCL’) alleging contravention of Section 4 of the Competition Act. There was an agreement between JSWCL and Ramachandran as per which all consignments of cement and construction products were to be dispatched and delivered by JSWCL to the dealer’s consignee location from any of JSWCL’s manufacturing units or warehouses. It was alleged by Ramachandran that JSWCL was making deliveries to other dealers in the region but not to his consignees and therefore, there was manifest collusion with other dealers which has caused him irreparable losses. In response, JSWCL contended that the required order procedure had not been followed by Ramachandran and that if he wanted supplies to be delivered to his consignees, he may direct them to place orders after registering their addresses with JSWCL as they only deliver cement at registered addresses.
Determining the relevant market to be the ‘market for manufacture and sale/supply of cement in Kerala’, CCI held that the cement market in South India has no clear leader, and even JSWCL enjoys only 22% market share thereof. Further, it specializes only in Portland Slag Cement, and is part of a multinational conglomerate. Its chances of being immune to competitive forces prevailing in the market are further diminished by the existence of other established players in the market, such as ACC, UltraTech, etc. CCI concluded that JSWCL was not in a dominant position, and therefore, the question of abuse did not arise.
 Case no. 76 of 2017.
CCI Dismisses Complaint claiming Violation of Section 4 by Judgement-Debtor as a result of Selective Non-Payment to Certain Judgement-Creditors
On February 27, 2018, CCI while deciding on information provided under Section 19(1)(a) of the Competition Act against Sri Ram Housing Finance & Investment of India Limited (‘Sri Ram Housing’), dismissed the batch of claims alleging abuse of dominance. In 2003, the SC declared the commercial complex constructed by Sri Ram Housing to be illegal and worthy of being demolished. Accordingly, the Municipal Authorities demolished the commercial complex. Consequently, a string of petitions were filed before the erstwhile Monopolies and Restrictive Trade Practices Commission (‘MRTP Commission’) claiming refund. The MRTP Commission ordered Sri Ram Housing to repay the principal amount, but did not decide on the interest to be paid.
Since the issue of interest was pending, Sri Ram Housing paid the principal amount to the informants, but did not pay interest. Note that the informants were not party to the proceedings before the MRTP. Thereafter, compensation applications were filed which were decided by the COMPAT, being its successor. COMPAT directed Sri Ram Housing to pay interest at 15% from the date of deposit of principal amount till the date of refund. Even then, interest was not paid. It was alleged by the informants that interest was paid to the other buyers but not to them, and this amounted to an infringement of Section 4.
CCI held that nothing had been placed on record to show that Sri Ram Housing was in a dominant position in any relevant market, and therefore, no prima facie case of contravention of Section 4 could be made out. Further, CCI clarified that non-payment of interest was not within its scope.
 Case no. 67 of 2017.
CCI Rejects Claims regarding AAI and PGCIL Acting in Abuse of their Dominant Positions in Setting Unreasonable Accreditation Standards
On February 27, 2018, CCI, while considering the information filed under Section 19(1)(a) of the Competition Act by Shri Prem Prakash, against Airport Authority of India (‘AAI’) and Power Grid Corporation of India Limited (‘PGCIL’), held the same to be insufficient to constitute abuse of dominance under Section 4 of the Competition Act. The primary grievance of Sri Prem Prakash concerned the policy/guidelines of the AAI and PGCIL which require testing of construction materials to be done only by laboratories which are accredited by a full member Mutual Recognition Arrangement (‘MRA’) of International Laboratory Accreditation Cooperation (‘ILAC’)/ Asia-Pacific Laboratory Accreditation Cooperation (‘APLAC’)/ International Accreditation Forum (‘IAF’).
Shri Prem Prakash’s laboratory was Accreditation Commission for Conformity Assessment Bodies (‘ACCAB’) accredited, but the AAI required National Accreditation Board for Testing and Calibration Laboratories (‘NABL’) accreditation. Based on an application filed by Sri Prem Prakash under the Right to Information Act, 2005, it was determined that the AAI did not have any scientific basis for its insistence on NABL accreditation. Similarly, PGCIL being a government company having monopoly over developing infrastructure for inter-state power transmission systems, maintained standards by accepting only private testing laboratories which operated in accordance with ISO/IEC 17011, having full membership and MRA of ILAC/ APLAC. It was contended that ILAC/ APLAC/ IAF were foreign private bodies, and no records pertaining thereto were available with the Bureau of Indian Standards or the Quality Council of India.
It was alleged by Sri Prem Prakash that by requiring accreditation by NABL or by labs having full membership of ILAC/ APLAC/ IAF, AAI and PGCIL put him and other accreditation bodies out of competition, and facilitated the monopoly of NABL. Such stipulation was alleged to be a contravention of Section 4 of the Competition Act.
CCI took notice of earlier information filed by the Sri Prem Prakash alleging abuse of dominance by PGCIL on a similar count, which was dismissed by the COMPAT in appeal after holding that PGCIL did not operate in the same market as Sri Prem Prakash did and instead, was a consumer of laboratory services. The COMPAT had also held that every consumer/procurer must have the freedom to exercise its choice freely in procurement of goods and services and such a choice was sacrosanct in a market economy as the consumers were best placed to evaluate what meets their requirements and has a competitive advantage. Further, while exercising the choice, they are free to stipulate standards for procurement and the same cannot be held to be anti-competitive.
Agreeing with and reaffirming the reasoning given in the above case, CCI concluded that PGCIL operated in a market different from that of Sri Prem Prakash’s, and being a consumer of services, had the right to choose. Accordingly, Shri Prem Prakash failed to prove that PGCIL was dominant or even present in the relevant market and therefore, there was no contravention of Section 4 of the Competition Act. Similarly, AAI was held to be a consumer as well, and not dominant in the ascertained relevant market – “market for laboratory services for testing construction materials in India.”
 Case no. 75 of 2017.
CCI finds Ghaziabad Development Authority Guilty of Abusing its Dominance by imposing Unfair Conditions on EWS Flat-Buyers
On February 28, 2018, CCI while deciding on a disputed DG investigation, based on information filed by Shri Satyendra Singh (‘Mr. Singh’) against the Ghaziabad Development Authority (‘GDA’), held GDA to be guilty of conduct in contravention of Section 4 of the Competition Act.
GDA is a statutory body created under the Urban Planning and Development Act, 1973 of Uttar Pradesh, engaged in developing and selling real estate in Ghaziabad district of Uttar Pradesh. On May 4, 2014, Mr. Singh was allotted a low cost residential flat under the GDA’s housing scheme (‘Scheme’) for the Economically Weaker Sections (‘EWS’) in Ghaziabad. The final price of the flat was stated to be ₹ 2 lakhs (approx. US$ 3,000) but the GDA later informed all allottees that based on the real construction cost of the project, the price had increased to ₹ 7 lakhs (approx. US$ 11,000) vide letter dated November 27, 2015. GDA asked all allottees to consent in writing to the increased price of the flat within 15 days, failing which their allotment would stand cancelled.
Delineating the relevant market as “market for provision of services for development and sale of low cost residential flats under affordable housing schemes for the EWSs in the district of Ghaziabad”, and the relevant product market as “market for provision of services for development and sale of low cost residential flats under affordable housing scheme for EWS”, the DG concluded that the GDA abused its dominance by imposing unfair conditions and price on the allottees, and even found 11 individual officers of GDA responsible. The investigation report of the DG was provided to the parties to file their objections/replies/suggestions to the same. In pursuance of the same, GDA argued that (i) Section 4 of the Competition Act was notified on May 20, 2009, and the scheme belonged to 2008, therefore it cannot apply retrospectively; (ii) GDA is not an ‘enterprise’ in terms of Section 2(h) of the Competition Act because it was performing a sovereign function under the Scheme; (iii) GDA is not-for-profit and constructs houses for general public, working out their final price on the basis of the actual construction cost incurred on the project, and the costing procedure drawn from the Guidelines for Costing issued by the UP Government, which provides that if the cost of the house increases more than 10% then the allottee may get the money back with 9% interest; (iv) as for the relevant market, the GDA’s Scheme was not the only scheme – Uttar Pradesh Avas Evam Vikas Parishad (UPAVP) had also launched an EWS scheme and several other options were available in Delhi and NCR, additionally, the relevant geographical market should not be restricted to Ghaziabad, since residents of NCR could also apply; (v) allottees had the option to withdraw from the Scheme, therefore no unfair conditions were imposed; (vi) estimation done at the time of announcement was incorrect and proceeding against the responsible officers were being conducted.
On GDA’s objection of the Competition Act not being retrospective, CCI relied on Kingfisher Airlines Limited and Another v. Competition Commission of India, where the Bombay High Court had held that “the Act does not render the agreement entered into, prior to coming into force of the Act, void ab initio…. But if the parties want to perform certain things in pursuance of the agreement, which are now prohibited by law, would certainly be an illegality and such an agreement by its nature, therefore, would, from that time, be opposed to the public policy.”
CCI also made a reference to the observations of the erstwhile COMPAT in the matter of DLF Limited v. Competition Commission of India, wherein COMPAT has held that “Any imposition, or the act after 20th May, 2009 could be validly inquired into by the CCI, as the language of section 4 of the Act is not retrospective, but prospective. Therefore, any tainted imposition after that date could be a subject matter of the inquiry, but it cannot be said that the entering into the agreement in the year 2006-07, as the case may be was an imposition after the Act”. Therefore, the Scheme could have been of 2008, but the letter of increased price was sent in 2015.
With regard to the GDA not being an enterprise under Section 2(h) of the Competition Act, the COMPAT has held in India Trade Promotion Organization v. Competition Commission of India, that the functions which are an integral part of the Government and which are inalienable, are ‘sovereign functions’ and commercial actions/ trading activities and actions, which can either be delegated or performed by the third parties, are alienable and are not ‘sovereign functions’. CCI concluded that the GDA’s actions were not inalienable sovereign functions, and thus, not immune to the Competition Act.
CCI rejected the contention that the relevant market included NCR and other areas, keeping in view the economic conditions of EWS persons, and the restrictions on their choices. Considering the 81.45% market share of the GDA, the dependence of EWS consumers on GDA as a result of lack of other options in Ghaziabad, and the surplus of resources at its disposal, CCI verified its dominance in the relevant market. The GDA had abused its dominant position knowing well that the informants belonged to the EWS category, by changing its stance from ‘final cost – ₹ 2 lakhs (approx. US$ 3,000)’ to ‘estimated cost’, by not including any stipulation in the brochure about a potential change in prices, and by including only one-sided conditions in the scheme, etc.
CCI held that the GDA was guilty and imposed a penalty of approximately ₹ 1 crore (approx. US$ 0.15 million). A cease and desist order was also passed against GDA.
 Case no. 86 of 2016.
 Writ Petition 1785 of 2009.
 (2014) Comp LR 1 (COMPAT).
 Appeal No, 36 of 2014.
CCI Dismisses Allegation of Collusive Refusal to Grant Exhibition/ Display Rights of Movies to Informant’s Multiplex
On March 8, 2018, CCI dismissed information filed by Sarv Prakash Developers (‘SDP’) under Section 19 of the Competition Act against Phantom Films (‘Phantom’), Zee & Essel Group (‘Zee-Essel’) and Fox Stars India (‘Fox’) (collectively the ‘Parties’). According to the information, the Parties and an ex-lessee of SDP’s multiplex had colluded with each other, as a result of which the Parties allegedly refused to grant exhibition rights of movies to SDP’s multiplex. SDP claimed that the collective ban against it was imposed at the behest of the ex-lessee and that the ex-lessee was ousted by SDP because of breach of contract.
CCI on examining the merits of the information observed that cinemas/ theaters had the option of simultaneously procuring rights of exhibition of movies from multiple distributors; and therefore, it cannot be said that the alleged non-supply of movies by the Parties is creating barriers for SDP to operate in the cinematographic exhibition market. As regards the alleged collusion, CCI scrutinized the communications exchanged between the parties and concluded that no such collusion could be ascertained therefrom.
 Case no. 65 of 2017.
CCI Penalises SpiceJet, Jet Airways, Indigo Airlines, Air India, and Go Air over Surcharge Levy on Cargo Transport
On March 7 2018, CCI fined Jet Airways (India) Limited (‘Jet Airways’), Interglobe Aviation Limited (‘IndiGo’), SpiceJet Limited (‘SpiceJet’), Air India Limited (‘Air India’) and Go Airlines (India) Limited (‘Go Airlines’) (collectively ‘Airlines’) on the basis of an information filed by Express Industry Council of India (‘EICI’), alleging inter alia collusion on fixing of Fuel Surcharge (‘FSC’) rates for cargo transportation, and thereby contravening Section 3 of the Competition Act. Though the DG found insufficient evidence to prove collusion, CCI noted that three of the named airlines (Jet Airways, IndiGo and SpiceJet) had acted in collusion in fixing FSC rates and collectively imposed a fine of about ₹ 55 crore (approx. US$ 8.25 million) on the three airlines. No penalty however, was imposed upon Air India as its conduct was not found to be in conjunction with the other airlines, or on Go Airlines, as it leased its cargo belly space to thirdly party vendors with no control on any part of commercial/ economic aspects of cargo operations done by vendors including imposition of FSC. The conduct on part of Jet Airways, IndiGo and SpiceJet was found to have resulted in directly determining the rates of air cargo transport and thereby to be in contravention of Section 3(1) read with Section 3(3)(a) of the Competition Act. Accordingly, penalties of ₹ 39.81 crore (approx. US$ 6 million), ₹ 9.45 crore (approx. US$ 1.4 million), and ₹ 5.1 crore (approx. US$ 0.8 million), were imposed upon Jet Airways, Indigo and Spice Jet respectively. Besides, a cease and desist order was also issued against the Airlines.
While imposing penalties, CCI applied the principle of relevant turnover and the penalties were based on the revenue generated by the airlines from air cargo transport services only. Considering the financial position of the Airlines at the relevant time and noting that FSC constitutes about 20-30% of cargo revenue, a penalty was imposed by CCI at 3% of their average relevant turnover of the last three financial years.
CCI denounced the Airlines for using FSC as a pricing tool which was essentially introduced to mitigate the fuel price volatility. The final order was passed by CCI pursuant to the directions issued by the erstwhile COMPAT remanding the matter back to CCI while setting aside the original order of CCI.
 Case No.30 of 2013.
Cadila Healthcare Limited v. Competition Commission of India
On March 9, 2018, the Delhi High Court (‘DHC’) dismissed a writ petition filed by Cadila Health Care Limited (‘Cadila’/ ‘Petitioners’) and refused to interfere in a pending inquiry after the submission of the DG investigation report. The writ petition filed by Cadila challenged the order under Section 26(1) of the Competition Act (‘Prima Facie Order’) passed by CCI dismissing the review/recall application preferred by Petitioner insofar as the Prima Facie Order extends to the Petitioners. The information was filed by Alis Medical Agency, Ahmedabad, Stockwell Pharma, Surat and Apna Dawa Bazar, Vadodara, alleging that when they approached certain pharmaceutical companies or their clearing and forwarding agents for supply of medicines, they were allegedly denied the same on the alleged directions of Federation of Gujarat State Chemist & Druggists Association in the State of Gujarat.
The Petitioners had submitted that they can approach the DHC for review/recall of the order under Section 26(1) of the Competition Act (on the basis of the legal position set out in Google v. CCI).The Petitioners had further submitted that the question of jurisdiction or matters which goes to the root of jurisdiction and where CCI has acted beyond the provisions of the Competition Act cannot be decided by CCI at the time of final arguments or later by the appellate court and as such, has to be seen by the DHC.
Key Observations of the DHC
In relation to the issue of whether the Prima Facie Order can be reviewed/recalled, the DHC distinguished the case from Google v. CCI by reasoning that in that case, it was held that person/enterprise would have a right to apply for review/recall of that order but such a power has to be exercised on the well-recognized parameters of the power of review/recall and without lengthy arguments and without the investigation already ordered being stalled indefinitely. In that case it was also noted that the investigation was still underway, when the application for recall was filed and also when the petition was filed in the court. In the present case, the recall application was filed after the report had been submitted by the DG to CCI. The conclusion in Google v. CCI needs to be read to mean a recall/review application can be filed during investigation and not after the submission of the report by the DG.
The DHC observed that once a DG report is submitted, the case is out of the realm of Section 26(1) or 26(2) of the Competition Act and the only remedy for the parties is to challenge the report before CCI and not the order under Section 26(1). With regard to the issue of whether CCI should have formed a prima facie opinion specifically against the Petitioners under Section 26(1) of the Competition Act and a general direction to the DG to investigate would not suffice, the DHC quoted the Supreme Court decision in Excel Crop Care Limited v. Competition Commission of India to hold that even if CCI has not formed prima facie opinion against the Petitioners in the Prima Facie Order, the DG would still be within its power to investigate them if the investigation revealed facts that the Petitioners have indulged in anti-competitive conduct. The DHC further noted that the Petitioners had also filed a review/recall application before CCI, whereby CCI considered the objections and applied its mind fresh on the Prima Facie Order and this additionally supported the reasoning of the DHC to restrain itself from interfering with it.
On the assertions made by the Petitioners that they were of the assumption until the issuance of the DG report that the notices issued by the DG to them were only to elicit information in general course and not as opposite parties did not find favour with the DHC either. The DHC held that this could not be a ground to challenge the Prima Facie Order once the DG report has been submitted and more so when the Petitioners never challenged the authority of the DG to issue notices under Section 36(2) read with Section 41(2) of the Competition Act.
Further, as far as issues on merits like malafides/ suppression of facts amounting to fraud, lack of vertical and horizontal relationships between the Petitioners and the Federation, proceedings being barred by res judicata, premature initiation of proceedings under Section 48 of the Competition Act were concerned, the DHC noted that the Petitioners could argue these matters before CCI while rebutting the evidence collected by the DG during investigation.
 W.P.(C) 2106/2018.
 LPA No. 733/2014.
 (2017) 8 SCC 47.
CCI Approves Proposed Combination between Reliance Aero Limited and Thales India Private Limited
On February 9, 2018, CCI approved the notice given under Section 6(2) of the Competition Act with respect to the proposed combination (‘Proposed Combination’) between Reliance Aero Limited (‘Reliance Aero’) and Thales India Private Limited (‘TIPL’). The Proposed Combination contemplated the creation of a joint venture i.e., Thales Reliance Defence Systems Limited (‘JVCo.’) in a 51:49 equity share. Reliance Aero is a company incorporated in India and is a subsidiary of Reliance Infrastructure Limited (‘RInfra’) (belonging to the Reliance Group) having no activities worldwide, except in relation to work being done through the existing JV with Dassault Aviation i.e., Dassault Reliance Aerospace Limited. TIPL, a wholly-owned subsidiary of Thales, is a private company registered in India and is engaged inter alia in the business of rendering technical support to its group companies vis-à-vis radars, air-borne electronic systems, avionics, optronics, air-traffic management, etc. and also undertakes activities relating to transportation industry including railways and metros.
CCI after perusing the information provided, concluded that the parties do not produce/ provide identical or substitutable services/products, and are not engaged in any activity relating to the production, supply, distribution, sale, storage, and services or trade in products or provision of services, which is at different stages or levels of the production chain, and that therefore, the Proposed Combination is not likely to have appreciable adverse affect on competition in India.
 Combination Registration No. C-2017/12/541.
CCI Approves Proposed Combination between Wilmar Sugar Holdings Private Limited and Shri Renuka Sugars Limited
On February 9, 2018, CCI approved a Share Subscription Agreement (‘SSA’) between Wilmar Sugar Holdings Private Limited (‘WSH’) and Shri Renuka Sugars Limited (‘SRS’) and concluded that it is not likely to have an appreciable adverse effect on competition in India.
WSH, a company incorporated under the laws of Singapore, is a wholly owned subsidiary of Wilmar International Limited (the parent company of the Wilmar International group of companies (‘Wilmar Group’)). SRS, a company incorporated in India, is engaged in the business of refining raw sugar; production, sale, distribution and branding of sugar and ethanol derived from sugarcane; and generation, distribution, sale and trading of electricity/power. WSH’s only investment in India is in SRS. It is already a shareholder of SRS having joint control over its operations along with the original promoters. CCI noted that Wilmar Group is active in the business of trade of raw sugar and refined sugar whereas SRS is active in the business of manufacture and distribution of sugar, ethanol and power business, therefore the activities of the parties overlapped in the business of sugar only.
CCI then noted that Wilmar Group has a very limited presence in the overlapping market through small volume of export/ import of sugar and the combined market share of the parties will be insignificant to raise any competition concerns. Further, in view of large number of organized and unorganized players in the sugar industry in India, CCI approved the transaction.
 Combination Registration No. C-2018/01/548.
CCI approves combination between MIIT African Management Limited and ETC Group (Mauritius) Limited
On February 1, 2018, CCI approved the proposed acquisition of equity shares of ETC Group (Mauritius) Limited (‘ETC), by MIT African Management Limited (‘MAML’) in two phases: (i) acquisition of equity shares that represent approximately 22.44% of the equity share capital of ETC by MAML from ETC Holdings (Mauritius) Limited (‘ETC Holdings’) (‘Phase I’); and (ii) acquisition of additional equity shares ranging from 7.30% to 9.10% of the equity share capital of ETC from ETC Holdings, depending on the financial performance of ETC, within two years of closing of Phase I (‘Phase II’).
MAML, a newly incorporated company in Dubai, UAE, is a subsidiary of Mitsui & Co., Limited (‘Mitsui’). Mitsui is a Japanese trading house engaged in a number of world-wide commodities and other businesses; including sale, distribution, purchase, marketing and supply of products in business areas such as iron and steel, coal and nonferrous metals, machinery, electronics, chemicals and energy-related commodities. Whereas, ETC is a company incorporated and registered in the Republic of Mauritius which conducts diversified agricultural trading and processing business and has activities in 27 countries across Africa, North America, Europe, Middle East and South East Asian countries.
CCI noted that in India, Mitsui is engaged in manufacture, production and sale of mineral fertilizers and sale of pulses while ETC is engaged in trading of sesame seeds, cashews, pulses and wheat, which meant that the activities of the parties overlapped only in respect of trading of pulses.
CCI on assessing the proposed combination in terms of the overall market for pulses in India and in terms of the narrower market for import of pulses in India, concluded that their market share is not significant to cause any change in competition dynamics and that their presence globally is not likely to cause appreciable adverse effect on competition in India either. CCI also took into account their customer and supplier relationship and held that it is not significant to cause any appreciable adverse effect on competition in India.
 Combination Registration No. C-2017/12/540.
CCI gives a green light to proposed acquisition between Amazon.com NV Investment Holdings LLC and Shoppers Stop
On January 2, 2018, CCI affirmed the proposed acquisition of 5% stake in Shoppers Stop Limited (‘Shoppers Stop’) by Amazon.com NV Investment Holdings LLC (‘Amazon’). Amazon, a wholly-owned subsidiary of Amazon.com Inc. (‘ACI’) is registered as a foreign portfolio investor with the Securities and Exchange Board of India and has the following investments through its Indian and overseas subsidiaries: (i) Amazon Seller Services Private Limited (‘Marketplace Affiliate’); (ii) Amazon Wholesale (India) Private Limited (‘Amazon Wholesale Platform’); and (iii) Amazon Payments (India) Private Limited (‘Amazon Payments’). Shoppers Stop, an entity listed on the Bombay Stock Exchange and the National Stock Exchange is engaged in selling apparel, accessories, beauty care products, etc., and sells products through the Marketplace Affiliate.
ACI, through its subsidiaries, is engaged in businesses relating to wholesale (B2B), retail (B2C), e-commerce platform, digital payments, etc. and Shoppers Stop is engaged in retailing products through its stores and e-commerce platforms (including Marketplace Affiliate). Apart from the existing relationship between Shoppers Stop and Marketplace Affiliate, there exists a potential relationship between: (i) Shoppers Stop and Amazon Wholesale Platform; and (ii) Shoppers Stop and Amazon Payments.
CCI noted that the presence of Shoppers Stop in overall B2C or in any narrower segment is insufficient to raise competition concerns. This was reaffirmed by the presence of other big players in the market such as Flipkart, Reliance Retail, PayTM, ZIP Cash, etc. providing similar products/services.
 Combination Registration No. C-2017/12/538.
CCI Disposes Information Against Producers of ‘Padman’ and ‘Padmavat’*
On June 1, 2018, CCI disposed of information filed by Shri Kshitiz Arya and Shri Purushottam Anand against Viacom18 Media Private Limited (‘Viacom18’), Bhansali Productions, Ms Twinkle Khanna, Kriarj Entertainment Private Limited (‘Kriarj Entertainment’), Side Films India Limited (‘Side Films’), Cape of Good Films Private Limited (‘COG Films’) and Hope Productions Private Limited (‘Hope Productions’) alleging violation of the provision of Section 3(3) of the Competition Act.
Viacom 18 and Bhansali Productions are the producers of the movie ‘Padmavat’ and the other enterprises are the producers of the movie ‘Padman’. The informants contended that the parties had allocated different time periods to release their respective movies as to avoid competition. ‘Padman’ was scheduled to release on January 25, 2018, the same date as of ‘Padmavat’, but due to protests and the litigation of ‘Padmavat’, the producers of ‘Padman’ agreed to reschedule the release to February 2, 2018. It was alleged that the sharing and allocation of time period for film releases between different filmmakers was aimed at increasing the profits of the filmmakers by reducing competition, thus amounting to collusion and market sharing within the ambit of Section 3(3)(c) of the Competition Act.
CCI observed that there were legitimate commercial reasons why ‘Padmavat’ and ‘Padman’ were released on the dates on which they were actually released. Releasing a movie is a strategic and tactical business decision taken by the producers based on a number of factors such as revenue sharing, branding, distribution expenditure and piracy. CCI noted that the strategy of production houses releasing mega budgeted movie in a manner whereby they did not compete with each was not unfair as both the movies cannot be released simultaneously in maximum number of screens. It was further observed that such a strategy reduces commercial risks and maximizes earning potential.
In light of the above, CCI opined that such decisions, which are a result of market outcome, are legitimate business decisions rather than an anti-competitive practice. CCI further concluded that no case for the alleged anti-competitive conduct was made out against the makers of ‘Padmavat’ and ‘Padman’, and accordingly disposed off the information under Section 26(2) of the Competition Act.
CCI Disposes Information Alleging Unfair Conditions in an Employment Contract of Client Associates*
On June 1, 2018, CCI disposed off information filed by Mr. Jaideep Ugrankar against Client Associates, alleging that the company had imposed unfair conditions in his employment contract in violation of the provisions of Section 3 and 4 of the Competition Act.
It was alleged that the employment contract in question included post employment obligations ranging from confidentiality agreements to a series of non-compete clauses. The informant also alleged irregularities in the payment of his salary by the company.
CCI observed that the informant had not made out a case for anti-competitive collusion under Section 3, and decided to assess the information under the provisions of Section 4 alone. CCI noted that the company in question is a private wealth management firm and it manages the financial affairs of its clients. To carry out its operations, the company procures services of professionals to work in wealth management firm, such as the informant in this case. Thus the relevant product market was defined to be the ‘market for procurement of services offered by professionals to the private wealth management firms’.
In this relevant market, CCI held that the presence of Client Associates was marginal, ands thus no case for abuse of dominance under Section 4 of the Competition Act was made out. Accordingly, CCI disposed off the information under Section 26(2) of the Competition Act.
CCI Disposes Allegation of Abuse of Dominance Against BMW*
On May 30, 2018, CCI disposed off information filed by Parsoli Motor Works Private Limited (‘PMWPL’) against BMW India Private Limited (‘BMW India’) and BMW India Financial Services Private Limited (‘BMW Financial’) alleging an abuse of dominant position under the provisions of Section 4 of the Competition Act.
PMWPL, an authorised dealer for BMW cars in Gujarat, alleged that BMW India had abused its dominant position by allowing dealers from outside Gujarat to sell cars inside the state without paying the requisite tax, thus causing financial losses to itself as well as the exchequer. Further, it was alleged that BMW India had unfairly terminated the dealership agreement of PMWPL without giving it any time to try and recoup the huge investment it had made.
CCI observed that BMW India had a negligible market share in the market for ‘passenger cars in India’, which was contested by a number of players. In such a market construct, BMW India cannot be said to be a dominant player and as such the question of abuse of dominant position will not arise. With regards to the termination and non renewal of the dealership agreement, CCI observed that no case for abuse was made out since the agreement was renewed annually, and as such was anyway about to lapse due to efflux of time. Lastly, CCI opined that issues regarding non-payment of taxes were outside the purview of the Competition Act. In light of the above, CCI disposed off the information under Section 26(2) of the Competition Act.
CCI Disposes Allegations Against Panchsheel Buildtech and Tata Capital Finance*
On June, 11, 2018, CCI disposed off information filed by Shri Ashish Gupta against Panchsheel Buildtech Private Limited (‘Panchsheel’), and Tata Capital Housing Finance Limited (‘Tata Capital’), alleging anticompetitive collusion and abuse of dominant position under the provisions of Sections 3 and 4 of the Competition Act.
The informant alleged that Panscheel and Tata Capital had colluded to ensure that the informant defaulted on EMI payments on loans taken from the latter for the purpose of purchasing a flat from the former. Such default, despite reminders by the informant, led to the informant’s CIBIL score being adversely affected, and ultimately the allotment of the concerned flat being cancelled by Panscheel. It was also alleged that Panscheel had even refused to return the initial booking amount paid by the informant.
CCI observed that Panscheel and Tata Capital were neither horizontally nor vertically linked, and as such no contravention of Section 3 could be made out. Further, CCI noted that Panscheel did not occupy a position of dominance in the relevant market of ‘provision of services relating to development and sale of residential apartments/ flats in Noida and Greater Noida’, and as such any unilateral conduct of Panscheel in cancelling the informant’s booking could not be termed as an abuse of dominance. In light of the above, CCI disposed off the information under Section 26(2) of the Competition Act.
CCI Disposes Allegations Against Sparco Multiplast*
On June 19, 2018, CCI disposed off information filed by Singhal Industries Private Limited (‘SIPL’) against Sparco Multiplast Private Limited (‘Sparco’) alleging abuse of dominant position and the presence of anti-competitive agreements by Sparco under the provisions of Sections 3 and 4 of the Competition Act.
SIPL alleged that the Gas Authority of India Limited (‘GAIL’), one of its important customers, had rejected its ‘Warning Mats’ in favour of Sparco’s ‘Wire Mesh’ even though its product was technically superior to that of Sparco. It was further alleged that Sparco had entered into an agreement with two French companies, Corelco and Courant, to prevent them from supplying warning mesh manufacturing machines to any other company in India other than Sparco.
CCI noted that the allegation that the allegation that Sparco’s product was inferior to that of SIPL was not sustainable. CCI noted that GAIL, as a consumer, had the freedom to choose and opt for a product which suited its requirements. It was further noted that there was no material on record to suggest that Sparco had monopolised warning mesh production by way of an alleged tie-up arrangement or agreement with Corelco and Courant. It was observed that the aforesaid companies were not supplying such products in India to begin with. Accordingly, CCI held that no contravention under Section 3 of the Competition was made out.
CCI further noted that there were several players which were active in the ‘market for warning mesh and mat used for protection of the underground pipelines in India’. Further as per the data for the year 2016-17 available in Centre for Monitoring Indian Economy Prowess database, the total sales and assets of SIPL were more than that of Sparco. Accordingly, CCI held that Sparco was not dominant in this market and as such no contravention of Section 4 was made out as well. In light of the above, CCI disposed off the information under Section 26(2) of the Competition Act.
CCI Rejects Allegations of Anti-Competitive Conduct against Uber and Ola*
On June 20, 2018, CCI disposed off four separate informations alleging contravention of Sections 3 & 4 of the Competition Act, filed by Meru Travel Solutions Private Lmited (‘Meru’) against ANI Technologies Private Limited (‘Ola’), Uber India Systems Pvt. Ltd. (‘Uber’), Uber BV, and Uber Technologies International Inc. through a common order.
The allegations against the parties in the four sets of information were broadly similar: (a) that the arrangement entered into between Ola, Uber and their driver-partners is an anti-competitive arrangement as it is designed to lock them into the parties’ network by providing huge incentives; (b) that Ola and Uber are individually or collectively dominant in cities such as Hyderabad, Chennai, Mumbai and Kolkata; (c) that, in the alternate, Ola and Uber are dominant as a ‘group’, due to the presence of common controlling institutional shareholders. The presence of these common shareholders also raises the issue of anti-competitive information exchange; and (d) that the parties had abused this position of dominance by indulging in predatory pricing by offering huge discounts and incentives to customer and driver-partners, and consequentially foreclosing the competition in the market by creating entry barriers.
CCI observed that the incentive model offered to driver-partners by Uber and Ola would not fall within the meaning of the term ‘agreement’ which is a pre-requisite under Section 3 of the Competition Act. CCI noted, that per its decisional practice, in the radio taxi service market, both drivers and riders have the option of ‘multi-homing’ by switching easily to a different aggregator by the medium of mobile applications. Further such alleged agreements cannot cause lock-ins and hence, barriers to entry in the radio taxi services market. Accordingly, CCI noted that no contravention of Section 3 of the Competition Act was made out in the case.
With respect to the allegations under Section 4 of the Competition Act, CCI noted that per its past decisional practice, the relevant markets in the present case would be the markets for ‘radio taxi services in Hyderabad’, ‘radio taxi services in Chennai’, ‘radio taxi services in Mumbai’ and ‘radio taxi services and yellow taxi services in Kolkata’. Within these markets, CCI observed that, given the nature of competition, prima facie dominance of Uber and Ola individually is not made out. CCI further noted that under the scheme of Section 4 of the Competition Act, a dominant position can be enjoyed only by one enterprise or group, and hence the contention of Meru that Uber and Ola were collectively dominant was without any merit.
CCI next considered the allegation that Ola and Uber are dominant as a ‘group’ due to the presence of controlling institutional shareholders such as Softbank, Tiger Global, Sequoia Capital and Didi Chuxing. CCI noted that the issue at hand was whether the presence of common investors in Ola and Uber would lead to the erosion of competitive restraints that each poses on the other. However, while such a theoretical possibility exists, an investigation under the Competition Act cannot be based on conjectures and apprehensions. CCI noted that there is no evidence on record to suggest that competition between Ola and Uber has been compromised in any manner. In the absence of any such discernible effect, CCI held that it would be legally untenable to hold that the parties were influenced in their operational decisions by the common investors. In light of the above, CCI concluded that a prima facie case had not been established against the parties under Section 3 or Section 4 of the Competition Act, and accordingly disposed off the informations under Section 26(2) of the Competition Act.
Interestingly, CCI observed that the effect of common ownership on Ola and Uber (who were the only effective competitors in the radio taxi service industry) is still to be fully examined. Hence, while CCI is legally constrained from initiating an investigation at this time, it would monitor the behavior of the parties to determine if any lessening of competition occurs in the future as a result of the aforementioned common ownership.
CCI Directs Investigation into the Conduct of Country Liquor Procurement in Uttar Pradesh
On July 9, 2018, CCI directed an investigation into the complaint filed by Starlight Bruchem Limited against four licensees (‘OPs 1-4’) of wholesale liquor in the state of Uttar Pradesh (‘UP’) and the Government of Uttar Pradesh, alleging contravention of several provisions of Section 3 and 4 of the Competition Act. The informant alleged that OPs 1-4 limited and controlled the market of country liquor by sourcing their purchases only from certain manufacturers to the exclusion of others thereby resulting in violation of Section 3(3) of the Competition Act. Further, OP 1-4 belong to the same parent entity i.e. OP-5 and therefore, OP-5 being the exclusive wholesaler of the country liquor in the State of UP was dominant and engaged in conduct that result in denial of market access and discriminatory conduct in violation of Sections 4(2)(c) and 4(2)(a) of the Competition Act, respectively.
CCI delineated five separate relevant markets, namely market for procurement of country liquor from licensed manufacturers in the following zones of UP i.e. Meerut Zone, Lucknow Zone, Gorakhpur Zone, Agra Zone and Varanasi Zone. CCI noted that OPs1-4 held exclusive licenses in each of the five zones demarcated by the state government, making them the only authority to sell country liquor in wholesale within their respective zones.
CCI noted that each of the licensees were dominant in their respective zones on account of the exclusive license granted to them by the Government of U.P.
In relation to allegation made under Section 3(3) of the Competition Act, CCI noted that the informant had failed to provide any evidence of anti-competitive agreement between OP 1-4. In regard to the allegations pertaining to abuse of dominance, CCI observed that OPs 1, 2 and 4 gave preferential treatment to two distilleries in terms of procurement, coupled with the fact that these distilleries were owned by OP-5. CCI was of the prima facie view that preferential procurement of country liquor was arbitrary, discriminatory and resulted in denial of market access to other distillers and manufacturers, meriting examination under Sections 4(2)(a)(i) and 4(2)(c) of the Competition Act. In view of the above prima facie findings, CCI directed the DG to conduct investigation into the complaint.
 Case 53 of 2017.
CCI Dismisses Residents’ Association’s Complaint Against Merlin Developers
On July 9, 2018, CCI disposed off the information filed by Cambridge Residents Welfare Association (‘Residents’ Association’) alleging violation of Section 4 of the Competition Act against Merlin Developers Private Limited (‘MDPL’), its office bearers, and Merlin Projects Limited (‘MPL’). The allegation concerned ‘Cambridge Residency’ which is a group of apartments built in Kolkata by MPL, and marketed by MDPL. It was alleged that the MDPL, its office bearers and MPL had deviated from the terms agreed upon in the sale agreement for apartments in Cambridge Residency, and had made false promises, including the delivery of a smaller super built up area, dishonor of maintenance clause in the sale agreement, and non-transfer of corpus fund to the Residents’ Association’s account. CCI defined the relevant market as the ‘market for provision of services for development and sale of residential flats in Kolkata’.
CCI ascertained the dominance of MPL by comparing it with competing entities on various parameters, including land bank, number of projects, rate per square feet, number of units, and area of the units. CCI found MPL to be a smaller player compared to other real estate players in Kolkata, along with the availability of other similar projects in the vicinity of Cambridge Residency. CCI held that MPL is not dominant in the relevant market and hence, no prima facie case was made out by the informant. Accordingly, CCI disposed off the information under Section 26(2) of the Competition Act.
 Case 50 of 2017.
CCI Dismisses Information Alleging Abuse of Dominance Against Tamil Nadu Civil Supplies Corporation
On July 4, 2018, CCI disposed off the information filed by Maheshwari Agro Products (‘MAP’) against Tamil Nadu Civil Supplies Corporation (‘TNCSC’), alleging violation of the provisions of Section 4 of the Competition Act.
MAP is a supplier of pulses and other ancillary things, and had been successfully participating in the tenders floated by TNCSC, a public sector undertaking, since 2012. In 2013, TNCSC had introduced stringent conditions in its tender process, including the purchase of stocks from the tenderers at a rate higher than the open market price. Furthermore, in its tender notification dated May 15, 2017, one of the conditions was that the bidder should have executed at least one contract valued at not less than ₹ 160 million, along with an annual average turnover of ₹ 320 million in the previous three financial years. It was alleged that imposition of such conditions that helped OP to favour certain bidders while disqualifying the others, is an act of abuse of dominant position.
While delineating the relevant market, CCI noted that the pulses could be supplied from anywhere in India. Therefore the relevant market was delineated as the ‘market for procurement of tur dal/Canadian yellow lentil in India’. Within this relevant market, CCI observed that there are many state-run agencies and corporations that operate in this market, exerting considerable competitive constraint on TNCSC. It was further observed that even after the tender conditions were altered, there remained ten bidders which ensured that the tender process was competitive and not arbitrary. Therefore, CCI concluded that no prima facie contravention of any provision of the Competition Act was made out, and dismissed the information under Section 26(2) of the Competition Act.
 Case 02 of 2018.
CCI Dismisses Bid Rigging Allegations against Petroleum Public Sector Undertakings
On July 4, 2018, CCI dismissed information filed against Indian Oil Corporation Limited (‘IOCL’), Bharat Petroleum Corporation Limited (‘BPCL’), and Hindustan Petroleum Corporation Limited (‘HPCL’) by certain unnamed informants. The information alleged contravention Sections 3 and 4 of the Competition Act by IOCL, BPCL, and HPCL (‘OPs’), through collusive tendering, price fixing and abuse of dominant position. The informants are individuals who are engaged in the business of providing services in relation to transportation of bulk LPG through trucks. They alleged that the terms, conditions, and price bands of the Notice Inviting Tenders (‘NIT’) of the three OPs were identical across different States. It was alleged that the price bands forced the bidders to quote within the arbitrary band with no commercial basis. Moreover, it was alleged that the OPs had kept the floor as well as ceiling prices of two different truck categories artificially high, thereby restricting competitive bidding.
At the outset, CCI discussed the question of jurisdiction raised by the OPs, who had argued that the correct forum for such complaints was not CCI, but the Petroleum and Natural Gas Regulatory Board (‘PNGRB’). The OPs relied on CCI’s previous orders granting itself the jurisdiction to deal with issues pertaining to oil/petroleum, which were stayed by the Delhi High Court. However, CCI relied on decisions of the Supreme Court to hold that the jurisdiction of the Competition Act extended to all sectors of the economy and sectors regulated by sector-specific laws, for competition-related issues.
On the allegation that the three OPs exercised collective dominance, CCI held that ‘collective dominance’ was not recognized by the Competition Act, and the existence of two strong players in the market was indicative of competition between them, unless they agree not to compete. As for the contravention of the provisions of Section 3 of the Competition Act, CCI observed that cartels generally comprise of sellers who agree to fix pries, and it may not be appropriate to treat a buyers’ cartel at par with a seller’s cartel. CCI noted that buyer power through joint purchasing agreements may lead to direct benefits for consumers in the form of lower prices and therefore, in order to investigate a buyer’s cartel, the informants need to prove potential theories of harm to prima facie establish anticompetitive cartel conduct.
CCI also observed that the OPs had not denied the enforcement of price bands, but had defended them against the calculation of costs of various components and profit margin. In light of the above, CCI concluded that no prima facie case was made out, and dismissed the information under Section 26(2) of the Competition Act.
 Case 05 of 2018.
 In case 26 of 2010 and Suo Moto case 03 of 2013.
 Ashoka Marketing Limited v. Punjab National Bank 1990 4 SCC 406; Competition Commission of India v. Fast Way Transmission Private Limited (Civil Appeal 7215 of 2014).
CCI Dismisses Information against Haryana Public Works Department Alleging Abuse of Dominance
On February 2, 2017, CCI concurred with the DG’s investigation and dismissed an information filed by Shri Rajat Verma against Public Works Department, Government of Haryana (‘PWD’), Secretary, Haryana PWD, and Superintending Engineer, Haryana PWD, alleging contravention of the provisions of Section 4 of the Competition Act in relation to unfair and discriminatory conditions contained in the bid documents floated by PWD.
The DG in its investigation defined the relevant market as ‘the market for procurement of construction services for construction/ repair/ maintenance of roads and bridges (other than railway bridges for railway traffic) in the territories of the States of Haryana, Himachal, Rajasthan, Punjab, Bihar, Madhya Pradesh, Uttar Pradesh, Uttarakhand and Delhi’. The DG concluded that PWD was not in dominant position in the relevant market as the contractors were not dependent upon PWD for supplying their services for construction of roads and bridges. Furthermore, there were no entry barriers on participation in tenders floated by other contractors in other States and Union Territories in India.
CCI concurred with the DG’s analysis, and concluded that since PWD was not dominant in the relevant market, there remained no requirement to examine the allegations of abuse of dominance under Section 4 of the Act. Accordingly, CCI closed the case under Section 26(6) of the Competition Act.
 Case 70 of 2014.
CCI Imposes Penalty on Glenmark, Chemists and Druggists in Gujarat for Abuse of Dominance
On June 12, 2018, CCI passed an order under Section 27 of the Act imposing penalties on certain chemists and druggists in Gujarat, and pharmaceutical companies for mandating a No-Objection Certificate (‘NOC’) to be obtained by dealers and distributors from local chemists and druggists associations as a prerequisite to undertake business activities .
In its investigation, the DG found that sub-clause (a) of Clause 28 of the Drugs (Price Control) Order, 2013 created an obligation on a pharmaceutical company/ distributor to sell drugs unless there was a ‘good and sufficient reason’ to refuse sale. On the basis of the responses and documentary evidences furnished by the pharmaceutical companies during the investigation, the DG noted some of the pharmaceutical companies and their clearing and forwarding (‘C&F’) agents did not fall foul of the provisions of the Act, as the refusal for not granting NOC was justified.
CCI observed that the practice of mandating NOCs from stockists prior to their appointment resulted in limiting drug supply in the market, a contravention of Section 3(3)(b) read with Section 3(1) of the Competition Act. Moreover, the parties were not able to provide any evidence to establish any benefits in the distribution channel on account of the NOC requirement. In light of above, CCI concluded that such practice amounted to an anti-competitive agreement under the provisions of the Competition Act, and imposed a penalty of ₹ 0.9 million on Federation of Gujarat State Chemists and Druggists Associations, ₹ 0.1 million on Amdavad Chemists Association, ₹ 0.1 million on Surat Chemists and Druggists Association, and ₹ 0.6 million on Chemists and Druggists Association of Baroda (calculated at the rate of 10% of the income recorded in the financial years from 2011 to 2016). Penalty was imposed at the same rate on the individual office-bearers of these associations as well. CCI also imposed penalty to the tune of 1% of the total average income as recorded in the financial years between 2013 and 2016 on Glenmark Pharmaceutical Limited (₹ 450 million), B.M. Thakkar & Co. (₹ 0.02 million), and Divine Savior Private Limited (₹ 0.5 million), and their individual office bearers.
Cases 65 of 2014, 71 of 2014, 72 of 2014 & 68 of 2015.
CCI Imposes Penalty on All India Chess Federation for Abuse of Dominance
On July 12, 2018, CCI passed an order under Section 27 of the Competition Act imposing a penalty on the All India Chess Federation (‘AICF’), for contravention of provisions of Section 3 and 4 of the Competition Act.
The information was filed by four chess players contending that the AICF registration form contained a declaration that denied their participation in any tournament / championship that was not authorized by AICF, contravention of which led to the players being banned for a period of one year from such participation along with confiscation of 50% of the prize money by AICF. Further, such participants were also required to issue an unconditional apology along with an undertaking promising the non-participation in any such future events that were not authorized by AICF.
CCI delineated two separate markets while defining the relevant market, namely: (i) market for organization of professional chess tournaments/events in India; and (ii) the market for services of chess players in India. In view of the regulatory powers enjoyed by AICF in organising professional chess tournaments and being the dominant consumer of services that was provided by chess players, CCI observed and concluded that AICF enjoyed a dominant position in both the relevant markets. CCI found certain conditions imposed on the players by way of AICF’s mandatory registration form as too harsh, especially Clause Z, which discusses the disciplinary actions of the AICF in the event a player participates in a tournament not authorised by AICF. CCI held that the disciplinary actions were very harsh, especially due to the absence of any opportunity for hearing or a provision whereby a player could take prior permission of the AICF for participating in a non-authorised tournament, leading to a contravention of Section 4(2)(b)(i) of the Competition Act. Furthermore, CCI took note of a caution displayed on AICF’s website, prohibiting players from participating in tournaments organized by other rival bodies, including the Chess Association of India. To this end, CCI found AICF to have used its dominance to deny its rivals access to the relevant markets, thereby contravening Section 4(2)(c) of the Competition Act.
CCI further noted that the undertakings mandated by AICF concerning non-participation of its players in non-AICF authorized tournaments were akin to exclusive distribution and refusal to deal as understood under Sections 3(4)(c) and 3(4)(d) of the Competition Act. Accordingly, CCI directed AICF to cease and desist from all such conduct recognized as amounting to abuse of dominance, to formulate procedure for authorizing chess tournaments in a fair, transparent and equitable manner, and to ensure all disciplinary actions against the players are proportional, fair and transparent. CCI directed AICF to file a compliance report within 60 days of the order’s receipt. Furthermore, CCI also imposed a penalty of ₹ 0.69 million on AICF for infringing provisions under Section 4 of the Competition Act.
CCI Imposes Penalty on Sports Broadcasters for Bid-Rigging
On July 11 2018, CCI passed an order under Section 27 of the Competition Act against Globecast India Private Limited and Globecast Asia Private Limited (‘Globecast’) and Essel Shyam Communication Limited (‘ESCL’) for manipulating the bidding process in tenders floated by sports broadcasters.
As per the information provided by Globecast, it had exchanged confidential commercial and price sensitive information with ESCL, which led to bid rigging in tenders for procurement of broadcasting services of various sporting events, especially during the year 2011-12. The arrangement between ESCL and Globecast was facilitated by a consultancy agreement under which certain employees Globecast employees received a share in profits from the contracts obtained through the collusion.
In its report, the DG analysed several communications between the impugned parties to establish concerted action in the bids submitted for provision of broadcasting services for certain ad hoc sporting events in India during 2011-12, amounting to infringement of Section 3(3)(d) read with 3(1) of the Competition Act.
CCI analysed each of the sporting events for which the impugned bids took place to arrive at a conclusion. CCI noted that for each of the events under examination, there was an exchange of commercially sensitive information between ESCL and Globecast that allowed them to co-ordinate their bids. CCI held that the conduct of the two parties adversely affected the competitiveness of the bidding process amounting to a contravention of Section 3(3)(d) of the Competition Act.
CCI imposed penalty on ESCL (₹ 319.4 million) and Globecast (₹ 13.2 million) at the rate of 1.5 times of their total profit for the period of contravention. It also penalized 8 individual office bearers of ESCL and Globecast for their role in the collusion at the rate of 10% of their average income in the three financial years preceding initiation of the case. However, since both the parties were leniency applicants, and had assisted in the investigation, CCI granted a 100% reduction in the penalty on Globecast and its office bearers, and 30% to ESCL and its office bearers.
Suo Moto Case 02 of 2013.
CCI Dismisses Allegations of Unfair Business Practices in Search Advertising Against Google
On July 12, 2018, CCI dismissed two separate information filed against Google for contravention of the provisions of Section 4 of the Competition Act. Mr. Vishal Gupta (‘Informant 1’) and Albion Infotel Limited (‘Informant 2’) are engaged in providing remote tech support services (‘RTS services’), and use Google’s advertising platform (‘AdWords’) for reaching out to their consumers. As part of the sign-up process on AdWords, the advertisers are required to sign a standard document agreement (‘AdWords Service Agreement’) with Google.
It was Informant 1’s allegation that the bidding process of AdWords was opaque. Google’s ‘User Safety Policy’ was ambiguous with a potential of discriminatory treatment. Further, Google had suspended Informant 1’s AdWords account to help launch its own rival service, Google Helpout (‘Helpouts’). Informant 1 alleged that such practices amounted to denial of market access. Informant 2 raised similar allegations against AdWords, Google’s User Safety Policy, and the process of termination of Informant 2’s AdWords account.
Based on the information, CCI formed a prima facie opinion of infringement and directed the DG to cause an investigation, delineating the relevant market as ‘the market for online search advertising in India’ (‘Initial Order’). Google filed an application with CCI seeking a recall of the Initial Order on the ground that CCI lacked jurisdiction and had incorrectly delineated the relevant market as the Informants advertised their RTS services to consumers based outside India, therefore, negating any concern of AAEC in India (‘Recall Application’). The Recall Application was dismissed by CCI, and thereafter Google approached the Hon’ble High Court of Delhi (‘DHC’) under a writ petition. The DHC remanded the matter to CCI, ordering the Recall Application to be considered afresh by CCI. In response to the DHC’s order, CCI considered the Review Application, and consequently dismissed it again, directing the DG to continue its investigation.
In its report, the DG concluded that Google enjoyed a position of strength in the relevant market, allowing it to operate independent of prevailing competitive forces. The DG further submitted that Google had abused its dominant position in the relevant market in violation of the provisions of Section 4(2)(a)(i) of the Competition Act for the following two reasons: (i) opaqueness and lack of transparency in assigning a quality score in the bidding process in AdWords; and (ii) one-sided terms and conditions provided in clause 11 read with clause 4 of the AdWords Advertisement Terms 2013 (‘2013 Terms’). However, the DG found that the suspension of the informants’ accounts was justified.
In its response, Google agreed with the DG’s findings pertaining to the suspension of the informants’ accounts. As for the DG’s finding on contravention of the Competition Act, Google submitted that these clauses were not unfair or discriminatory, and that they were ubiquitous across the industry. Moreover, it claimed that the DG had failed to show any anti-competitive effect arising out of these clauses.
In its analysis, CCI demarcated the three issues that survived for its consideration: (i) whether the AdWords accounts of the Informants were suspended by Google in an unfair or discriminatory manner amounting to abuse of dominance? (‘Issue 1’); (ii) whether Google imposed unfair conditions on its advertisers and whether this amounted to an abuse of dominance? (‘Issue 2’); and (iii) whether the bidding process of AdWords can be characterized as extremely opaque and non-transparent? (‘Issue 3’)
On Issue 1, CCI found Google’s termination of the Informants’ account fair and justifiable. It took note of over a thousand instances of various AdWords policy violations by the Informants, which included abuse of third-party trademarks, incorrect display of uniform resource locator (‘URL’), and use of multiple URLs to cause confusion among the users. Moreover, CCI found that Google had a well-established appeal process for advertisers whose accounts are under suspension. Furthermore, CCI found no merit in the allegation dealing with termination of the informants’ accounts and the launch of Helpouts, since the Helpouts was not a substitute for RTS services.
On Issue 2, CCI noted that clause 11 of the 2013 Terms instead of being discriminatory, was in fact beneficial in protecting consumers from harm. It noted that not having the ability to suspend or terminate accounts would render a platform like Google unable to deal with advertisers that harm consumers. CCI also noted that the clause was in compliance with local laws concerning prohibition of certain advertisements. Moreover, CCI held that clauses such as Clause11 are ubiquitous across the industry, and are not one-sided. In the present case itself, both advertisers and Google are free to terminate the relationship, and there are no ongoing advertising obligations on the advertisers.
On Issue 3, CCI held that there was no merit in the DG’s finding that the ‘Quality Score’ given by Google to the advertisers was opaque and susceptible to manipulation. CCI reasserted its finding in Matrimony.com/CUTS v. Google LLC, where it had held that Google provides sufficient data to advertisers on the performance of their advertisements. Based on the above reasoning, CCI concluded that no case for any abuse of dominance was made out against Google, and dismissed the information.
There was also a dissent note, signed by a single member of CCI, which took the view that CCI ought not to have passed a final order, but should have referred the case back to the DG for further investigation on certain aspects such as the reasons for termination of AdWords account of other RTS services providers, and possibility of remote access through Helpouts.
 Case Nos. 6 & 46 of 2014.
 Case Nos. 7 & 30 of 2012.
CCI Dismisses Bid Rigging Allegations Against Railway Signaling Cable Suppliers
On July 12, 2018, CCI dismissed a reference filed by the Chief Materials Manager-I, North Western Railway (“NWR”), Jaipur, alleging contravention of Section 3 of the Competition Act, in relation to bid-rigging in tenders for procurement of railway signaling cables.
The informant had named 37 enterprises, all of whom were Research Designs and Standard Organization (‘RDSO’) approved suppliers of cables. It was averred that the cable suppliers had formed a cartel for supply of signaling cables to North Western Railways, and quoted high rates in eight tenders floated between 2012 and 2013 by NWR for signaling cables (‘Impugned Tenders’).
CCI, having found a prima facie case, directed the DG to conduct an investigation into the alleged contravention. In its report, the DG concluded that eleven of the cable suppliers in the Impugned Tenders had manipulated the bidding process and had thus contravened the provisions of Section 3(3)(d) read with Section 3(1) of the Competition Act.
In its analysis, CCI found no merit in the DG’s conclusion, and agreed with the submissions of the parties that the similar pricing in Impugned Tenders may be due to market conditions. CCI noted that the input costs were common in the market. Therefore, tender quotations invariably reflected similar prices. The same could not be regarded as an evidence of collusion. Furthermore, CCI noted that the prices of raw materials were determined by RDSO-approved vendors. Moreover, CCI found no evidence on record in relation to sharing of price sensitive information with regard to the Impugned Tenders. CCI also noted the submission of the cable suppliers that the abstentions in participation in any of the Impugned Tenders were driven by constraints such as those concerning working capital and labour, and not collusion. Furthermore, CCI found no implicit channel of collusion, such as common management and structural links between the cable suppliers.
In the absence of any direct or circumstantial evidence amounting to anti-competitive agreement amongst the bidders, CCI observed that no tacit or explicit collusion between the cable suppliers was established. Accordingly, CCI held that no contravention of the provisions of Section 3(3)(a) and 3(3)(d) read with Section 3(1) of the Competition Act was made out, and dismissed the information.
However, CCI advised the Railways to modify its procurement policies to harmonize it with competition law principles. CCI suggested that this could be done by reassessing the rules with respect to participation of sister concerns in tenders floated by Railways for procurement of products from various RDSO approved suppliers.
 Reference Case No. 07 of 2013.
CCI Imposes Penalty on South Asia LPG Company for Abuse of Dominance
On July 11, 2018, CCI passed an order under Section 27 of the Competition Act imposing a penalty on the South Asia LPG Company Private Limited (‘SALPG’) for abuse of dominant position. The information was filed by East India Petroleum Private Limited (‘EIPL’). SALPG, an Indian company established in 1999 as a joint venture between Hindustan Petroleum Corporation Limited (‘HPCL’) and Total Gas & Power India Private Limited (‘TGPI’), is engaged in the business of providing terminalling services, which includes receipt, storage and dispatch of propane/butane/liquefied petroleum gas (‘LPG’) to oil marketing companies (‘OMCs’) at the Visakhapatnam Port.
As per the information, EIPL alleged three counts of unilateral conduct by SALPG amounting to contravention of the provisions of Section 4 of the Competition Act. First, that SALPG had imposed certain mandatory conditions on the OMCs that resulted in limiting and restricting the provision of services by EIPL as well as the market for such services. Second, that SALPG was charging exorbitant bypass charges, which limited the economic viability of EIPL’s services for the users. Third, that SALPG controlled the total volume of pre-mixed LPG that could be imported from Very Large Gas Carrier (‘VLGC’) to be bypassed for tank-truck loading. This meant that the remaining gas had to be necessarily transported through the underground storage facility of SALPG, and the practice restricted the business volumes of EIPL.
CCI delineated the relevant market as the ‘market for upstream terminalling services at Visakhapatnam Port’. CCI further noted that SALPG was the provider of terminalling services at Vishakhapatnam Port, and therefore enjoyed a monopoly for the provision of such services. Additionally, SALPG will continue to be dominant even on a stream-wise segmentation of terminalling services. On the issue of abuse, CCI undertook an examination of allegations of denial of market access to EIPL by SALPG by way of restriction on EIPL’s access to terminalling infrastructure. On its part, SALPG submitted that the restrictions on access to terminalling infrastructure were justified as they ensured safety and technical feasibility of the entire apparatus, and created business efficiencies. Based on its analysis, CCI concluded that SALPG’s efficiency claims were unfounded, and the denial of access had ensured that a significant capacity of LPG terminal at Visakhapatnam Port remained unutilized over the last seven years. CCI also took note of SALPG’s reluctance to undertake an independent study on safety concerns, which CCI construed as an attempt by SALPG to refuse sharing its terminalling infrastructure.
In sum, CCI found SALPG in contravention of Sections 4(2)(a)(i), Section 4(2)(a)(ii), 4(2)(b)(i) and Section 4(2)(c) of the Competition Act, and imposed a penalty at the rate of 10% of SALPG’s average annual turnover generated from the relevant market for upstream terminalling services at Visakhapatnam Port for the Financial Years 2014-15, 2015-16 and 2016-17, amounting to ₹ 192.07 million.
 Case No. 76 of 2011.
CCI Approves Acquisition of UST Holdings Limited by Macritchie Investment Pte. Ltd.*
On May 24, 2018, CCI approved the acquisition of up to 21.3% of the issued and paid-up capital of UST Holdings Limited (‘UST’) by Macritchie Investment Pte. Ltd. (‘MRIPL’) pursuant to the execution of a Share Subscription Agreement on May 9, 2018.
MRIPL is an indirectly wholly owned subsidiary of Temasek Capital (Private) Ltd, which is a wholly owned subsidiary of Temasek Holdings. The portfolio companies of the Temasek group are engaged in financial services, telecommunications, media and technology, transportation and industrial consumers and real estate, life sciences and agribusiness, as well as energy and resources. UST is engaged in providing Information Technology services – software development and support services.
CCI observed that while there were no horizontal overlaps between the acquirer and the target, the acquirer and the Temasek group do have investments in Indian companies which operate in the information technology (‘IT’) space. However, CCI noted that UST did not offer similar services in the IT space as those offered such Indian investee companies of MRIPL and the Temasek Group. Further, the IT space is characterized by high levels of dynamism and innovation. Accordingly, CCI concluded that the proposed transaction was not likely to have any AAEC in any market in India, and approved the same.
CCI Approves Corporate Reorganization of Unilever PLC and Unilever NV*
On May 31, 2018, CCI approved the corporate reorganization of the Unilever Group to simplify the existing legal structure, currently headed by Unilever PLC and Unilever NV, under a single new holding company i.e. ‘New NV’. Unilever PLC (along with Unilever NV) is the ultimate parent company of the Unilever group.
The Unilever Group is one of the largest consumer companies and its business is organised in three divisions, which operates through: (i) Beauty & Personal Care, (ii) Home Care and (iii) Foods & Refreshment. In India, the Unilever group is primarily present through Hindustan Unilever Limited (‘HUL’), a public limited company and listed on Bombay Stock Exchange Limited and National Stock Exchange of India Limited. HUL is inter alia, engaged in manufacture and sale of product such as soaps, detergents, shampoo, skin care, toothpaste, and deodorant.
CCI observed that Unilever PLC and Unilever NV had been operating as a single economic entity. Further, post the proposed transaction the joint control being currently exercised by Unilever PLC and Unilever NV over the Unilever group would subsume into New NV. There would be no change in the shareholding pattern or management of any of the companies of the Unilever group. Accordingly, CCI concluded that the proposed transaction was not likely to have any AAEC in any market in India, and approved the same.
CCI Imposes a ‘Gun-Jumping’ Penalty on Intellect Design Arena
On May 7, 2018, CCI passed an order under Section 43(a) of the Competition Act imposing a penalty on Intellect Design Arena Ltd. (‘IDAL’) for consummating a notifiable transaction without prior approval from CCI. While assessing a different notified combination, CCI observed that Polaris Financial Technology Limited (‘PFTL’) had by way of a scheme of arrangement approved by a board resolution dated 18th March, 2014, demerged its “products business”, which was subsequently acquired by IDAL.
CCI observed that the said demerger and the subsequent acquisition prima facie met the jurisdictional thresholds under Section 5 of the Competition Act, and issued a show cause notice to IDAL directing it to show why proceedings for ‘gun jumping’ under Section 43(a) of the Competition Act should not be initiated against it. IDAL’s response to the show-cause notice comprised of the following two lines of argument (a) that the benefit of the de minimis exemption (which, at the time, exempted acquisitions of shares, voting rights, assets or control of enterprises which had less than ₹ 2500 million in assets in India, or less than ₹ 7500 million in turnover in India) was available acquisition was available to the transaction since the turnover of PFTL in India (i.e. from customers in India) was less that ₹ 7500 million, and (b) that under Section 20(1) of the Competition Act, CCI was precluded from inquiring into any combination after a period of one year had passed from the date the combination came into effect, which it had in the present case.
With respect to the first issue, CCI observed that as per its decisional practice, the value of turnover is to be taken per the enterprise’s books of accounts, irrespective of where the revenue was derived from. CCI noted that while the revenue derived by PFTL from exports was substantial, its total revenue as seen in the books of account amounted to ₹ 18539 million, substantially over the de minimis threshold. Accordingly, CCI concluded that IDAL would not be able to take the benefit of the de minimis exemption. Further, with respect to the second issue, CCI observed that the provisions of Section 20(1) of the Competition Act applied to the reviewing of combination and not to the initiation of proceedings for ‘gun jumping’ under Section 43A of the Competition Act. Further, for the application of Section 43(a) the effects of the combination on the market in India were irrelevant.
In light of the above, CCI held that the transaction ought to have notified, and in having consummated the same without CCI approval, IDAL had violated the provisions of Section 43(a) of the Competition Act. Accordingly, CCI imposed a penalty of ₹ 1 million on IDAL.
CCI Approves Acquisition of IGE Private Limited and Elpro International Limited by Metlife International Holdings, LLC*
On June 21, 2018, CCI approved acquisition of 6.05% of the equity share capital of PNB Metlife India Insurance Company Limited (‘PMLI’) from IGE Private Limited (‘IGE’) and Elpro International Limited (‘Elpro’) by Metlife International Holdings, LLC (‘MIHL’) pursuant to execution of a share purchase agreement dated May 7, 2018. By way of the proposed transaction, MIHL sought to acquire 4.71% and 1.33% additional equity capital of PMLI from IGE and Elpro respectively, therefore increasing its shareholding in PMLI to 32.05%.
MIHL, a wholly owned subsidiary of Metlife Inc., is a limited liability company incorporated in the United States of America. PMLI, a public unlisted company incorporated in India, is an insurance company and provides life and health insurance services and products, under the brand name PNB Metlife. Elpro, a public listed company, is engaged in the business of manufacturing surge arresters and holds 12.75% of the equity share capital in PMLI. IGE, a private limited company, is engaged in the trade of commodities, wind energy generation and real estate. It holds 8.57% of the equity share capital in PMLI and 46.03% in Elpro.
CCI observed that the parties did not have any horizontal overlaps or vertical arrangements in India. Accordingly, CCI concluded that the proposed transaction was not likely to have any AAEC in any market in India, and approved the same.
CCI Approves Acquisition of Mankind Pharma Limited by Beige Limited and Link Investment Trust*
On May 09 2018, CCI approved acquisition of 10% of the equity share capital of Mankind Pharma Limited (‘Mankind’) by Beige Limited (‘Beige’) and Link Investment Trust (‘Link’) pursuant to a share purchase agreement executed between the parties followed by an amended and re-stated shareholder’s agreement. As part of the proposed transaction, Mankind would also acquire control over several enterprises which supply pharmaceutical products to Mankind for captive consumption.
Beige, an investment company, is registered in Mauritius and owned by Maize Investments Limited and indirectly controlled by ChrysCapital VII, LLC (‘ChrysCapital’). Link, a private trust registered in India, is engaged in making investments. Mankind is a public limited company incorporated in India and is engaged in the business of manufacturing and trading of pharmaceutical and healthcare products.
CCI observed that while there were no horizontal overlaps between the acquirers and Mankind, Beige, Link and ChrysCapital did have certain shareholdings in enterprises that are engaged in pharmaceutical and healthcare business, such as Curatio Healthcare Private Limited (‘Curatio’), Torrent Pharmaceuticals Limited, Intas Pharmaceuticals Limited, Ipca Laboratories Limited and GVK Biosciences Limited (‘GVK’). Based on the extent of shareholding and nature of rights held, CCI considered only Curatio and GVK for the purpose of its competitive assessment. CCI noted that the relevant market for pharmaceutical products was to be considered at the molecular (i.e. active pharmaceutical ingredient) level and observed that the activities of Mankind and Curatio overlapped in seven formulations viz., (i) Biotin and Comb; (ii) Ketoconazole; (iii) Emollients – Protectives; (iv) Aminexil + Minoxidil; (v) Anti acne soaps; (vi) Other dermatological preparations; and (vii) Lidocaine + Prilocaine.
With respect to the first six markets, CCI observed that the combined market shares of the parties ranged from 0-5% – 20-25%. Further, the parties were subject to competitive constraints by other strong market players as well. With respect to the last relevant market i.e., ‘Lidocaine + Prilocaine’, CCI noted that despite having a combined market share of 60-65%, the products of Mankind and Curatio in this market were different from the perspective of the consumer and thus were not close competitors. Accordingly CCI opined that the proposed transaction was unlikely to cause any AAEC in India, and approved the same.
CCI Approves Acquisition of Siemens Project Ventures GmbH by FIH Mauritius Investments Limited*
On May 04, 2018, CCI approved acquisition of an additional 6% of the equity share capital of Bangalore International Airport Limited (‘BIAL’) by FIH Mauritius Investments Limited (‘FIH Mauritius’), from Siemens Project Ventures GmbH (‘Siemens’), pursuant to a Share Purchase Agreement executed on March 29, 2018.
FIH Mauritius is an investment holding company incorporated in Mauritius for making investments in India and is not engaged in any trading or business. BIAL is a public company incorporated in India and is engaged in operation and maintenance of an international airport at Bangalore. Siemens is an entity incorporated in Germany and is engaged in provision of project finance services.
CCI observed that as a result of the proposed transaction, FIH Mauritius would not acquire and Siemens would not lose any rights in BIAL including the right to nominate members on the board of BIAL. Accordingly, CCI concluded that the combination would not change the competition dynamics in any markets in which the parties were engaged and accordingly approved the proposed transaction.
CCI approves Acquisition of Electrosteel Steels Limited by Vedanta Limited*
On May 11, 2018, CCI approved the acquisition of 90% of the equity share capital of Electrosteel Steels Limited (‘ESL’) by Vedanta Limited (‘Vedanta’) pursuant to a resolution plan under the Insolvency and Bankruptcy Code 2016 (‘IBC’), dated March 29, 2018 entered into between the parties.
Vedanta, a public company incorporated in India, is a subsidiary of Vedanta Resources Plc. which is an entity incorporated in United Kingdom. It is a natural resources company having operations in aluminium, zinc, lead, silver, copper, iron ore and power. ESL, a public company incorporated in India, is a part of Electrosteel Group and is engaged in the business of iron and steel. It manufactures and sells products such as Pig Iron, Billets, TMT Bars and Wire Rods.
CCI noted that both parties were involved in the manufacture and sale of pig iron in India. Further, although there was no existing vertical relationship between the parties, a potential for such vertical relationship did exist. However, CCI noted that the combined market share of the parties was insignificant and there were several competitors which imposed competitive restraints upon the parties. Accordingly, CCI concluded that the proposed transaction was unlikely to cause any AAEC in India, and approved the same.
CCI Approves Acquisition of Monnet Ispat and Energy Limited by AION Investments Private II Limited and JSW Steel Limited*
On May 11, 2018, CCI approved acquisition of 74.29% of the equity share capital and management control of Monnet Ispat and Energy Limited (‘Monnet’) by AION Investments Private II Limited (‘AION’) and JSW Steel Limited (‘JSW’) pursuant to a resolution plan under the IBC dated December 12, 2017. The proposed transaction also involved transfer of Monnet’s non-core assets to a newly incorporated entity by way of a slump sale, after which, Monnet proposed to transfer 100% of equity shares of the said newly incorporated entity containing the aforementioned non-core assets.
AION, a special purpose vehicle, is wholly owned and controlled by AION Capital Partners Limited (‘APCL’) and operates on investments in stressed, distressed and over leveraged assets in India. JSW is listed on the National Stock Exchange of India Limited and BSE Limited and is a flagship company of the JSW group wherein it is an integrated manufacturer of non-alloyed carbon steel, various categories of alloyed steel, etc. Monnet is listed on the NSE, BSE and the Calcutta Stock Exchange Limited, and is engaged in the manufacture and sale of primary steel and sponge iron, steel and ferro-alloys and mining of minerals like coal and iron ore in India.
CCI observed that there were no horizontal overlaps between AION, APCL and Monnet, since neither AION was engaged in the manufacture, production and sale of steel products, nor did APCL hold any investment or exercises any right in any enterprise involved in the steel sector in India. However, CCI noted that activities of JSW and Monnet overlapped in certain activities related to manufacture and sale of: pig iron, sponge iron, semis (specifically billet/blooms), and long products (TMT bars). CCI observed that these products constituted separate relevant markets of their different technical characteristics, price etc. It further noted that the combined market shares of the parties in all the above relevant markets, based on parameters such as installed capacity, gross production and sales, ranged from a miniscule 0-5% – 20-25%. The parties were also subject to significant competitive restraints from other strong market players, including integrated and non-integrated steel producers. Lastly, CCI noted that the parties did not have any existing vertical relationship, and in terms of potential vertical relationships, were constrained by large competitors. Accordingly, CCI concluded that the proposed transaction was not likely to have any AAEC in any market in India, and approved the same.
CCI Approves Bayer’s Acquisition of Monsanto*
On 14 June, 2018, CCI approved the acquisition of the entire shareholding of Monsanto Company (‘Monsanto’) by Bayer Aktiengesellschaft (‘Bayer’) subject to the parties divesting certain lines of businesses in India. Both Bayer and Monsanto are large global agro-chemical companies with substantial business presence in India.
CCI noted that both parties were amongst the largest global vertically integrated companies operating across the entire value chain of supply of agricultural inputs like seeds and traits, crop protection, and digital farming solutions. While reviewing the acquisition, in addition to assessing horizontal and vertical overlaps, CCI also examined conglomerate effects that could result from the parties’ complementary product portfolios.
On 3 November 2017, CCI reached a prima facie view that the acquisition could cause AAEC in certain relevant markets. It issued a show cause notice to the parties asking them to demonstrate how the acquisition would not cause AAEC. CCI was not convinced by the parties’ response (including their reliance on divestitures offered by them in other jurisdictions), and initiated the detailed second phase review. Finally, after considering the parties’ and other stakeholders’ submissions, CCI concluded that the acquisition could cause AAEC in the following relevant markets:
a. Market for non-selective herbicides in India (i.e. herbicides with broad spectrum applications): CCI noted that the acquisition would eliminate a strong competitive constraint in an already concentrated market with substantial entry barriers (upfront R&D costs, regulatory know-how, distribution network, intellectual property rights, etc.). This was because, apart from the parties, Syngenta was the only other ‘integrated R&D player’ (i.e. capable of discovering new active ingredients and developing new formulations) active in this market.
b. Market of licensing of herbicide tolerant trait for seeds in India (i.e. traits which allow crop plants to survive the application of non-selective herbicides): Interestingly, while CCI noted that neither party had commenced commercialization of these traits in India (both parties had pending regulatory approvals), it still concluded that the acquisition was likely to cause AAEC. This was primarily because of the limited number of integrated R&D players with the ability to compete in this market which is marked by high barriers to entry in the form of high innovation costs and regulatory uncertainty (in fact, CCI found no other competitor with a proprietary herbicide tolerant trait). Accordingly, CCI concluded that the acquisition would cause AAEC in this market since it would result in the elimination of the threat to Monsanto from Bayer’s innovation activities, effectively removing Monsanto’s incentive to innovate.
c. ‘Upstream’ market for licensing of Bt. trait for cotton seed in India: According to CCI, Monsanto enjoyed an extremely high share of this market, and Bayer was amongst the few sources of potential competition in this already highly concentrated market with high entry barriers in the form of long and uncertain regulatory process for entry as well as costly and complex R&D requirements.
d. ‘Downstream’ market for commercialization of Bt. cotton seed in India: CCI noted that while in terms of current sales, the parties had relatively low combined market shares, most of their competitors were sub-licensees of Monsanto’s Bt. cotton traits. Further, CCI noted that Monsanto had decided not renew these sub-licenses and the ensuing litigation was currently pending at the Supreme Court. Accordingly, per CCI, the parties’ competitors’ shares (as they stood) were not a good indicator of future market dynamics since their shares could even disappear completely depending on the outcome of the pending litigation. Given that context, and given that the parties were amongst the few vertically integrated market players with a nationwide distribution network, the parties were already in an advantageous position against their competitors. Consequently, the acquisition would only compound the parties’ relative advantage in the market. CCI also concluded that post-acquisition, the parties would have a strong incentive to use their market power in the ‘upstream’ market for Bt. cotton traits to foreclose their competitors in the ‘downstream’ market for commercialization of Bt. cotton seeds. While concluding that the acquisition could result in vertical foreclosure, CCI also relied on the complaints alleging vertical foreclosure already filed against Monsanto by its downstream competitors.
e. Upstream market for licensing of parental lines or hybrids for rice seeds and the Downstream market for commercialization of hybrid rice seeds in India: The parties would enjoy a large combined share (45-50%) in the downstream market (albeit with a minor increment of less than 5%). However, CCI looked at Bayer’s strength in the upstream market for parental lines or hybrids for rice seeds, and concluded that the combined entity was likely to result in AAEC in the downstream market for commercialization of hybrid rice seeds.
f. Upstream market for licensing of parental lines or hybrids for corn seeds and the Downstream market for commercialisation of hybrid corn seeds in India: While CCI noted that Bayer had quit the hybrid corn seeds business in India, it also noted that both parties had potentially competing gene stacks for corn seed upon regulatory approval for genetically modified corn seed. CCI observed that the acquisition would combine the parties’ strength of seed traits and trait stacks, which could cause AAEC in the market for licensing of parental lines or hybrids (including traits) for corn seeds in India.
g. Upstream market for licensing of parental lines or hybrids for millet seeds as well as in the Downstream market for commercialization of hybrid millet seeds: CCI noted Bayer’s presence in the upstream market and the parties’ combined strength in the downstream market (combined shares of 25-30%, albeit with low increments of less than 5%), and concluded that the acquisition is likely to result in AAEC in the downstream market for commercialization of hybrid millet seed in India.
h. Markets for each specific vegetable crop hybrid seeds in India: Citing (i) parties’ substantial presence in 10 of these specific vegetable crop hybrid seeds markets, (ii) lack of significant competitive constraints posed by minor competitors (with less than 5% shares in the respectively relevant markets), (iii) lack of competitive constraints imposed by the ‘secondary’ seed competitors (which rely on ‘primary’ seed companies like the parties), and (iv) the parties’ strong distribution network unmatched by most competitors, CCI concluded that the acquisition was likely to cause AAEC in 10 specific vegetable crop hybrid seeds markets (e.g., cabbage, cucumber, bitter-gourd, etc.).
CCI also observed that the acquisition raised the risk of subduing competition in the innovation and development of new GM and non-GM traits, as well as in the downstream licensing industry when it came to innovation, royalty, and competitors’/customers’ access to such traits and traits stacks.
Interestingly, CCI also noted that the acquisition was characterized by strong portfolio effects which would allow the combined enterprise to bundle their traits, seeds, and crop protection offerings in a manner as to exploit customers and foreclose competitors (e.g., by developing traits for seeds which the only work with the parties’ agrochemical products). According to CCI, post acquisition, the parties could gain market power by adapting their global digital applications for Indian agriculture, and establishing a ‘one-shop-platform’ in the seed and traits value chain as well as the agrochemical supply chain. CCI also found the parties’ pooling of agro-climatic data (which would be far deeper and wider than their competitors’ because of the parties’ strong presence across the agrochemical, seed and trait, and crop protection value chains) to be another source of increased market power.
Following from the competition concerns outlined above, CCI proposed a modification plan to address them (‘Remedies Package’). The Remedies Package comprised both structural as well as behavioural remedies. In terms of structural remedies, the parties are required to sell (to a purchaser to be approved by CCI): (i) Bayer’s global glufosinate ammonium business (which relates to the non-selective herbicides market), (ii) Bayer’s global broad acre crop seeds and traits business, with limited exceptions (including the millet and cotton seeds business in India), (iii) Bayer’s global vegetable seeds business (to be sold as a whole and to a single purchaser to be approved by CCI), and (iv) sell Monsanto’s entire shareholding in Maharashtra Hybrid Seed Company Limited (‘Mahyco’). The Remedies Package also contained, inter alia, the following behavioural commitments applicable for a period of 7 years: (i) broad-based, non-exclusive licensing of GM as well as non-GM traits on a fair, reasonable and non-discriminatory (‘FRAND’) basis; (ii) non-exclusive licensing of non-selective herbicides or their active ingredients in the case of launch of the GM/non-GM trait in India which restrict the purchasers from using specific non-selective herbicides being supplied only by the parties, on a FRAND basis; (iii) granting access to the parties’ digital platforms and parties’ agro-climatic database on FRAND terms through non-exclusive, non-transferrable, non-sub-licensable, royalty bearing licenses; (iv) committing to mandatorily extending any better licensing terms offered to one licensee of the parties (e.g., for Bt. cotton technology or other GM/non-GM trait or technology) to all such existing and future licensees in India; (v) undertaking not to bundle products in a manner that could have the effect of excluding competitors; and (vi) maintaining non-exclusive distribution channels for supply of agricultural products.
CCI Approves Carmel Point Investment’s Acquisition in IndiaFirst Life Insurance Company
On July 19, 2018, CCI approved Carmel Point Investment Limited’s (‘CPIL’) acquisition of certain shares in IndiaFirst Life Insurance Company Limited (‘IndiaFirst’). The acquisition involved a transfer of 26% of IndiaFirst’s shares to CPIL, on a fully diluted basis. CPIL also gained certain affirmative rights in IndiaFirst, and the right to nominate director(s) on IndiaFirst’s board.
CPIL is an investment holding company incorporated in Mauritius, engaged in making long term investments in portfolio companies, and a part of the Warburg Pincus Group (‘Warburg’), which is a private equity firm based in United States of America. Warburg has investments in companies active in sectors such as energy, financial services, and healthcare. IndiaFirst is an Indian public company, established as a joint venture between Bank of Baroda, Andhra Bank and LGMEL, and is engaged in the business of life insurance and related products.
CCI noted that CPIL did not have any investments in India, and no portfolio company of Warburg engaged in life insurance business is based in India as well. Therefore, CCI found no horizontal overlap between the parties. As for vertical overlaps, CCI found that while two portfolio companies of Warburg are registered as corporate agents for distributing life insurance products in India, they do not act as a corporate agent for IndiaFirst. Therefore, it was noted that the total revenue derived by them from the corporate agency business as well as their presence in the corporate agency services was insignificant to raise any competition concern. Based on the above, CCI held that the transaction was not likely to have an AAEC in India, and approved the same.
 Combination Registration No. C-2018/06/578.
CCI Approves the Acquisition of Shares in IIFL Wealth Management Limited’s Acquisition by General Atlantic Singapore Fund
On July 27, 2018, CCI approved the acquisition of IIFL Wealth Management Limited (‘IIFLW’) by General Atlantic Singapore Fund Pte. Ltd. (‘GASF’). The proposed transaction involved IIFLW issuing certain equity shares to new investors (including GASF), which would lead to change in the shareholding of GASF in IIFLW, from 21.60% to 21.15%. Furthermore, there would not be any changes in the rights held by GASF, and the new investors were not acquiring any rights in IIFLW.
GASF is an investment holding company, incorporated in Singapore, which is managed by entities controlled by General Atlantic Services Company LLC (‘GASC’), a private equity firm based in the United States of America. The principal activity of the GASF is investing through foreign direct investment in portfolio companies in India. GASF is an existing shareholder of IIFLW, with a 21.61% along with certain affirmative rights, and the right to nominate director(s) on the board of IIFLW. IIFLW is a public company incorporated India and is engaged in portfolio management services, distribution of financial products, and acts as a stock broker.
CCI held that the transaction would not cause any change in the market dynamics in which the parties are involved, and that there is no likelihood of an AAEC in India. CCI accordingly approved the transaction.
 Combination Registration No. C-2018/07/582.
CCI Imposes Penalty on Telenor for Gun-Jumping*
On August 03, 2018, CCI passed an order under Section 43(a) of the Competition Act, imposing a penalty on Telenor ASA (‘Telenor’) for consummating a combination without seeking approval by way of a requisite notification.
Lakshdeep Investments & Finance Private Limited (‘Lakshdeep’) had filed a notice with CCI for its proposed acquisition of shares of Telewings Communications Services Private Limited (‘Telewings’). Per the transaction, Lakshdeep was to acquire 51% of the equity share capital in Telewings, and ultimately hold 26% of its equity share capital. The transaction involved the following steps: (i) Telewings’ participation in the 2G spectrum auction to be conducted by the Department of Telecommunications from November 12, 2012 with an intention to acquire the necessary spectrum for carrying telecommunication operations in India; (ii) Upon Telewings being declared successful in the 2G spectrum auction, Lakshdeep’s acquisition of 51% of the equity share capital of Telewings (‘Lakshdeep Share Transaction’); (iii) After acquiring the 2G spectrum and requisite licenses necessary for carrying on the business operations in India, Telewings’ acquisition of business of Unitech Wireless (Tamil Nadu) Private Limited (‘Uninor’) on a going concern basis (‘Uninor Business Transaction’); and (iv) On receiving the approval of the Foreign Investment Promotion Board, Telenor was to increase its shareholding to 74% and consequently Lakshdeep to hold 26% of the equity share capital of Telewings (‘Share Transaction 1’).
In its review of the transaction, CCI asked Lakshdeep for clarifications with respect to the steps for which the approval of the Commission was being sought including whether the approval was being sought for step (iii) and (iv). Based on Lakshdeep’s response, CCI observed that the transaction was not likely to cause any adverse competition concern in India, and accordingly approved the same by way of an order dated November 29, 2012.
CCI further observed that Lakshdeep holding shares in Telewings to the extent of 51%, transfer of business from Uninor to Telewings, and the increase in stake of Telenor in Telewings from 49% to 74 % could not be considered as an intra-group transaction, and therefore the exemption available to intra-group transaction as per Item 8 of Schedule I to the CCI (Procedure in regard to the transaction of Business relating to Combination) Regulations, 2011 (‘Combination Regulations’) were not applicable to these steps. Telewings appealed this finding before the Competition Appellate Tribunal.
In the meantime, CCI received a further notice under Section 6(2) of the Competition Act from Bharti Airtel Limited and Telewings concerning a proposed transfer of 100% of the equity share capital of Telewings to Airtel. CCI observed that Telenor had consummated Share Transaction 1, and subsequently increased its shareholding in Telewings from 74% to 100% (‘Share Transaction 2’) without notifying it to CCI. CCI further observed that Telewings had also consummated Uninor Business Transaction without notifying it to CCI.
In regard to Share Transaction 2, CCI noted that with 26% shareholding, Lakshdeep still had joint control over Telewings, therefore transfer of the same had the effect of bringing a change in the control of Telewings, from a joint control of Lakshdeep and Telenor to the sole control of Telenor. Thus, Share Transaction 2 was found to not be an intra-group transaction, and therefore not covered under the exemption contained in Item 8 of Schedule I of the Combination Regulations.
CCI held, that given the negative control of Lakshdeep over Telewings, and of Unitech Group over Uninor, Uninor Business Transaction and Share Transaction 1 were not intra group acquisition of assets in terms of the erstwhile Item 8 Exemption (which stated that intra-group acquisition of control or shares or voting rights or assets were not ordinarily likely to cause an appreciable adverse effect on competition and are therefore exempted from notification). CCI further noted that as regards the amended Item 8 Exemption (which exempt from notification acquisition of shares or voting rights or assets within the same group, except in cases where the acquired enterprise is jointly controlled by enterprises that are not part of the same group), the amendment was only meant as a clarification to the exemption.
While deliberating on the mitigating factors, CCI noted that the disclosure of all the steps in the transaction was insufficient to absolve the parties of their obligations to file separate notices in the event the transactions were not inter-connected, or to a composite notice in the event the transactions were interconnected.
In light of the above, CCI imposed a penalty of ₹ 0.5 million on Telenor.
*Order dated 03.07.2018 in Combination Registration No. C2012/10/87.
Amended by Notification F. No. 3-1/Amend/Comb.Regl./2013/CD/CCI, dated April 4, 2013.
Cartels 2019 | India
A. The Basic Legal Framework.
1. What is (are) the statutory basis (bases) for challenging cartel behavior/effects in your jurisdiction?
The [Indian] Competition Act, 2002 (CA02) is the primary legislation on competition in India. A cartel can be challenged under two related provisions of the CA02. First, Section 3(1) of the CA02, restricts enterprises from entering into agreements that cause or are likely to cause an appreciable adverse effect on competition (AAEC) in India. Agreements that cause an AAEC are declared void under Section 3(2) of the CA02. The second relevant provision under which cartels can be challenged is Section 3(3) of the CA02, which seeks to prohibit cartel agreements on the basis of the ‘presumption’ that they indeed cause an AAEC. Accordingly, once the Indian antitrust regulator, the Competition Commission of India (CCI) has established the existence of a cartel agreement, it need not engage in an assessment of whether the cartel indeed causes AAEC and can directly proceed to prohibit the agreement. The parties to the cartel have the right to adduce counter evidence to rebut the presumption of AAEC associated with cartels. In practice, rebuttal of this presumption is quite onerous and rarely successful.
2. Identify the public enforcement agencies, noting any differences in their jurisdiction?
The CCI is the statutory authority in charge of enforcing and administering competition law in India. The CCI is equipped to investigate anti-competitive practices and is aided by its independent investigative arm, the Office of the Director General (DG), in conducting inquiries into contraventions of any of the provisions of the CA02. The CCI either can direct the DG to investigate into possible cartels (and also other forms of potentially anti-competitive conduct) on its own motion or based on a reference from the Central or a State Government or a statutory authority. Similarly, any person, consumer or their association/trade association can file a complaint (referred to as ‘information’) which may form the basis for initiation of an inquiry.
Based on the evidence made available, if the CCI establishes the existence of a prima facie case, it directs the DG to carry out an in-depth investigation and submit a detailed report with the findings. If the CCI is not satisfied with the DG’s report, it may require the DG to conduct further investigation. Thereafter, the CCI typically invites the alleged cartelists’ views on the DG’s report and offers them an opportunity for oral hearing. Finally, if the CCI finds that a cartel exists or an agreement is anti-competitive in nature, it may impose penalties and pass any other orders it deems appropriate. On the other hand, in the absence of a prima facie case being made out, the CCI will proceed to close the matter and communicate its decision to the informant.
Decisions of the CCI may be appealed to the National Company Law Appellate Tribunal (NCLAT). With effect from 26 May 2017, the former competition appellate authority, the Competition Appellate Tribunal (COMPAT), has been dissolved and replaced by the NCLAT, which is the new appellate authority for competition law related cases, amongst others.
Decisions of the NCLAT may be further appealed to the Supreme Court of India (SC). However, such appeals to the SC will only be entertained on a point of law and the SC will not re-examine the facts which have already been decided by the NCLAT. In parallel, the Indian judicial system also affords an opportunity to parties to contest CCI’s decisions before High Courts, in limited situations, for example when the CCI’s decision infringes parties’ fundamental rights enshrined in the Constitution of India.
3. Is there a private right of action for challenging cartel behavior/effects and if so, identify the conditions precedent, if any, to such an action?
The CA02 is designed to prohibit anti-competitive agreements and other types of conduct in general. While any person (including an enterprise, a statutory authority or the Government) can inform the CCI about any potential cartel arrangement, the CA02 does not empower them to pursue a private right of action. The information received by the CCI can form the basis for an inquiry into the alleged cartel; the informant cannot pursue the claim as a private right of action. However, upon a definite finding of infringement, any person aggrieved by the anti-competitive conduct, including cartels, can initiate proceedings for compensation of losses suffered due to such anti-competitive conduct.
4. Is potential liability criminal? civil? both? What are the potential scope of criminal penalties or civil judgment awards?
The CA02 only prescribes civil liability for anti-competitive practices, including cartels. The sanctions for engaging in cartels include monetary penalties and ‘cease and desist’ directions. The monetary penalty can be imposed on both the erring enterprise and the individual office bearers of the errant enterprises who are found responsible for the cartel conduct.
The monetary penalty for cartels can extend up to the higher of 3 times the relevant profit or 10% of the relevant total turnover of the errant enterprise for each year of the duration of the cartel. Alternatively, the monetary penalty can be up to 10% of the average relevant turnover for the last three financial years of the errant enterprise (usually computed from the date of the finding of infringement by the CCI).
5. Are there statutes which take account of alleged cartel behavior indirectly (i.e., other than challenging the existence and operation of the cartel directly?)
The CA02 is a self contained statute empowering the CCI alone to examine cartels.
6. How is “cartel conduct” defined; by statute? By regulation? By precedent? Is there conduct involving joint action between competitors that does not amount to a violation of law?
The CA02 defines the term “cartel” to include an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of goods or services.
Agreements amongst competitors, to- (a) directly or indirectly determine purchase or sale prices; (b) limit or control production, supply, markets, technical development, investment or provision of services; (c) share markets of source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market; and (d) directly or indirectly rig bids, are prohibited on the basis of the presumption that they cause an AAEC.
The CA02 recognizes that not all forms of agreements or joint actions between competitors are necessarily anti-competitive in nature. Accordingly, the presumption of AAEC that is otherwise attached with the 4 types of agreements amongst competitors listed above, does not apply to efficiency enhancing joint ventures. The CCI has also recognized that collective/joint action by competitors in pursuit of an otherwise legal right, such as a petition for levy of trade remedy measures (e.g. antidumping duties) does not fall foul of the prohibition on cartel agreements.
7. Describe the variety of competition law violations that can be classified as “cartel” behavior? Price fixing among competitors? Bid-rigging? Output restrictions? Agreements on product characteristics? Agreements on other forms of competitive activity?
The CA02 contains an exhaustive list of agreements amongst competitors (cartels) that shall be prohibited on the basis of the presumption that they cause an AAEC. The list comprises the 4 types of agreements identified in response to Question 6 above.
8. What limitations period(s) apply and how are they calculated?
Section 3 of the CA02 which contains the discipline on cartels and other anti-competitive agreements came into effect on 20 May 2009. While there has been some debate on whether the provisions of the CA02 can be applied retrospectively, Indian courts have clarified that for an agreement pre-dating 20 May 2009 to be examined and prohibited by the CCI, it must have continued to be in effect post 20 May 2009 [Kingfisher Airlines Limited v. CCI, (2010) 4 Comp LJ 557 (Bom)]. Apart from the temporal cut off date of 20 May 2009, there is no limitation on the CCI’s jurisdiction to examine anti-competitive agreements, including cartels and other forms of anti-competitive conduct.
9. Are their industries, sectors or other activities that involve cartels but are exempt from scrutiny under statutes or precedent?
As stated above in response to Question 6, the presumptive rule of AAEC associated with horizontal cartel agreements does not apply to efficiency-enhancing joint ventures. The CA02 provides for the right of any person to restrain any infringement and impose reasonable conditions to protect his intellectual property rights. Additionally, the CA02 also contains a limited carve out for what may be dubbed as ‘export cartels’.
10. What are the limits, if any, on the exercise of personal jurisdiction over alleged cartel participants and on the exercise of jurisdiction over the controversy? If the conduct occurs entirely in foreign jurisdictions, can it be reached by enforcement in your jurisdiction?
The CCI’s jurisdiction to examine a conduct is tied entirely to the question of whether the conduct causes or is likely to cause an AAEC in India. Accordingly, if a conduct that takes place entirely outside the India has the potential to cause AAEC in India, the CCI can, as it routinely does, assert jurisdiction over such conduct. The CCI is also empowered to examine the conduct of individual office bearers responsible for the adoption of anti-competitive conduct by the enterprises they serve, whether they are located in India or outside India, so long as the conduct causes an AAEC in India.
11. Are principles of comity established and applied in your jurisdiction? By statute? By governmental order? By precedent? Identify any conditions precedent to application of principles of comity and/or exceptions to its application, including whether application of these principles are mandatory or subject to discretion.
For the purpose of discharging its duties and performing its functions, the CA02 has granted authority to the CCI to enter into any memorandum of understanding or arrangement with foreign agencies, with the prior approval of the Central Government. Thus far, the CCI has entered into cooperation agreements with competition authorities in jurisdictions like the European Union, United States, Canada, Brazil, South Africa, China, Russia and Australia. The cooperation agreements however do not provide for extensive cooperation between the CCI and its counterparts, especially on cartel enforcement. The cooperation, at this stage is limited to exchange of ideas, best practices and non-confidential information.
B. The Procedure Framework For Cartel Enforcement – Initial Steps.
1. What are the initial investigatory steps taken by enforcement agencies? What is the usual sequence?
On receipt of information on potentially anti-competitive agreements or conduct, the CCI engages in a preliminary examination to ascertain whether the materials presented before it warrant the initiation of an investigation, usually referred to as ‘formation of prima facie view’. At this stage, while the CCI does not have any legal obligation, if it deems necessary, it may call upon the informant or the party against whom allegations are made for a ‘preliminary conference’. Neither the informant, nor the opposite party(ies) has the right to seek a ‘preliminary conference’. Once the CCI has formed a prima facie view that a case fit for detailed investigation by its investigative arm- the DG exists, it issues a formal order directing the DG to conduct an investigation. The DG usually starts the investigation process by sending probe notices seeking information from the relevant parties, followed by deposition of relevant personnel and on occasions ‘search and seizure’ operations to gather relevant information.
2. Are dawn raids or surprise visits possible?/common? If so, describe the obligations of a firm or individual faced with such an inquiry, including the role, if any, of outside counsel and limits on such activity.
The DG enjoys wide powers in conducting unannounced search and seizure inspections, more commonly known as dawn raids. The DG has the power to conduct a dawn raid after obtaining a warrant from the Chief Metropolitan Magistrate, New Delhi.
The DG has conducted two publicly reported search and seizure operations so far. The first of these dawn raids was on the offices of JCB India Ltd. (JCB) on 22 September 2014 in an abuse of dominance case. After the raid, JCB challenged the DG’s dawn raid in the Delhi High Court on the ground that the warrant did not permit the DG to seize JCB’s documents and only authorized a search. The Delhi High Court held that the DG had misused its dawn raid powers and went beyond the directions stipulated in the warrant. The issue of whether the DG is permitted to use any of the material seized during the JCB raid is currently pending adjudication before the SC, where more clarity is expected on the DG’s powers in conducting dawn raids.
More recently, the second dawn raid took place when simultaneous search and seizure operations were carried out at the premises of Eveready Industries India Ltd. (Eveready), Indo National Ltd. (Nippo) and Panasonic Energy India Co. Ltd. (Panasonic) on 23 August 2016 and the DG obtained clinching evidence for prosecuting a cartel for zinc-carbon dry cell batteries in India.
The DG’s powers for search and seizure are quite extensive and the entities being raided have an obligation to cooperate with the officials during the search and seizure operation. All officers, employees and agents (including former persons) of the company being investigated are required to preserve and produce all books and papers in their custody relating to the company to the DG officials. These persons are also required to extend all assistance in connection with the investigation. While faced with a dawn raid situation, the best and the most advisable course of action is to extend all cooperation to the investigators. However, the party to the investigation has the right to require the presence of two independent witnesses for overseeing the search and seizure operation and also seek a written record of the entire operation, including an exhaustive list of documents and information seized by the investigators. If the investigators seek to record statements on oath, the relevant officials may assert their right to be accompanied by their counsel while their statements are being recorded. However, they are not allowed to consult with their counsel during the oral deposition.
3. What are the restrictions, if any, on dawn raids or surprise visits? Access to computers? Access to e-mails? Seizure of documents considered relevant?
The DG is required to exercise its powers to conduct dawn raids sparingly and only in cases where there are reasonable grounds to believe that the documents which are useful for evidentiary purposes may be destroyed, mutilated, falsified or secreted. To ensure that the DG does not exercise this power arbitrarily, it is required to secure a judicial warrant before conducting a dawn raid. The judicial warrant, issued for specific dawn raids usually defines the scope of the raid and the DG’s otherwise wide powers are circumscribed by the terms of the warrant secured. Subject to the terms of the warrant, the DG is empowered to search and collect copies of both physical books and documents (including emails) as well documents stored on electronic devices, including computers and phones.
4. What obligations exist to prevent or avoid spoliation of potentially relevant information?
The CA02 requires every direction of the DG, issued either during the course of a dawn raid or otherwise, to be complied with by the relevant person. The CA02 specifically prohibits alteration, suppression or destruction of any documents required to be furnished to the DG. Similarly, providing the DG with a false statement or document or omitting to provide any material fact intentionally is prohibited under CA02. Accordingly, any person who engages in such activity either during the dawn raid or otherwise or who does not comply with the directions of the DG could be subjected to a penalty which may extend to INR 10 million.
5. Can officers or employees be required to respond to interviews/questions during the dawn raid or surprise visit? Are there procedural requirements? What is the interviewing practice thereafter? How are refusals to cooperate addressed?
The CA02 empowers the DG to examine on oath any person for the purposes of the investigation, including during the dawn raid. Procedurally, the DG is only required to secure a judicial warrant before conducting a dawn raid. Under CA02, any individual or employee whose statement is recorded on oath by the DG has the right to assert the presence of his/her counsel but may not consult or confer with him/her during the deposition. The notes of such deposition are recorded in writing and are required to be signed off by the person being examined. Thereafter, the statement on oath may be used as evidence in the proceedings.
Any refusal to submit to the deposition directed by the DG would likely be treated as failure to comply with the directions of the DG. Failure to adhere to DG’s direction may attract significant penalties under CA02 which may extend up to INR 0.1 million for each day during which such failure continues, subject to a maximum of INR 10 million.
6. Can companies/interviewees obtain copies of documents furnished to the enforcement agency or other records reflecting what transpired?
The party to the investigation has the right to require the presence of two independent witnesses for overseeing the search and seizure operation and also seek a written record of the entire operation, including an exhaustive list of documents and information seized by the investigators. The contents of the written record should primarily include:
– the details and ownership of the place being searched;
– names and designations of the DG officials;
– name and complete address of the independent witnesses;
– details of the items inspected and seized;
– duration of the search; and
– signatures of the authorised officer and independent witnesses.
As a matter of practice, the DG may provide a list of all documents seized during the investigation to the company.
7. Do officers or employees have a right to counsel? May company counsel take on this role or otherwise participate in the interview? Limitations on counsel’s ability to speak or advise the interviewee during the interview?
Any person whose statement is recorded on oath by the DG has the right to be accompanied by an ‘advocate’ who is registered under the Advocates Act, 1960 (Advocates Act). Under the Indian law, an in-house counsel is not considered as an ‘advocate’ per the Advocates Act and therefore, does not enjoy right to represent the company or otherwise be present during the deposition.
While there are no expressly prescribed rules, regulations or guidelines measuring the extent to which external counsel may participate during the deposition, a division bench of the Delhi High Court has recently held that parties summoned by the DG have the right to be accompanied by advocates but cannot consult them during the deposition while the DG collects evidence. The Court has directed the DG to ensure that the counsel does not sit in front of the witness; but is some distance away and the witness should not be able to confer, or consult with him/her during the deposition [CCI v. Oriental Rubber Industries Private Limited, LPA 607/2016 dated 24 May 2018].
8. Are individuals typically required to obtain separate counsel? When and under what circumstances?
The company officials are not necessarily required to obtain separate counsel and may very well seek legal advice and representation from the company’s counsel. It is advisable though to engage separate counsels. At times, the interests of the individual employees and the company may not be aligned, for example- an employee who has engaged in an anti-competitive conduct in breach of his/her company’s code of compliance could face separate disciplinary proceedings at his/her workplace and may hence require representation by a separate counsel. Similarly, when an employee, without the consent of his/her company, files for leniency, he/she would likely engage a counsel separate from the company’s counsel.
9. Based on experience in your jurisdiction, what are the principal initial steps that defense counsel should undertake during the initial phase of an enforcement effort?
The principal initial steps that defense counsel should consider taking include- (a) request the CCI for a copy of its order directing the DG to conduct an investigation; (b) examine the CCI’s order to ascertain whether the CCI’s decision to initiate the investigation is correct or whether there are grounds for seeking a recall of the order; (c) examine whether the CCI has exercised its jurisdiction appropriately; and (d) guide the client to start an internal investigation to ascertain the relevant facts which will be helpful in responding to the DG’s request for information as the investigation progresses.
10. How does an enforcement agency in your jurisdiction obtain documentary evidence or testimony in the course of investigating alleged cartel behavior? What procedural and substantive requirements apply?
For the purpose of investigation, the DG and the CCI have been vested with wide powers which include the powers of a ‘civil court’ under the Code of Civil Procedure, 1908 relating to:
– summoning and enforcing attendance of any person and examining them on oath,
– requiring the discovery and production of documents,
– receiving evidence by way of an affidavit,
– issuing commissions for the examination of witnesses or documents, and
– requisitioning any public record or document, or a copy of a public record or document from any office.
The CCI (General) Regulations, 2009 (General Regulations) framed under the CA02, further set out the procedure to be followed by the DG during investigation in taking evidence on record including issuance of commissions for examination of witnesses and documents.
Once an investigation begins, the DG typically issues notices to the informant and the enterprises accused of contravening the provisions of the CA02, directing them to furnish relevant information, including documents and copies of email correspondence. The DG may also send information requests to competitors, suppliers, and customers of the parties to the investigation. Similarly, the DG is empowered to summon an individual or officials of the concerned parties for deposition and take their statement on oath.
11. How does a governmental agency in your jurisdiction proposing to investigate alleged cartel behavior obtain other types of (e.g., non-documentary) information?
The DG and the CCI have the power to obtain oral testimony by examining individuals on oath. The oral depositions for key officials of the cartel participants, the informant and other third parties are typically conducted by the DG during the investigation process. The CCI may also call upon any experts from the fields of economics, commerce, accountancy, international trade or any other discipline in order to assist in its inquiry.
The CCI often examines economic evidence such as the nature of the industry, the number of players in the market, the level of market concentration, parallel movement in prices, trends in production and dispatch, capacity utilization, cost structures, and variations in profit margins across firms, while carrying out cartel inquiries. The CCI also relies on conduct-based evidence, including evidence of meetings between competitors, similar or identical bidding prices, membership of trade associations, history of cartelisation, and information exchange practices.
12. Is a company or individual located in your jurisdiction obligated to produce documents or other evidence that is available to it/him/her even if located in another jurisdiction? In the “cloud”? Is there a distinction between information that is available by searching on a local computer as opposed to information that the individual would have to request be sent into the jurisdiction?
Given the CCI’s extra-territorial powers, the DG and the CCI have the power to compel an individual to produce documents in physical or electronic form notwithstanding the fact that the evidence sought may be located in another jurisdiction.
13. When, where and how are principles of attorney-client privilege applied? Are they limited to counsel admitted in your jurisdiction? Are communications to or from in-house counsel recognized as privileged?
In India, professional communications between attorneys and clients are protected as ‘privileged communications’ under the Indian Evidence Act, 1972 (Evidence Act). This attorney-client privilege restricts attorneys from disclosing any communications exchanged with the client and stating the contents or conditions of documents in possession of the legal advisor in the course of, and for the purpose of, his professional employment with the client.
The attorney-client privilege applies only to an attorney who is admitted as an ‘advocate’ with the Bar Council of India or any State Bar Council. This attorney-client privilege continues even after the employment has ceased. However, there are certain limitations to the attorney-client privilege and the law does not protect any disclosures made with the client’s express consent, any communication made in furtherance of any illegal purpose or any fact observed by an attorney, showing that any crime or fraud has been committed since the commencement of his employment.
An in-house counsel, being in the full-time employment of a person as a salaried employee, is not recognized as an ‘advocate’ and thus, professional communications between an in-house counsel and officers, directors and employees of a company are not protected as privileged communications between an attorney and his client. In other words, to invoke the privilege, the communications must necessarily be made or received by an ‘advocate’.
14. Are there other privileges recognized in your jurisdiction that may be pertinent to a cartel investigation? For example, the privilege against self-incrimination?
No other privileges are recognised in India and the right against self-incrimination is available to individuals in criminal and not civil cases. There are no criminal sanctions for engaging in cartels and hence the privilege against self-incrimination is not available in cartel investigations.
15. Are initial requests for information commonly resisted by individuals and firms? What are the consequences, legally and practically, of non-cooperation with the enforcement agency’s requests or insistence of strict fulfillment of legal conditions precedent?
Failure to appear for oral depositions or to provide information requested by the DG may result in the CCI initiating separate penalty proceedings for non-cooperation. The CCI has been quite strict in taking action and imposing penalties on entities and individuals who have failed to provide the required information sought in the investigation process through written questionnaires or in oral depositions. Non-cooperation with the DG or obstructing the DG from carrying out dawn raid operations may attract significant penalties under CA02 which may extend up to INR 0.1 million for each day during which such failure continues, subject to a maximum of INR 10 million as may be determined by the CCI.
16. Are targets of enforcement actions able to protect confidential or proprietary information? Are third parties able to obtain such protection?
The CA02 provides an overarching protection in terms of confidentiality and states that no information relating to any enterprise that has been claimed confidential be disclosed by the CCI without the previous written permission of such enterprise, otherwise than in compliance of the CA02 or any other law for the time being in force. Further, the General Regulations permit parties to request the DG or the CCI for confidential treatment of documents provided that they submit a statement setting out cogent reasons for the request as well as stipulate the term and expiry of such confidentiality claim.
Requests for confidentiality are permitted only if publicly disclosing the document or any part of it will result in the disclosure of trade secrets, lead to the destruction or appreciable diminution of the commercial value of any information, or can reasonably be expected to cause serious injury to the party submitting the information. In arriving at a decision regarding confidentiality, the DG and the CCI may consider factors such as the extent to which the information is public or known to employees, suppliers, distributors and others in the business, the measures taken to guard secrecy of the information and the ease or difficulty with which the information could be acquired or duplicated by others. The confidentiality protection is available to both the parties to proceedings and third parties.
Where confidential information forms a part of parties’ written submissions, they are required to file both a confidential and a public version (redacting the confidential information). The non-confidential version of the submissions will be a part of the public record of the proceedings and open to inspection by other parties.
17. When and how do defense counsel for the target of a cartel investigation raise legal and factual arguments to persuade the enforcement agency to forego taking action or modify their prospective action?
Pleadings regarding the factual and legal basis for an enforcement action are typically made by defence counsel after the CCI forwards a copy of the DG’s investigation report to the parties concerned. The CCI gives the concerned parties an opportunity to respond with written submissions followed by oral hearings, where defence counsel can present their arguments on the matter.
18. Is there a leniency, immunity and/or amnesty regime applicable in your jurisdiction? What standards are applied? How and when is leniency, immunity and/or amnesty sought? What forms does leniency, immunity and/or amnesty take and what is the practice as to the scope of protection granted? To whom is it available? Available only to the party that is first to seek it? Available only if party is not a “ringleader” of the activity? Can a company apply for a “marker”? If so, under what conditions and with what limitations? What is the record of the enforcement agency(ies) in your jurisdiction with respect to granting leniency, immunity and/or amnesty?
The CCI’s leniency programme is aimed at inducing cartel participants to break rank and provide information against their fellow cartelists under the CCI (Lesser Penalty) Regulations, 2009 (Lesser Penalty Regulations). The CCI has the power to impose a lesser penalty on a member of an alleged cartel if such member has made a ‘full, true and vital disclosure’ in respect of the violations of the CA02. A leniency applicant would do this by admission of participation in such anti-competitive conduct and thereby benefit from the reduction of the penalty that could potentially be imposed on it. The first applicant for leniency may be granted up to 100% reduction in penalty. However, such immunity up to 100% will be granted by the CCI only if, at the time of application, it did not have enough evidence regarding the existence of a cartel contravention. There is a sliding scale of leniency and other applicants may have their penalty reduced on submitting evidence, which in the CCI’s opinion provides ‘significant added value’ and enhances the ability of the DG or the CCI to establish the existence of a cartel. The second and other subsequent applicants are eligible for penalty reduction of up to 50% and 30% respectively.
The CCI considers a number of factors on whether to grant leniency and an applicant seeking to benefit from the provisions of the Lesser Penalty Regulations is required to:
– cease to participate in the cartel from the time of the disclosure,
– provide vital disclosure in respect of the contravention,
– provide all relevant information, documents and evidence as required by the CCI,
– cooperate genuinely, fully, continuously and expeditiously throughout the investigation and proceedings before the CCI, and
– not conceal, destroy, manipulate or remove documents which are relevant to the proceedings, and may contribute to establishment of a cartel.
If, according to the CCI, the applicant fails to comply with any of these conditions, it may not grant any leniency.
On receipt of an application, the CCI will proceed to mark the priority status of the applicant and convey its decision about the same to the applicant. In the event the information is received orally or through email/fair, the CCI will require the applicant to submit a detailed written application with all information and evidence within a period of 15 days. In the event the application is not received within this time or such extended time as agreed by the CCI, the applicant loses its priority status. The date and time of receipt of the application will be recorded and unless the evidence submitted by the first applicant has been evaluated, the next applicant will not be considered by the CCI.
The CCI passed certain amendments to the Lesser Penalty Regulations on 22 August 2017 aimed at streamlining and strengthening its leniency programme by attracting better-quality evidence through leniency applications, and ensuring that it expends lesser resources. The amendment broadly expands the scope of the Lesser Penalty Regulations by allowing individual whistle-blowers to approach the CCI with evidence on collusion. It brings in an additional requirement for an enterprise applying for leniency to also furnish details of individuals who have been involved in the cartel on their behalf. The amendment also abolishes the earlier cap on the number of leniency applicants who could benefit from the penalty waiver and allows the CCI to grant immunity to more than three applicants, each eligible for a penalty waiver for up to 30%.
Finally, the amendment has introduced significant changes to the provisions on confidentiality by allowing the DG to disclose information under the Lesser Penalty Regulations to other parties for the purposes of the investigation if it ‘deems necessary’. However, if the applicant does not consent to such disclosure, the DG will have to necessarily record its reasoning for disclosure in writing, and seek the approval of the CCI. The amendment appears to be intended to ensure that the parties against whom a negative finding may be made are afforded a fair opportunity to controvert evidence and allow the DG to test such evidence, or collect further evidence, by putting it across to other parties. Until now, the identity of an applicant seeking immunity, as well as the evidence submitted by it under the Lesser Penalty Regulations was not permitted to be disclosed by the DG or the CCI unless such disclosure was required by law, was consented to by the applicant, or such information was publicized by the applicant itself. The amendment dilutes this provision, and grants the DG the flexibility to disclose such information to other parties. The amendment also allows for file inspections by parties to information submitted by leniency applicants and this notably overrides the confidentiality provision of the Lesser Penalty Regulations. Accordingly, the non-confidential version, which redacts non-public commercially sensitive information and business secrets, becomes available for inspection by parties.
The CCI has passed three decisions so far relating to leniency applications filed before it:
– In January 2017, the CCI issued its first order in the Brushless DC Fans which involved bid-rigging for tenders relating to the supply of fans to the Indian Railways. The CCI considered evidence supplied by Pyramid Electronics, one of the three parties, by way of a leniency application and granted a reduction in penalty of 75% for having assisted the CCI in coming to a conclusion that section 3(3) of the CA02 was violated. The reason the leniency applicant did not get a full 100% reduction in penalty was because the investigation had already commenced by the time the leniency was filed and the CCI already had some evidence against the cartel participants. The CCI also imposed penalties on the individual officials in charge of the three parties, at the rate of 10% of their average income for the three preceding financial years but granted Pyramid’s employee a 75% reduction in penalty.
– In April 2018, the CCI granted a relief of lesser penalty to three manufacturers for cartelisation of zinc-carbon dry cell batteries in India. While determining penalty of 1.25 times the profits of the companies for each year of duration of the cartel, the CCI proceeded to reduce the fines based on the manufacturers’ priority in filing the leniency applications as well as their value addition to the instigative process. Accordingly, Panasonic was granted 100% immunity and a nil penalty whereas Eveready and Nippo were granted a penalty reduction of 30% and 20% respectively. The CCI also imposed penalties on individual officers at the rate of 10% of their average income for the last three preceding financial years and reduced their penalties in proportion to the respective company’s priority status.
– Most recently, in May 2018, the CCI found bid rigging by six firms in relation to the tenders floated by Pune Municipal Corporation for the operation and maintenance of municipal organic and inorganic solid waste processing plant. During the DG’s investigation, all six firms filed leniency applications with the CCI. However, the CCI reduced penalties only for four firms and their individual officers (by 50% for two firms, and 40% and 25% respectively for the other two firms) and refused to grant leniency as there was no significant value addition by the remaining two firms.
C. The Procedure Framework For Cartel Enforcement – When Enforcement Activity Proceeds.
1. Does the investigating authority in your jurisdiction seek information directly from company employees? With what process and notice? What rules or limitations apply?
The DG enjoys wide investigative powers, including the power to seek information relevant for its investigation by directing either the company or its officials or both to submit information that it considers relevant to the investigation. The DG usually seeks information by sending notices but in limited situations, it can also gather information by conducting search and seizure operations. The DG is bound by the terms of the investigation set by the CCI in its prima facie order directing the conduct of investigation.
2. Can the investigating authority in your jurisdiction seek documentary information directly from the target company or others? How is this accomplished?
Documentary evidence is also typically sought by issuing notices and directing the company(ies) to furnish relevant information, records or documents within a stipulated time period.
3. Does the investigating authority in your jurisdiction seek information directly from companies or individuals located outside the jurisdiction? How is this accomplished?
The DG usually contacts companies and individual officers outside India directly. Again, a notice is issued directing a company or an individual located outside India to furnish relevant information or documents directed by the DG within a certain time period. A copy of such notice may also be sent by the DG to the external legal counsel of the company.
4. Is there significant inter-agency cooperation/coordination within your jurisdiction? If so, describe its effect. Are there limitations on exchange of information?
While the CCI has entered into cooperation agreements with competition authorities in other jurisdictions, these agreements are limited to the exchange of ideas, best practices and non-confidential information and do not provide for any extensive cooperation especially on cartel enforcement.
5. Does your enforcement agency(ies) typically cooperate with enforcement agencies in foreign jurisdictions and if so, with what effects? What proportion of cartel enforcement activity in your jurisdiction involves coordination between enforcement agencies in other countries? Describe how such coordination affects a case brought in your jurisdiction.
As stated in the response to Question 4 above, the CCI has not entered into any extensive cooperation agreement with its counterparts specifically with regard to cartel enforcement.
6. If a criminal case is going to be brought, what are the steps taken in order to issue a complaint/indictment or similar process? Before what tribunal(s) are criminal cases litigated? To whom is evidence presented? What significant pre-trial procedures apply? What rights do defendants have to (a) access information in the hands of the enforcement agency? (b) access potentially relevant information in the hands of the third parties?
The CCI has no jurisdiction to impose criminal sanctions on entities for cartel infringement.
7. If a civil action is going to be brought, what are the steps taken in order to issue a complaint or similar process? Before what tribunal(s) are civil cases litigated? To whom is evidence presented? What significant pre-trial procedures apply? What rights do defendants have to (a) access information in the hands of the enforcement agency? (b) access potentially relevant information in the hands of the third parties?
Complaints regarding a contravention of the provisions of the CA02 may only be brought before the CCI. The complainant is required to file an ‘information’ containing the statement of facts, details of contraventions along with documents, affidavits and evidence in support of this, a succinct narrative in support of the alleged contraventions and the relief sought in the matter.
On receipt of information on potentially anti-competitive agreements, the CCI engages in a preliminary examination to ascertain whether the materials presented before it warrant the initiation of an investigation, referred to as ‘formation of prima facie view’. At this stage, while the CCI does not have any legal obligation, if it deems necessary, it may call upon the informant or the party against whom allegations are made for a ‘preliminary conference’. However, neither the informant, nor the opposite party(ies) has the right to seek a ‘preliminary conference’. Once the CCI has formed a prima facie view that a case fit for detailed investigation by the DG exists, it issues a formal order directing the DG to conduct an investigation. The DG usually starts the investigative process by sending probe notices seeking information from the relevant parties, followed by deposition of relevant personnel and on occasions ‘search and seizure’ operations to gather relevant information. The DG will analyse this evidence and use the same in preparing its investigation report.
Subject to confidentiality restrictions, the DG’s report usually contains findings on each of the allegations made in the information together with all evidences, documents, statements or analyses collected during the investigation. The CCI shares a copy of the DG’s report to the parties, inviting their views and seeking their responses. Parties always have an opportunity to inspect the CCI’s case file and obtain copies of documents and records submitted during the proceedings. Further, if considered as necessary or expedient, the CCI or the DG may grant an opportunity to parties to cross-examine persons whose statements may have been used to reach a finding of infringement.
8. Are enforcement actions involving cartels typically brought against multiple parties in a single proceeding? Under what circumstances can parties obtain separate trials?
Cartel actions in India are against multiple parties and almost always brought in a single proceeding.
9. How is the burden of proof in an enforcement proceeding defined/applied? Does the standard vary by type of proceeding?
The CA02 prohibits cartels on the basis of the presumption that they cause an AAEC in India. The presumption of AAEC associated with cartels is a rebuttable presumption and parties to the agreement have the opportunity to prove that their agreement does not, or is not likely to cause, an AAEC. While the initial burden to prove a cartel agreement lies with the CCI, the burden to rebut the presumption of AAEC associated with a cartel agreement vests with the defendants. The shifting of burden of proof in cartel inquiries necessitates an evaluation of evidentiary threshold at two stages – first, when the CCI ought to establish the existence of a cartel agreement and second, when the defendants seek to rebut the presumption of AAEC associated with cartel agreements.
In determining whether an agreement causes an AAEC in India, the CCI balances the possibility of various ‘negative’ and ‘positive’ factors. The ‘negative’ factors include the creation of barriers to entry, driving existing competitors out of the market and foreclosing competition by hindering entry. The ‘positive’ factors include benefits accruing to consumers, improvements in the production or distribution and promotion of technical, scientific and economic development. Since cartel contraventions under the CA02 are civil in nature, the standard of proof applied by the CCI to demonstrate the existence of an anti-competitive cartel agreement is the ‘balance of probabilities’.
10. In an enforcement proceeding (civil or criminal), who acts as the finder of fact? Who applies the law to those facts?
As stated above, cartel proceedings are civil in nature. Accordingly, during the investigative process, the DG acts as a finder of facts and applies the law to those facts while submitting its investigation report to the CCI. However, the ultimate finder of facts and their assessment under the relevant legal provisions in cartel proceedings is the CCI. It may disagree with the DG’s findings, apply the law to the facts afresh and pass necessary orders as it deems fit.
11. Can evidence obtained in one proceeding be used in other proceedings? What about evidence proffered by an applicant for leniency or evidence from another jurisdiction?
The CA02 is silent on whether the CCI can share evidence gathered during the course of its investigations with other enforcement agencies. However, the CA02 contains an express provision, allowing “information” on potentially anti-competitive conduct to be provided by the Central or State Governments or statutory authorities. The CCI often receives “information” from the Central/State Governments and other statutory authorities, and has indeed initiated investigations on the basis of such information. Similarly, the CA02 also provides for a “reference” to be made by any statutory authority to the CCI and vice versa, where in the course of a proceeding, an issue is raised that any decision by such authority would be contrary to the provisions of the CA02 or the CCI may make a reference on any aspect of the CA02 whose implementation is entrusted to another statutory authority.
12. How are Rules of Evidence applied?
The proceedings before the CCI are in the nature of quasi-judicial proceedings. While the CCI has the flexibility to devise its own investigative procedure, being a quasi-judicial body, it is required to follow the general rules on evidence (contained in the Evidence Act). In general, the CCI can admit evidence, available in physical form (books, papers, etc.), electronic form (emails and other types of electronically stored data) and also by way of sworn affidavits. As a quasi-judicial body, the CCI is required to share copies of evidence gathered by it with the parties to the investigation and shall extend the opportunity to controvert the evidence.
13. What role is typically played by retained experts? Economists? Other disciplines?
The CCI may engage experts from the fields of economics, commerce, accountancy, international trade or any other discipline in order to assist in conducting an inquiry. Expert evidence in the form of economic studies, authoritative texts, analyses based on market surveys, etc. are all admissible as material evidence for the purpose of an inquiry.
14. What privileges, if any, are recognized (or subject to significant limitation)?
Although not explicitly stated in the CA02, the Evidence Act recognises attorney-client privilege and this privilege can be asserted before the CCI in any proceedings before it.
15. Is it possible to have multiple or simultaneous enforcement proceedings involving the same or related facts?
The CCI typically clubs similar complaints received against alleged contravening parties and examines such cases in a consolidated manner, unless there is a difference in the nature of allegations or a difference in the time period for the alleged contraventions.
D. Sanctions and Remedies In Government Cartel Enforcement .
1. Does the investigatory agency have authority to impose sanctions directly? If so, with what limitations? If not, describe the tribunal(s) in which proceedings take place.
The DG, the investigative arm of the CCI, does not have the authority to impose sanctions. The CCI is indeed empowered to impose sanctions directly for the infringement of the provisions of the CA02. However, in limited situations where the CA02 prescribes sanctions for non-compliance of the CCI’s orders or directions or refusal to pay the penalties imposed by the CCI (which could be punishable with an imprisonment of up to 3 years or a maximum fine of INR 250 million, or both), the CA02 requires that such sanctions be imposed by the Chief Metropolitan Magistrate, New Delhi based on a complaint filed by the CCI. The Chief Metropolitan Magistrate is a part of the criminal courts system in India and the relevant authority tasked with imposing criminal sanctions.
2. Is there a procedure for “plea bargaining” or settlement? If so, at what stage of the proceeding? As a practical matter, how does the plea bargain or settlement process work in your jurisdiction?
The CA02 does not expressly provide for the administrative settlement of cases. Accordingly, even if the parties settle their grievances and the informant seeks to withdraw the complaint, the CCI may continue to proceed with the matter. Interestingly, the Madras High Court has held that since the CCI is not a body set up to decide private disputes between individuals but rather, mandated to prevent adverse effects on competition and because it has residuary powers to pass any orders/directions as it may deem fit, the scheme of the CA02 does allow parties to enter into a compromise/settlement and for the CCI to accept the same if it is satisfied that this would not lead to the continuance of anti-competitive practices and would not be prejudicial to consumer interests or freedom of trade [Tamil Nadu Film Exhibitors Association v. CCI & Ors., W.A. No. 1086 and 1087 of 2013]. However, it remains to be seen how the CCI deals with the issue of settlements in light of this decision.
In case of an appeal before the NCLAT, the appellant may be permitted to withdraw the appeal with prior permission from the NCLAT.
3. If liability or responsibility is established are there collateral effects e.g., Establishing a prima facie case in other litigation? Possible debarment of the company and its officers from governmental bidding processes? Can these effects be avoided or mitigated by plea bargaining or settlement?
Collateral effects cannot be avoided as the CA02 does not expressly permit settlement of cases. In any event, once a company or a person is found guilty of contravening the provisions of the CA02, its eligibility for governmental bidding processes or any such commercial opportunities would depend upon the rules governing such processes.
4. Describe the range of available sanctions and penalties in criminal proceedings as to companies and, if applicable, individuals deemed responsible. Are some available only in special circumstances? Are sanctions and penalties applied by the judge presiding as he/she determines or is it the product of an adversary proceeding with argument or based on a pre-set formula? Does the enforcement agency propose the amount of fines or other penalties?
The CCI has no jurisdiction to impose criminal sanctions on entities for cartel infringements.
5. Describe the range of available sanctions and penalties in civil proceedings as to companies and, if applicable, individuals deemed responsible. Are some available only in special circumstances? Are sanctions and penalties applied by the judge presiding as he/she determines or is it the product of an adversary proceeding with argument? Are there sanctions that can be imposed to regulate future behavior of a company or individual? I sow common are such additional sanctions?
In case of a cartel, the CCI can impose a monetary penalty extending up to the higher of 3 times the relevant profit or 10% of the relevant turnover of the errant enterprise for each year of the duration of the cartel agreement. With respect to any other anti-competitive agreements, the CCI can impose a penalty up to 10% of the average relevant turnover of the previous three financial years (usually computed from the date of the finding of infringement by the CCI), on each party to the anti-competitive agreement. The monetary penalty can be imposed on the individual office bearers of the errant enterprises who are found responsible for the cartel conduct. The CCI will also pass ‘cease and desist’ orders directing the parties involved to discontinue the anti-competitive conduct. Further, the CCI may direct the modification of the terms or clauses of anti-competitive agreement and pass any other order, including directing the payment of costs to the complainant.
6. Is a company’s “effective compliance program” considered as a factor in m imposing sanctions and penalties? If so, how is “effectiveness” considered in light of a determination that legal standards have been violated?
In the past, the CCI has considered the existence of a competition compliance program as a mitigating factor while determining the quantum of penalty to be imposed on infringing enterprises. However, it has not gone into significant detail as to the effectiveness of such compliance programs in order to determine the extent of the violation.
7. Can sanctions in the governmental proceeding extend to mandatory consumer redress?
Apart from imposing penalties, orders directing discontinuing the anti-competitive conduct and payment of costs, the CCI cannot order for compensation or mandatory consumer redress. A party aggrieved by a conduct found to be anti-competitive can approach the appellate tribunal, the NCLAT, seeking compensation for the harm suffered.
8. What forms of judicial review or appeal are available from decisions in governmental enforcement proceedings? What standard(s) is (are) applied? How common is such review?
Decisions passed by the CCI can be appealed to the NCLAT and thereafter, a further appeal lies to the SC.
The NCLAT being the first court of appeal, is empowered to examine both the questions of facts and law and has wide discretion while evaluating the CCI’s orders. For example, while the CCI may have dropped certain charges as being irrelevant and its order may not contain any specific finding on such charges, there is a risk that the NCLAT may consider such a charge to be relevant.
The SC, being the final court of appeal usually does not consider questions of facts, and limits its review to questions of law alone.
Since the sanctions for cartels are quite significant, the guilty enterprises/persons usually contest the CCI’s decision before the NCLAT. Moreover, cartel enforcement in India is only about 9 years old. There are several aspects of the CA02 that require clarity and more often than not, this lack of clarity provides ample basis to contest the CCI’s decisions before the NCLAT and then before the SC.
E. Private Civil Litigation Involving Alleged Cartels .
1. Do private firms and/or individuals have a private right of action to seek relief from effects alleged to have resulted from cartel behavior?
Under the CA02, the Central or State Government, local authority or any enterprise or person is permitted to make an application to the NCLAT to seek compensation for any loss or damage shown to have been suffered as a result of cartel conduct. Further, an application may be filed against enterprises for the recovery of compensation when any loss or damage is suffered by an applicant as a consequence of such enterprise violating any order or direction of the CCI or the NCLAT. The NCLAT would inquire into such claims (it may also seek recommendations of the CCI) and then pass its compensation order.
2. What are the threshold requirements for such an action? How and where is it brought?
The NCLAT has the power to adjudicate on a claim for compensation that may arise from the findings of the CCI or the orders of the NCLAT, in an appeal against the CCI’s orders. It is important to note that an application for compensation can only be made after the CCI or the NCLAT, on appeal, has determined that a violation of the substantive provisions of the CA02 has indeed taken place.
3. Can such actions be styled as “class actions” or other forms of collective action? Do consumer associations or public interest groups have standing?
The CA02 provides for class action suits as a remedy in a situation where a group of persons have the same claim against the infringer and allows one or more persons to file an application on behalf of all the interested parties. The NLCAT must grant the applicant permission. Where permission is granted, the applicant must give notice of the application at their expense, by personal service, or, where by reason of the number of persons service is not practicable, by public advertisement (as directed by the NCLAT). Importantly, there is no limit to the number of persons to be represented and the application is maintainable on behalf of a fluctuating body but their interest must be common.
4. If private actions apply in your jurisdiction, how are questions of indirect purchasers or “passing-on” defenses handled?
An enterprise or person claiming compensation is required to show that it has suffered loss or damage because of anti-competitive conduct by the infringing enterprise. While there is no precedent regarding the practice of the NCLAT, typically Indian courts only award damages to parties that have suffered a direct and consequential loss. Therefore, indirect purchasers may not be entitled to compensation unless they can establish that they have indeed suffered such loss.
5. What is the process applied for hearing and resolving such claims?
As stated above, once a final decision has been passed on a matter by the CCI or on appeal by the NCLAT in regard to the violation of the provisions of the CA02, the NCLAT will examine the allegations made in a compensation application and then proceed to pass an order directing an enterprise to pay the realizable amount of compensation for the loss or damage caused to the applicant as a result of the cartel conduct. The NCLAT may also obtain the CCI’s recommendations before passing the order of compensation.
6. Is evidence from governmental investigations or proceedings admissible?
In adjudicating compensation claims, the NCLAT will consider the evidence and findings of the CCI and will not examine the matter afresh. Its inquiry will only be limited to determining the eligibility and quantum of compensation due to an applicant.
7. How do the standards for relief in a private civil action differ from those applicable to governmental proceedings?
While monetary penalties have been prescribed under the CA02, compensation awarded to applicants by the NCLAT is subjective; it depends on the amount determined by the NCLAT as adequate for compensating the loss or harm suffered by the applicant because of the anti-competitive conduct.
8. What forms of relief can a claimant (or claimants) seek? Compensatory damages? Treble damages? Punitive damages? Other relief?
The CA02 only provides for relief in the form of compensation for the loss or damage caused to the applicant as a result of a cartel contravention by an enterprise. In contrast to other jurisdictions, errant enterprises will not be liable to treble damages and damages in India do not typically include punitive or exemplary damages. Moreover, compared to other jurisdictions, Indian judges typically hesitate to award large damages claims.
9. Based on the experience in your jurisdiction, what forms of relief are most commonly obtained?
There have been no reported compensation claims thus far following cartel decisions and it remains to be seen what sort of relief can be granted to the applicant.
10. Based on the experience in your jurisdiction, how often do claims of this type proceed to completed litigation as opposed to dismissal or settlement? What is the typical time frame (or range of time frames) from inception of the claim to resolution?
Since there have been no reported compensation claims, it is difficult to predict the time frame for such claims.
11. Are successful attorneys for claimants compensated and if so, how is that amount determined?
Advocates in India are not allowed to charge contingency fees and because of this prohibition, it is unlikely that successful attorneys for claimants can be compensated.
12. Are unsuccessful claimants obligated to pay defense costs and/or attorneys’ fees? If so, how is that determined and applied (particularly in class or collective actions?
The NCLAT could order unsuccessful applicants to pay costs in proceedings in the event it finds such compensation claims to be frivolous in nature or a waste of the NCLAT’s time/resources.
For the responses to Questions 5-12, please note that there have been no reported compensation claims thus far following cartel decisions and presently, there are only two compensation applications pending before the NCLAT in abuse of dominance cases. More clarity can be expected on the process applied for hearing and resolution of such private actions based on the outcome and the NCLAT’s decisions with respect to these claims. Further, it remains to be seen what standard will be adopted by the NCLAT to determine the amount of compensation, along with other forms of relief that can be legitimately granted to the claimant. Accordingly, these decisions, which are being keenly awaited, are expected to lay down the roadmap in India for private follow-on actions in competition cases.
13. What forms of judicial review or appeal are available from decisions involving private civil litigation? What standard(s) is applied? How common is such review?
Appeals from the NCLAT’s decisions on compensation claims lie to the SC.
F. Supplementary Information.
1. Are there other items of information that are pertinent to an understanding of the process, scope and adjudication of claims involving alleged cartel conduct in your jurisdiction?
In March 2017, the SC issued its first substantive ruling on the provisions of the CA02 in the Dubbed Serials case. The SC held that trade unions comprising members engaged in economic activities are associations of such ‘enterprises’ and therefore, threats of boycott issued by these trade associations in the event their demands were not fulfilled amounted to a violation of Section 3 of the CA02. Further, the SC noted that in every cartel case, the first step should be to define the relevant market, a practice which the CCI had not consistently adopted so far due to the presumption of AAEC for horizontal agreements. This is additional requirement is expected to increase the DG’s and the CCI’s burden while investigating cartel cases.
The CCI has also narrowed the scope of the ‘single economic entity’ defence in respect of which it had originally held that agreements between entities that are part of the same ‘group’ cannot be scrutinized under Section 3 of the CA02, since they are in the nature of ‘internal agreements’. In an interesting turn of events, the CCI departed from its previous approach in the Insurance Companies case and proceeded to penalise four public sector insurance companies that were all wholly owned subsidiaries of the Central government for bid-rigging. The CCI held that the insurance companies did not constitute a single economic entity as evidence suggested that each company had independently decided its business strategy while participating in the tender, and discussed each others’ proposed bid prices. More recently, in the Grasim Industries case, while rejecting a plea of single economic entity urged by Grasim Industries Ltd. and Aditya Birla Chemicals (India) Ltd., the CCI held that where two or more entities of the same group decide to separately submit bids in the same tender, they are not part of a single economic entity. Based on these decisions, the CCI appears to hold that in the context of bid-rigging, the entities involved would be treated as separate enterprises and would be expected to comply with the provisions of the CA02, even in respect of any agreements entered into by them inter se.
2. Do governmental authorities in your jurisdiction publish written guides relating to cartel conduct and enforcement available to consumers and business people? If so, please identify them including URL if applicable
As part of its advocacy series, the CCI has published guides on:
– Cartels (http://cci.gov.in/sites/default/files/advocacy_booklet_document/cartel%20book.pdf),
– Bid Rigging
– Leniency Program
– (http://cci.gov.in/sites/default/files/advocacy_booklet_document/Leniency.pdf), and
– Competition Compliance Programme for Enterprises
1. Rahul Rai, Partner
2. Gaurav Bansal, Associate
3. Sangeetha Mugunthan, Associate
The Intellectual Property and Antitrust Review | India
In the past few years, the debate on the interplay between competition law and intellectual property rights (IP) in India has continued to draw attention. In addition to dealing with questions of jurisdiction and addressing disputes dealing with fair, reasonable and non-discriminatory (FRAND) terms, the Competition Commission of India (CCI) has increasingly focused its attention on issues such as the impact of standard-setting on competition law; and the use (or abuse) of IP-related judicial processes by dominant enterprises to stifle competition.
The general prohibition on anticompetitive agreements and abuse of dominance under the Indian Competition Act, 2002 (the Competition Act) applies equally to IP-related business practices as it would to non-IP-related conduct. The only reference to IP rights in the Competition Act is by way of an express carveout that recognises the right of any person to impose reasonable and necessary conditions for protecting IP rights, specifically conferred under certain identified Indian IP statutes. This carveout does not, however, extend to unilateral conduct, thereby exposing IP holders to the risk of scrutiny under the abuse-of-dominance provision (Section 4) of the Competition Act.
In this chapter, we provide (1) a brief overview of the year in review; (2) issues surrounding antitrust and licensing in India; (3) the international debate surrounding the standard-selection process and the manner in which the CCI and Competition Appellate Tribunal (COMPAT) have interpreted competition claims arising out of standards while issuing prima facie orders; (4) the circumstances under which transfer of IP could be viewed as a transfer of assets under the merger control provisions (Section 5) of the Competition Act; and (5) finally we discuss, under ‘other abuses’, the emerging jurisprudence involving IP-related vexatious litigation leading to abuse-of-dominance claims before the CCI.
II YEAR IN REVIEW
The emerging discourse surrounding IP-linked antitrust issues in India is invariably tied to the application of the disciplines contained in Section 3 of the Competition Act (which deals with anticompetitive agreements) and Section 4 of the Competition Act (which deals with abuse of dominance).
The debate on IP-related antitrust issues in India came to the fore in 2014 when the CCI examined whether the practice of several domestic and multinational passenger vehicle manufacturers (PVMs) of selling spare parts and diagnostic kits only through authorised dealers resulted in ‘denial of market access’ to independent repairers and after-sales service providers, or constituted a ‘refusal to deal’. Without examining the larger question of the primacy of IP holders’ right to use and commercialise an IP-protected technology the way they deem appropriate, the CCI summarily held that PVMs’ decision not to supply spare parts and diagnostic kits to third-party or non-authorised dealers and after-sales repair and service providers results in denial of market access, and IP rights do not offer any protection from a finding of infringement under Section 4 of the Competition Act. Consequently, the CCI has opened the door for ‘compulsory licensing’ of IP protected technology to third parties, should it establish that the owner of the IP-protected technology is in a dominant position in a relevant market.
While examining the claim on refusal to deal, the CCI’s approach appears to give primacy to short-term foreclosure effects over the due deference that relatively more mature antitrust jurisdictions, such as the United States, extend to primacy of IP rights, which are essential for fuelling innovation and competition in the long run. Drawing simplistic analogies, the CCI summarily held that selling diagnostic tools in the open market would not compromise the IP rights of the PVMs in the diagnostic tools.
On appeal by certain PVMs, the COMPAT agreed with the CCI’s findings that PVMs’ decision not to supply spare parts and diagnostic kits to third-party or non-authorised dealers amounted to refusal to deal. Further, the COMPAT dismissed the arguments of the PVMs that restrictions requiring supply of spare parts and diagnostic tools only through authorised dealers were ‘reasonable’ restrictions to protect their IP and that the PVMs were simply trying to prevent the circulation of counterfeit spare parts in the aftermarkets. In this regard, the COMPAT observed that circulation of counterfeit parts would be curbed if the restrictions imposed by PVMs on sale of genuine spare parts in the aftermarkets were removed.
While coming to its decision, the COMPAT also observed that the PVMs did not have valid IP rights because (1) the PVMs’ copyright protection did not subsist under the copyright laws in India, as the article to which the copyrighted drawings pertained had been produced more than 50 times by an industrial process, and (2) the PVMs were not able to prove that the right under a patent registered by a parent outside India is available in India.
In another instance, the CCI held that a claim of alleged violation of the complainant’s (an animation company) registered title by the defendant company (another animation company) was not a competition-law concern, given that there had been a series of legal proceedings between the parties to claim ownership of the title ‘Picasso’ in various forums and courts.
More recently, the Madras High Court in a decision that could be more immediately relevant to competition cases initiated at the behest of IP implementers against the potentially anti-competitive practices of IP owners, has ruled that the scheme of the Competition Act empowers the CCI to consider settlement agreements between the complainant(s) and defendant(s).
The potential repercussion of this judgment of the Madras High Court on settlement in IP cases has been discussed in the subsequent paragraphs.
III LICENSING AND ANTITRUST
Antitrust concerns associated with IP licensing arrangements are relatively low on the CCI’s enforcement agenda. Where the CCI has dealt with complaints arising out of the unfairness or restrictions of licensing terms, it has done so fairly simplistically, without dealing, in any significant manner, with the interplay of IP and antitrust or balancing IP rights with the public interest.
i Anticompetitive restraints
Restrictive terms in licensing arrangements would be examined as vertical restraints under Section 3(4) of the Competition Act. In the absence of any specific provisions for assessing licensing arrangements, antitrust concerns arising out of licensing arrangements are treated within the same conceptual framework that applies to the sale of goods or services under the Competition Act. Simply put, restrictions accompanying IP licensing arrangements are prohibited if they can result in an AAEC, and the CCI is unlikely to reach a finding of AAEC unless the IP licensor enjoys significant market power. For instance, any attempt by an IP licensor to determine the pricing decision (for the licensed IP) of the IP licensee would be scrutinised as potentially anticompetitive ‘resale price maintenance’.
An IP licensor could also impose territorial or customer-specific restrictions as part of the IP licensing arrangement (e.g., the aforementioned broadcaster being forbidden from broadcasting the licensed video content outside a certain territory or from broadcasting to a specified group of potential viewers). Such territorial or customer-specific restrictions would be scrutinised as an instance of potentially anticompetitive ‘exclusive distribution’ or an anticompetitive refusal to deal. An IP licensor could also restrict the IP licensee from dealing with any competing IP licensor, a restriction that would be examined as a potentially anticompetitive ‘exclusive supply’ arrangement. Any attempt by an IP licensor to make the grant of the IP licence conditional on the IP licensee purchasing the IP licensor’s other products, services or licences would be treated as a potentially anticompetitive ‘tie-in’ arrangement.
Notably, the Competition Act provides a limited carveout allowing IP owners to impose restrictions, including restrictions accompanying their licensing arrangements, which are reasonable and necessary to prevent the infringement of their existing IP rights.
ii Refusals to license
Unlike in the United States and the EU, where refusal to deal is usually examined as unilateral conduct, in India, refusal to deal can also be scrutinised as an anticompetitive vertical restraint. Thus, a refusal to grant a licence altogether or imposition of unreasonably restrictive licensing terms can be examined as a potentially anticompetitive refusal to deal. For instance, in the Auto Parts case, the CCI viewed the car companies’ refusal to license their diagnostic (software) tools and repair manuals to independent repairers and workshops as an anticompetitive refusal to deal.
A ‘refusal to license’ can equally be scrutinised as an abuse of dominance under Section 4 of the Competition Act, to the extent that the refusal results in a denial of market access, restricts the production of goods or services, or restricts the technical or scientific development relating to goods or services. For instance, in the Auto Parts case, apart from holding the car companies liable for anticompetitive vertical restraints, the CCI also held that the car companies’ refusal to license the diagnostic tools to independent repairers and workshops was an abuse of their dominance.
However, in a recent decision, the CCI observed that a delay in licensing on account of plausible business justifications, namely minimising the imminent threat of reverse engineering, could not be considered as denial of market access, as every entity has a right to protect its own commercial interests.
iii Unfair and discriminatory licensing
Where an IP licensor is in a dominant position (e.g., the owner of a standard-essential patent (SEP), where dominance can flow from the patent being indispensable for complying with an industry or technical standard), the terms of its licensing arrangements could be scrutinised for being potentially ‘unfair’ or ‘discriminatory’ and thus, abusive. For example, charging excessive royalty rates or charging different royalty rates to similarly placed customers may be viewed as an imposition of unfair or discriminatory prices and thus, an abuse of dominance. For instance, in a complaint against Monsanto Inc, United States (MIU), the CCI reached a preliminary view that MIU had charged ‘unfair’ royalty rates since its trait value (a kind of recurring royalty fees) was a percentage (16–18 per cent) of the maximum retail price of the final seed packet in advance of each crop season. In turn Monsanto Technology LLC (Monsanto) filed a suit for infringement of patent, trademark and passing off before the Delhi High Court against the Nuziveedu group (sub-licensee of Monsanto’s BT cotton technology). The Nuziveedu group refused to pay license fee in terms of the agreements with Monsanto, claiming that Monsanto could not claim anymore than the “trait value” fixed by the State governments. Recently, a division bench of the Delhi High Court found against Monsanto by stating that plant varieties and seeds cannot be patented under the Indian Patents Act. The observations of the Delhi High Court in this case may have a bearing on the CCI’s investigation against MIU.The CCI has dealt with the issue of discriminatory or unfair licensing terms in a few cases. In Atos/Verifone, the CCI examined allegations that Verifone, a manufacturer of point of sale (POS) terminals, had imposed unfair and discriminatory conditions in the grant of licences for its software development kits (SDKs), a basic version of which was required to operate POS terminals, to value-added service (VAS) providers and third-party processors (TPPs) such as Atos. In its licensing arrangements with VAS providers, Verifone restricted the licensee from using any third party to develop or assist in developing any software using the licensed software, without first obtaining prior permission from Verifone and disclosing certain confidential information, including the names of its customers. Verifone contended that these restrictions were further to its IP rights pursuant to which it could legitimately restrict the grant of its licence to third parties without its permission. The CCI disagreed with Verifone’s plea and viewed the restrictions as simply the means to further Verifone’s entry and growth in the VAS market. The CCI also held that Verifone’s rationale for not allowing VAS developers to develop payment software (i.e., that it may damage the basic software of the POS terminal that was necessary for its functioning) was inconsistent with Verifone’s practices in other countries. The CCI also found the SDK licence agreement imposed ‘unfair’ disclosure requirements on VAS providers that were driven by Verifone’s desire to gain confidential commercial information from VAS providers and enable it to exploit the lucrative VAS market. Based on these findings, the CCI held that Verifone had imposed unfair and discriminatory terms in its SDK licence agreements with VAS providers and imposed a penalty of approximately US$670,000.
The CCI’s approach towards excessive pricing claims in the IP licensing context is consistent with its general approach on unfair pricing, where it has chosen to adopt a simple cost-plus approach for determining whether the price has a reasonable relation to the economic value of the product supplied. The CCI’s decisions on IP and antitrust issues are being contested before the appellate courts and it will take a while before definite guidance on these issues emerges.
IV STANDARD-ESSENTIAL PATENTS
i Standard-selection process and antitrust
Industry standards are widely acknowledged to be one of the fundamental drivers of the modern economy. Standard setting through stakeholder collaboration usually results in significant efficiencies; for instance, the interoperability of standards, consumer safety, technological innovation and the introduction of performance standards in the market. While antitrust authorities have recognised the pro-competition benefits of standardisation, the standard-selection process itself involves deliberation and communication between competitors that may raise potential antitrust concerns. For instance, coordination in a standard-selection process may lead not only to minimum price-fixing, but also to a buyers cartel in which the licensees (voting members of the standard-setting organisation) coerce patent holders to accept lower royalties in exchange for having their patents incorporated into a standard.
Apart from the coordination concerns involved in a standard-selection process, the adoption of industry standards involving IP may result in the creation of an SEP. Once a patent is included in a standard and is widely adopted, it grants absolute monopoly power to the SEP holder. The SEP holder is under an obligation to license on a FRAND basis and a failure to do so could be an abuse of dominant position. The task of an antitrust regulator is therefore not limited to adjudicating only violation of FRAND commitments by the SEP holder, but also extends to claims involving abuse of the standard-setting process. Globally, much of the antitrust litigation and controversy in relation to standard-selection processes has revolved around SEPs, and specifically patent hold-ups.
In India, the antitrust concerns surrounding standard-selection processes have also followed this trend, looking at issues surrounding FRAND terms for the Global System for Mobile Communications, or GSM standard, in the Erricson v. Micromax case and others. In March 2013, Ericsson sued Micromax, claiming damages worth INR 100 crore (~USD 15.2 million) alleging that Micromax had refused to enter into a licensing agreement covering Ericsson’s patented innovations across several wireless technology standards after three years of negotiations failed to yield a license agreement. Micromax, contested the claims, arguing that Ericsson was not licensing Its SEPs on FRAND terms. Micromax, with and subsequently Intex, approached the CCI aleging abuse of dominance by Ericsson. The CCI noting that the practices adopted by Ericsson were discriminatory and contrary to FRAND terms directed the Director General, Competition Commission of India (DG) to investigate Ericsson for any potential violation of the provisions of the Competition Act. This order of the CCI was challenged by Ericsson before the Delhi High Court. During the pendency of these proceedings, Ericsson and Micromax entered into a global patent license agreement and ended their dispute. Even though Micromax, apparently, has written to the CCI to withdraw its complaint, the Delhi High Court noted that notwithstanding such withdrawal, the CCI would be at liberty to proceed against Erriscon for any potential abuse of its dominant position.
In addition, the CCI has turned its attention more recently to the potentially anticompetitive effects arising out of voluntary non-SEP technical standards. Recently, the CCI considered whether the digital projection and screening of Hollywood movies in India, through Digital Cinema Initiative (DCI)-compliant servers – agreed and enforced between six Hollywood movie production houses (HMPs) by way of a joint venture – would lead to an anticompetitive horizontal agreement or abuse of dominant position. The HMPs, to protect their proprietary content from piracy, required the cinema owners and digital cinema service providers to comply with DCI technology. Arguably, the DCI-compliant servers provide better image quality to the viewers and protect HMPs from piracy of their proprietary content. The CCI considered protection from piracy as a reasonable defence under the Competition Act to require the projection of movies through DCI-compliant technology (for protection of HMPs’ copyright), and decided that the allegations did not merit investigation. On considering this issue on appeal, however, the COMPAT equated the requirement of DCI-compliant servers by HMPs with the process of private standardisation, and held that adoption of high standards could possibly have resulted in the creation of entry barriers for non-DCI-compliant service providers. Essentially, in its analysis, the COMPAT viewed the requirement of DCI-compliant technology introduced by HMPs as being a private standard-setting process (that may result in an abuse of dominance). Accordingly, it ordered the Director General to conduct an investigation into the matter. Interestingly, both the CCI and the COMPAT did not delve deeper into the protection available to efficiency-enhancing joint ventures under the Competition Act.
While the approach adopted by the COMPAT seems to suggest that a private standard-setting process involving non-SEPs can indeed be investigated under the Competition Act, it remains to be seen how the CCI will balance, on one hand, the need to protect IP developed jointly for the promotion of minimum cinematic ‘quality’ standards with, on the other hand, the competing claims that the IP is being misused to keep out ‘non-compliant’ film distributors and results in an abuse of dominance.
V INTELLECTUAL PROPERTY AND MERGERS
The Indian merger control regime requires the mandatory notification of all mergers and acquisitions that meet certain jurisdictional thresholds; these thresholds are assessed on the basis of the sum of the acquirer and target company’s assets and turnover collectively. However, the question of whether the licensing of IPs constitutes the ‘acquisition’ or ‘transfer’ of assets (and consequently requires notification) has been the subject of some debate. Since IPs can be transferred through many methods, including through their assignment, exclusive licensing, non-exclusive licensing, sub-assignable licensing, for a limited duration or perpetually, the CCI has been called upon to identify situations where such licensing might require merger notification. The CCI has now clarified through its decisional practice that the licensing of an IP will not in itself constitute a transfer or acquisition if the licence is demonstrably non-exclusive – both as a matter of law (de jure) and as a matter of fact (de facto). The licensor has to, among other things, establish that it itself continues to use the IP, or indeed license out the IP to others for wider use; and that the licence is not exclusive, irrespective of terminology used in the licence agreements. As a corollary, IP licences that do not meet this test, either de jure or de facto, will be treated as asset acquisitions that trigger merger notification to the CCI if no statutory exemption is available.
VI OTHER ABUSES (SHAM OR VEXATIOUS LITIGATION – IP AND ANTITRUST)
Sham or vexatious litigation as a tool to exclude competition is one of the important issues in IP and antitrust, since it involves the strategic use of IP infringement actions before courts with the ultimate objective of excluding a rival from the market. Globally, mature antitrust regulators have examined vexatious litigation as a strategy involving denial of market to a competitor. In the EU and the United States, the courts have laid down two broad principles that need to be satisfied when resolving an antitrust claim based on vexatious litigation: first, the lawsuit must be objectively baseless to the extent that no reasonable litigant could except success on the merits; and second, the IP holder’s utilisation of the court system must be conceived in the framework of a plan to eliminate competition.
While in India litigation in relation to both SEP and sham complaints are ongoing, the focus of this section is on complaints involving sham IP litigation. In the past eight years of antitrust enforcement, the CCI has received three complaints regarding sham litigation as a potential abuse of dominance. The CCI initiated an investigation into the first-ever complaint based on vexatious litigation in 2014. However, in the subsequent complaints, the CCI has refrained from directing investigations based on sham litigation, requiring the presence of exceptional circumstances. In all these cases, the CCI has effectively followed the principles laid down by the courts in the EU and the United States to examine claims involving vexatious litigation. The CCI’s approach in the first case of this nature involved a complaint against JCB India Ltd (JCB), where the complainant Bull Machines Private Limited alleged that JCB had, as patent holder, used an ex parte infringement injunction obtained from the High Court to strategically delay its own competing product launch. The withdrawal of the patent infringement suit by JCB soon after the product launch had been successfully delayed, formed the basis of the CCI’s investigation into whether JCB had engaged in sham or vexatious litigation.
In more recent cases, however, the CCI appears to be increasingly reluctant to view as abusive conduct the use of court proceedings to enforce legitimate IP rights. For instance, recently the CCI, in an initiation order in Biocon v. Roche, considered that Roche had been engaged in a long-drawn-out (and continuing) legal battle involving IP rights before the Delhi High Court and noted that recourse to legal proceedings is a right of every party and, as a general principle, cannot be viewed as being sham litigation except under exceptional circumstances. It seems the intensity of the underlying patent battle, as reflected by the time taken in arguments before the High Court, has weighed heavily with the CCI in determining that the patent litigation was not vexatious.
In sum, the jurisprudence on the point of vexatious litigation under the Competition Act so far has developed on the basis of the CCI’s prima facie orders. Since the prima facie orders of the CCI are not determinative of their final findings or meant to list detailed reasoning, the CCI’s approach to vexatious litigation remains a mater of some speculation.
VII OUTLOOK AND CONCLUSIONS
The Madras High Court’s observation in The Tamil Nadu Film Exhibitors Association v. Competition Commission of India that the Competition Act permits the parties to settle their dispute, subject to CCI’s satisfaction that the settlement would not lead to or help continue any anti-competitive practice in India. This observation opens the door for the CCI to consider the global license agreement between Micromax and Ericsson and the subsequent request by Micromax to terminate the proceedings against Ericsson while examining the allegations against Ericsson. While the Competition Act is designed to remedy instances of anti-competitive practice afecting the market as a whole and not just the interest of select competitors, the CCI may very well continue to examine the allegations against Ericsson, the very fact that the complainant Micromax no longer wishes to pursue its claims against Ericsson may likely weaken the CCI’s case against Ericsson.
To conclude, CCI has adopted a largely balanced and progressive approach in ensuring that the enforcement of competition law is not at odds with preservation of IPs. In doing so, it has taken cues from decisional practice in other jurisdictions, and has evolved its own jurisprudence on issues such as whether patent litigation is sham, or indeed on the role of private standards in the market. However, much of the future direction of the CCI’s decision-making in this area will be determined in appellate review, where the Indian Supreme Court is likely to have the last word. As with many other issues, the enforcement of antitrust law on questions involving IP is likely to continue to evolve in the coming years.
The Merger Control Review | India
The Indian merger control regime came into effect on 1 June 2011 with the notification of Sections 5 and 6 of the Competition Act 2002 (Competition Act). The regime is governed by the Competition Act, notifications issued by the Ministry of Corporate Affairs, Government of India (MCA) and the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations 2011, as amended up to 8 January 2016 (Combination Regulations).
Under the Indian merger control regime, a ‘combination’ (i.e., an acquisition, merger or amalgamation) must be notified to and approved by the Indian competition authority, the Competition Commission of India (CCI), if it breaches the prescribed asset and turnover thresholds and does not qualify for any exemptions. The requirement to notify the CCI is mandatory and such combinations are subject to a standstill or suspensory obligation. Where a combination causes or is likely to cause an appreciable adverse effect on competition (AAEC) within the relevant market in India, the combination is void. By 31 March 2018, the CCI had cleared 515 combinations, with a vast majority within the 30-working-day Phase I period. To date, the CCI has cleared five combinations subject to remedies after a detailed Phase II investigation, but so far has never outright blocked a combination.
In this chapter we give a brief overview of the recent trends in Indian merger control, including key amendments to the Combination Regulations and then outline the circumstances under which parties to a transaction are required to notify the CCI, and the factors taken into account by the CCI when determining whether a combination is likely to cause an AAEC.
II YEAR IN REVIEW
The past year has seen the CCI increasingly assert itself in relation to both procedural and substantive matters relating to merger reviews. Up until 31 March 2018, the CCI cleared 515 combinations in various industries such as telecommunications, agro-chemicals, pharmaceuticals, aviation, manufacturing, information technology, financial services, banking and broadcasting.
The landscape of the Indian merger control regime is shifting rapidly due to the frequent amendments to the Combination Regulations. On 27 March 2017, MCA issued a notification (the March 2017 notification) that (1) extended the scope of the de minimis exemption to mergers also; (2) limited the value of assets and turnover, in the transfer of a portion of an enterprise (i.e., in an asset sale), to only the value of the assets and turnover of such a portion of enterprise/division/business being transferred; and (3) maintained the increased value of the jurisdictional thresholds under the Competition Act. These changes are far-reaching and very welcome given that:
The March 2017 notification does away with the artificial distinction based on form, between transactions structured as ‘acquisitions’ and ‘mergers and amalgamations’ and instead, looks to the substance. In sum, the de minimis exemption will now be available to all types of combinations, irrespective of the manner in which they are structured. It clarified the basis for computing the value of assets and turnover attributable to assets in asset sales. It also extended the application of the de minimis exemption till 29 March 2022.
On 31 March 2017, the Finance Act 2017 (the Finance Act) was notified in the official gazette, and sought to dissolve the Competition Appellate Tribunal (COMPAT). The Finance Act has since become effective on 26 May 2017 and all the powers and duties of the COMPAT have been transferred to the National Company Law Appellate Tribunal (NCLAT). As a result, over 50 cases pending with the COMPAT as on 26 May 2017 have been transferred to the NCLAT. Such cases are being heard afresh by the NCLAT.
Subsequently, on 29 June 2017 the MCA issued another notification (the June 2017 notification) that does away with the requirement to necessarily notify a combination within 30 calendar days of the trigger event. The measure has been taken to alleviate the concerns of stakeholders who felt constrained by the deadline stipulated under the Competition Act.
Importantly, the June 2017 notification puts an end to the possibility of penalties for delayed filing. Transacting parties will no longer be constrained to decide on the strategy, collect information and make the filing within the short window of 30 calendar days. Parties to global transactions requiring notification in multiple jurisdictions can now make the filing in India contemporaneous with other jurisdictions. The June 2017 notification will not only help the parties align their strategy, but also help the CCI align its review timelines with other jurisdictions.
Notably, the requirement to file a notice with the CCI is still mandatory and the suspensory regime (i.e., requirement to receive CCI approval prior to closing) still applies. Accordingly, any breach of these requirements will still lead to penalties under Section 43A of the Act. However, removal of a 30-day deadline makes it significantly easier for businesses to comply with the merger notification requirement in India and is in line with international best practices in merger control. On 4 April 2018, the Union Cabinet, chaired by the Prime Minister, approved a proposal to reduce the number of members in the CCI from one Chairperson and six members to one Chairperson and three members, by not filling in the current and expected vacancies. The Union Cabinet cited the reduction in the CCI’s case load resulting from the revision of the de minimis thresholds as the primary factor behind this decision.
III THE MERGER CONTROL REGIME
i Applicable thresholds
A ‘combination’ is any acquisition, merger or amalgamation that meets certain asset or turnover thresholds, under Section 5 of the Competition Act. The asset and turnover thresholds applicable to combinations comprise two tests, which are applicable to the immediate parties to the transaction and separately to the group to which the target or merged entity (as the case may be) will belong, and have both Indian and worldwide dimensions.
The ‘parties test’ looks at the assets and turnover of the immediate parties to the transaction, that is, the acquirer and the target, or the merging parties, and a notification is triggered if the parties have any of the following:
a combined assets in India of 20 billion rupees;
b a combined turnover in India of 60 billion rupees;
c combined global assets of US$1 billion including combined assets in India of 10 billion rupees; or
d combined global turnover of US$3 billion including combined turnover in India of 30 billion rupees.
Even if the parties’ test thresholds are not met, a notification may be triggered if the ‘group’ to which the parties would belong post-transaction has any of the following:
a assets in India of 80 billion rupees;
b turnover in India of 240 billion rupees;
c global assets of US$4 billion including assets in India of 10 billion rupees; or
d global turnover of US$12 billion including a turnover in India of 30 billion rupees.
Every combination must mandatorily be notified to the CCI, unless the parties are able to take advantage of any of the exemptions provided in the Competition Act, the Combination Regulations or the Notification issued by the MCA. These exemptions are as follows.
The requirement of mandatory notification prior to completion does not apply to any financing facility, acquisition or subscription of shares undertaken by foreign institutional investors, venture capital funds, public financial institutions and banks pursuant to a covenant of an investment agreement or a loan agreement. Such transactions need to be notified in the simpler and shorter Form III within seven days of the date of acquisition.
Categories of transactions usually exempt from mandatory notification – Schedule 1 of the Combination Regulations identifies certain categories of transactions that are ordinarily not likely to cause an AAEC in India, and need not normally be notified to the CCI. They are as follows:
a acquisition of shares or voting rights made solely as an investment or in the ordinary course of business, of less than 25 per cent of the total shares or voting rights of the target enterprise, and there is no acquisition of control of the target enterprise;
b acquisition of additional shares or voting rights of an enterprise where the acquirer or its group, prior to the acquisition, already holds 25 per cent, but not 50 per cent, or more shares or voting rights are being acquired, and there is no acquisition of joint or sole control over the target enterprise by the acquirer or its group;
c acquisition of shares or voting rights by an acquirer who has 50 per cent or more of the shares or voting rights of the enterprise prior to the acquisition, except where the transaction results in a transfer from joint to sole control;
d acquisition of assets not directly related to the business activity of the party acquiring the asset or made solely as an investment or in the ordinary course of business, not leading to control of an enterprise, and not resulting in acquisition of substantial business operations in a particular location or for a particular product or service, irrespective of whether such assets are organised as a separate legal entity;
e amended or renewed tender offer, where a notice has been filed with the CCI prior to such amendment or renewal;
f acquisition of stock-in-trade, raw materials, stores and spares, trade receivables and other similar current assets in the ordinary course of business;
g acquisition of shares or voting rights pursuant to a bonus issue, stock split, consolidation, buy back or rights issue, not leading to acquisition of control;
h acquisition of shares or voting rights by a securities underwriter or a stockbroker on behalf of a client in the ordinary course of its business and in the process of underwriting or stockbroking;
i acquisition of control, shares, voting rights or assets by one person or enterprise, of another person or enterprise within the same group, except in cases where the acquired enterprise is jointly controlled by enterprises that are not part of the same group; and
j a merger or amalgamation involving two enterprises where one of the enterprises has more than 50 per cent of the shares or voting rights of the other enterprise, or a merger or amalgamation of enterprises in which more than 50 per cent of the shares or voting rights in each of such enterprises are held by enterprises within the same group, provided that the transaction does not result in a transfer from joint control to sole control; and
k acquisition of shares, control, voting rights or assets by a purchaser approved by the CCI pursuant to and in accordance with its order under Section 31 of the Competition Act.
Target-based exemption (de minimis exemption)
Transactions where the target enterprise either holds assets of less than 3.5 billion rupees in India, or generates turnover of less than 10 billion rupees in India, are currently exempt from the mandatory pre-notification requirement. Pursuant to the March 2017 notification the exemption has been extended to mergers and amalgamations as well (it was previously applicable only to transactions structured as acquisitions).
Applicability of thresholds to asset acquisitions
Pursuant to the March 2017 notification, in the transfer of a portion of an enterprise, division or business (i.e., in an asset sale), the applicability of the thresholds under Section 5 of the Competition Act and the de minimis exemption is limited to only the value of the assets and turnover of such a portion of enterprise, division or business. The pre-amendment position required the value of the assets and turnover of the entire target enterprise to be taken into consideration for the de minimis exemption to apply. Further, the exemption is valid until 29 March 2022 unless it is further extended.
iii ‘Control’ as per the CCI
The acquisition of control or a shift from joint to sole control is an important determinant for whether exemptions relating to minority investments and intra-group reorganisations are applicable. Under the Competition Act, ‘control’ includes ‘controlling the affairs or management by (1) one or more enterprises, either jointly or singly, over another enterprise or group, (2) one or more groups, either jointly or singly, over another group or enterprise’. There is no ‘bright line’ shareholding percentage identified as conferring control.
The CCI has examined the issue of what constitutes ‘control’ in several cases. In SPE Mauritius/MSM Holdings, the CCI held that veto rights enjoyed by a minority shareholder over certain strategic commercial decisions might result in a situation of joint control over an enterprise. These rights include engaging in a new business or opening new locations or offices in other cities; appointment and termination of key managerial personnel (including material terms of their employment); and changing material terms of employee benefit plans. In Century Tokyo Leasing Corporation/Tata Capital Financial Services Limited, the CCI observed that veto rights could create a situation of control over when they pertain to approval of the business plan, approval of the annual operating plan (including budget), discontinuing any existing line or commencing a new line of business, and the appointment of key managerial personnel and their compensation. In Caladium Investments/Bandhan Financial Services, the CCI expanded the scope of such affirmative rights to include veto rights over amendments to charter documents, changes in capital structure, changes to dividend policy and appointment of auditors in the list of rights that could be seen as leading to joint control.
Interestingly, in the Jet/Etihad case, the CCI came to the conclusion that the acquisition of 24 per cent of the equity share capital of Jet Airways (Jet) by Etihad Airways (Etihad) allowed Etihad to exercise joint control over the assets and operations of Jet. The CCI determined that the terms of the agreements entered into between Jet and Etihad, along with a governance structure that allowed Etihad to appoint two out of six directors (including the vice-chair) on the board of directors of Jet, allowed Etihad to exercise ‘joint control’ over Jet. Notably, the Indian capital markets regulator, the Securities and Exchange Board of India (SEBI) differed on this issue, going on to say that under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011 (the Takeover Code), the definition of ‘control’ is narrower than that under the Competition Act and, therefore, that the acquisition does not grant ‘joint control’ of Jet to Etihad.
The CCI’s interpretation of ‘control’ resonates with the practice of its overseas counterparts like the European Commission (EC) and the US Federal Trade Commission (FTC) (particularly the former). Similar to the EC, the CCI has categorically taken the position that the ‘ability to exercise decisive control over the management and affairs’ of the target company amounts to control for the purposes of the Competition Act.
Investors therefore need to keep in mind that even minority investments could be seen as an acquisition of control and trigger a notification if the thresholds in the Competition Act are met. This could extend to entirely innocuous financial investments.
iv Treatment of JVs
One of the common ways in which investors choose to do business in India is by way of joint ventures (JVs) with Indian counterparts. These joint ventures may be ‘greenfield’ (i.e., through the setting up of an entirely new enterprise) or ‘brownfield’ (i.e., via an investment in an existing enterprise).
The Competition Act does not specifically deal with JVs from a merger control perspective. However, as setting up a greenfield JV or the entry of a new partner in a brownfield JV involves the acquisition of shares, voting rights or assets, such acquisition may require notification to the CCI, if the jurisdictional thresholds are met and are not otherwise eligible for any exemption.
A greenfield JV would involve the setting-up of a new enterprise, which by itself will not have sufficient assets or turnover to trigger a notification. Prior to the March 2017 notification, where any of the parent companies to the JV transfer assets to the JV at the time of incorporation, a merger filing may have been triggered on account of the anti-circumvention rule in Regulation 5(9) of the Combination Regulations. The anti-circumvention rule requires that where, in a series of steps or individual transactions that are related to each other, assets are being transferred to an enterprise for the purpose of such enterprise entering into an agreement relating to an acquisition or merger or amalgamation with another person or enterprise, for the purpose of Section 5 of the Act, the value of assets and turnover of the enterprise whose assets are being transferred shall also be attributed to the value of assets and turnover of the enterprise to which the assets are being transferred. In such an event, despite the fact that the newly created joint venture may not itself have any assets or turnover, the acquisition of shares, voting rights or assets in the joint venture may require a notification to the CCI. However, the March 2017 notification clarifies that when only a portion of an enterprise, division or business is involved in a transfer (i.e., in an asset sale), then only the value of the assets and turnover of such portion of enterprise, division or business should be considered and not the value of assets and turnover of the entire enterprise housing the relevant business, division or portion.
The March 2017 notification therefore has created uncertainty over the application of the anti-circumvention rule. As a general matter, the principles of statutory interpretation require a harmonious construction between the substantive provisions of an enabling statute and a rule or any other form of delegated legislation. As such, any delegated legislation has to be read and construed consistent with the enabling statute. Accordingly, the anti- circumvention rule (provided under the Combination Regulations which is delegated legislation by the CCI) should be construed in light of, and consistently with, the provisions of the March 2017 notification (enacted by the Government of India).
Interestingly, the Combination Regulations also contains a ‘substance test’ whereby the CCI can look beyond a transaction structure and assess whether the substance of the transaction would trigger a notification requirement to the CCI.
iii The merger control regime – relevant considerations to reviewing a combination
The ‘appreciable adverse effect on competition’ test
The Competition Act prohibits the entering into of any combination, which has or is likely to have an AAEC in the relevant market in India, and treats all such combinations as void.
Consistent with practices in other jurisdictions, the CCI first determines the relevant market or relevant markets, and in that context considers the competitive effects of the combination. It then considers a number of non-exhaustive factors set out in the Competition Act to determine whether the combination is likely to cause an AAEC.
A relevant market is defined as the market, which may be determined with reference to the relevant product market or the relevant geographic market or with reference to both the markets.
In turn, a relevant product market is defined 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. Notably, the CCI is only required to consider products or services that are interchangeable or substitutable by consumers. Therefore, the CCI is not required to consider supply-side substitutability in determining the relevant product market.
The relevant geographic market is a market comprising the area in which the conditions of competition for supply of goods or provision of services or demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas.
The CCI has used economic tools such as the Elzinga-Hogarty test and chains of substitution in certain cases to determine the scope of the relevant market, but this is more the exception than the rule.
Upon determining the boundaries of the relevant market or markets, the CCI considers the competitive effects of the combination. The CCI is required to consider all or any of the following factors:
a actual and potential level of competition through imports in the market;
b extent of barriers to entry into the market;
c level of combination in the market;
d degree of countervailing power in the market;
e likelihood that the combination would result in the parties to the combination being able to significantly and sustainably increase prices or profit margins;
f extent of effective competition likely to sustain in a market;
g extent to which substitutes are available or are likely to be available in the market;
h market share, in the relevant market, of the persons or enterprise in a combination, individually and as a combination;
i likelihood that the combination would result in the removal of a vigorous and effective competitor or competitors in the market;
j nature and extent of vertical integration in the market;
k possibility of a failing business;
l nature and extent of innovation;
m relative advantage, by way of the contribution to the economic development, by any combination having or likely to have an AAEC; and
n whether the benefits of the combination outweigh the adverse impact of the combination, if any.
In the 515 cases that the CCI has reviewed so far, it has typically considered factors such as the parties’ and competitors’ market shares, market concentration levels post-combination, the number of competitors remaining post-combination, barriers to entry, extent of growth in the market and countervailing buyer power to determine whether the combination being considered is likely to cause an AAEC. However, unlike more mature jurisdictions, so far the CCI has stopped short of expressly identifying an economic theory of harm to the parties or in its orders. An illustrative decision is the PVR/DT case. With respect to the acquisition by PVR Limited (PVR) of the film exhibition business of DLF Utilities Limited (DT), the CCI expressly considered that post-combination market shares and increments, the lack of efficiencies, the likelihood that the combination would result in the parties being able to significantly and sustainably increase prices or profit margins, and the lack of incentives to innovate further as sufficient grounds to determine there would be an absence of effective competitors and, therefore, the combination of PVR and DT would likely have an AAEC.
The CCI’s analysis has focused on whether a combination is likely to cause an AAEC in India, even in cases where parties may have proposed global markets, or where markets are import-driven.
An interesting development in the Indian merger control regime has been the perceptible shift in the CCI’s initial ‘soft attitude’ in clearing mergers. Initially the CCI did not use its powers to direct modifications to the terms of transactions or impose commitments to ensure compliance with the provisions of the Competition Act. Recently, the CCI has formally approved five different combinations subject to modifications in the form of structural and behavioural commitments, even though there are no formal guidelines on merger remedies as yet.
Voluntary commitments offered by parties during Phase I investigations
In several cases, modifications have been volunteered by the parties themselves in the Phase I stage, rather than being directed by the CCI. In Mumbai International Airport Private Limited/Oil PSUs the parties offered various behavioural remedies voluntarily on the basis of which approval was granted by the CCI. In Elder Pharmaceutical/Torrent Pharmaceuticals, the CCI approved the transaction after the parties agreed to modify the scope of a non-compete clause in the agreement and reduce its scope from five to four years. Similarly, in Agila Specialities/Mylan Inc, Tata Capital/TVS Logistics, Clariant Chemicals (India) Limited/Lanxess India Private Limited and Advent International Corporation/MacRitchie Investments Private Limited the CCI approved the transaction only after the parties undertook to reduce the term of the non-compete clause. In Orchid Chemicals and Pharmaceuticals Ltd/Hospira, the CCI acknowledged that a non-compete clause is essential to acquire the full value of the asset, however, the clause must be reasonable in its application. The Guidance Note issued by the CCI on non-compete restrictions, will also certainly serve parties as an important tool in drafting non-compete restriction clauses. In most previous decisions, the CCI’s approach to modifications was primarily limited to non-compete obligations. However, more recently, in St. Jude Medical Inc./Abbott Laboratories the parties offered voluntary structural remedies through divestment of assets. In China National Chemical Corp/Syngenta AG, the CCI granted an approval subject to a remedy proposal offered by the parties wherein they voluntarily agreed to treat two of their respective Indian subsidiaries as separate independent businesses for 7 years, in addition to divestment of three formulated crop protection products sold by Syngenta in India. In Dish TV/Videocon, the CCI granted an approval in spite of the combined entity’s market share accumulating to 45% in the market for DTH services in India. The CCI noted the possible customer apprehensions regarding the customer of each party having to bear the cost of technical realignment. However, the CCI was satisfied with the voluntary commitments offered by the parties that included (i) bearing the cost of such realigning and re-configuring the antennas installed by customers to make it compatible with the transponders; and (ii) bearing the cost of the antenna/set top box which may be required to be changed as a result of the transaction. Additionally, the CCI observed the ease of switching by consumers, constraints from other modes of distribution of TV content, presence of a sectoral regulator, expected entry of new players and accordingly granted the approval.
Modifications directed by the CCI pursuant to Phase II investigations
In Sun/Ranbaxy, Holcim/Lafarge and PVR Cinemas/DT, the CCI approved the transactions on the condition that certain assets of the parties involved in these transactions would be divested to third parties to prevent AAEC in the relevant markets identified. Interestingly, the CCI also issued a revised divestment order in Holcim/Lafarge after the original divestment process ran into regulatory hurdles. The CCI recently approved the Dow/DuPont transaction subject to divestment of assets, cancellation of certain trademarks and a commitment that the parties would not enter the market for Flusilasole, a fungicide (the underlying active ingredient and formulations) for a certain duration, and also sell off their ‘MAH grafted polyethylene’ business. In Agrium/Potash, the CCI directed divestment of PotashCorp’s shareholding in three companies (divestment assets) as well as a commitment to not acquire stake in the divested businesses for a period of 10 years.
Merger filing time frames
As stated above, the June 2017 notification does away with the requirement to necessarily notify a combination within 30 calendar days of the trigger event, which may be:
a the final approval of the merger or amalgamation by the board of directors of the enterprises concerned; or
b the execution of any agreement or other document for the acquisition of shares, voting rights, assets or control.
The term ‘other document’ has been defined as being any binding document, by whatever name, conveying an agreement or decision to acquire control, shares, voting rights or assets, and includes any document executed by the acquirer conveying the decision to acquire, in the case of hostile acquisitions. Interestingly, the CCI had introduced a third category of trigger event, which is the public announcement (PA) under the Takeover Code made by parties for the acquisition of shares, voting rights or control over a listed enterprise in GE/Alstom. After much debate, the PA has been specifically identified in the Combination Regulations as being a trigger document. The Combination Regulations previously considered any communication of the intention to acquire, by the acquiring enterprise, to the government or any statutory authority (such as SEBI, the Foreign Investment and Promotion Board or the Reserve Bank of India) to be a trigger event. Given the ambiguity of this provision, the CCI brought in more clarity by identifying PAs as a specific form of communication to SEBI, a statutory authority, as a trigger document by way of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations 2016 notified on 8 January 2016. The Combination Regulations now state that where a public announcement has been made in terms of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations 2011, for acquisition of shares, voting rights or control, such public announcement shall be deemed to be the ‘other document’.
Further, the CCI has made it mandatory for parties to file a single notification for ‘interconnected’ transactions, one or more of which may be a combination. What constitutes ‘interconnected’ is somewhat vague, and is essentially determined by the CCI on a case-by-case basis. Interconnected transactions do not need to have any causal link or interdependence. Moreover, there is no time limit under the Competition Act or the Combination Regulations within which the CCI would consider transactions to be inter-connected (unlike in the EU), though the CCI does not consider transactions notifiable prior to 1 June 2011, the date on which the Indian merger control provisions came into force.
Parties have the option of notifying the CCI in either Form I, which is the default short-form notification, or in Form II, the more detailed long-form notification, where the parties have a horizontal overlap of over 15 per cent or a vertical overlap of over 25 per cent. In a recent round of amendments to the Combination Regulations, the CCI has overhauled the format of Form I, streamlining it and introducing accompanying guidance notes to assist parties in filing Form I.
Once notified, the CCI is bound to issue its prima facie opinion within 30 working days of filing, not accounting for ‘clock stops’, namely, when the CCI asks for additional information or directs parties to correct defects in their submissions. However, the CCI is also bound to issue its final order within 210 calendar days, even though the Combination Regulations provide that the CCI will ‘endeavour’ to pass relevant orders or directions within 180 days. In practice, the CCI has cleared the vast majority of all transactions within 30 working days (excluding ‘clock stops’), thus giving positive signals to the business community.
Invalidation of notifications
The CCI has enhanced powers to invalidate a notification within the 30-working-day review period in three circumstances:
a if it is not in accordance with the Combination Regulations;
b if there is any change in the information submitted in the notification, which affects the competitive assessment of the CCI; and
c if the transaction was notified in Form I, but the CCI is of the view that the transaction ought to have been notified in Form II (in this case, the CCI returns the Form I notification and directs parties to re-file in Form II).
While the CCI has the discretion to grant notifying parties a hearing before it determines to invalidate a notification, it is not mandatory for the CCI to do so. Further, the time taken by the CCI to arrive at such decision is excluded from the review clock.
The CCI appears to have used this power for invalidation in a technical fashion. In BNP Paribas/Sharekhan, the CCI invalidated a notification on the technical ground that the individual who signed the notification on behalf of the notifying party was not properly authorised to do so. In GE/Alstom, the CCI directed the parties to re-file the notification entirely in Form II (even for markets where there was insignificant overlap), as they had provided more detailed Form II level information only where overlaps were in excess of the market-share thresholds prescribed under the Combination Regulations.
Penalties for delayed filings or failure to file
The June 2017 notification puts an end to the possibility of penalties for delayed filing. Transacting parties will no longer be constrained to decide on the strategy, collect information and make the filing within the short window of 30 calendar days. However failure to file before implementation of the transaction continues to allow the CCI to impose a penalty of up to 1 per cent of the assets or turnover of the combination, whichever is higher. The maximum penalty imposed to date is 50 million rupees each in Piramal Enterprises/Shriram and GE/Alstom – both penalties were much lower than the statutory upper limit.
Confidentiality of submitted information
Confidential information and documents contained in merger filings and subsequent submissions are not automatically granted confidential treatment by the CCI. The notifying parties are required to specifically identify such information and make a request for confidential treatment for an identified time period. The CCI usually grants confidential treatment only over commercially sensitive or price-sensitive information or business secrets, the disclosure of which would cause commercial harm to the notifying parties and typically for not more than three years. However, it should be noted that the CCI, being a statutory body, is subject to the (Indian) Right to Information Act 2005 (the RTI Act), through which citizens can secure access to information in control of public authorities. While, legally, the CCI is required to provide access to citizens, confidential information provided by parties falls within an exemption under the RTI Act and it is therefore likely that these inbuilt safeguards in the RTI Act, coupled with the CCI’s own confidentiality regime, will be sufficient to assuage industry concerns in this regard.
Judicial review of mergers and the appellate process
On 26 May 2017, all the powers and duties of the COMPAT, were transferred to the NCLAT. As a result, decisions of the CCI may be challenged before the NCLAT, by any person aggrieved by that decision, including the central government, state government, a local authority or an enterprise. A further appeal from any order of the NCLAT lies to the Supreme Court of India.
In a decision that would have had wide-ranging implications, the COMPAT previously stayed the operation of the revised divestment order of the CCI in Holcim/Lafarge upon the application of a prospective bidder for the divested assets, however, this appeal was subsequently withdrawn by the appellant.
Other COMPAT decisions in the context of merger reviews include the challenge in the case of the CCI’s order in Jet/Etihad, which allowed Etihad to acquire a certain percentage of the equity share capital of Jet. The complainant alleged that the CCI allowed the combination without correctly appreciating the facts of the case or carrying out a detailed assessment. The COMPAT, however, dismissed the matter, ruling that the complainant was not an ‘aggrieved party’ within the meaning of the Competition Act and hence had no locus standi to challenge the order of the CCI. Similarly, in Piyush Joshi v. CCI, the COMPAT dismissed the appeal against the approval of the merger of Royal Dutch Shell Plc and BG Group Plc, stating that the appeal was premature. However, this appeal now lies before the NCLAT and the final order is yet pending.
Regarding gun-jumping and belated filing penalties, the COMPAT upheld the penalty imposed by the CCI on Piramal for failing to notify three interconnected transactions. In CCI vs. Thomas Cook, the Supreme Court recently dismissed the order of the COMPAT that had overturned the penalty imposed by the CCI on Thomas Cook for alleged gun jumping. The Supreme Court held that there was no requirement of mens rea under Section 43A of the Competition Act or intentional breach as an essential element for levying penalties. The Supreme Court further emphasized that technical interpretation to isolate two different steps of transactions of a composite combination was against the spirit and provisions of the Competition Act. Notably, Eli Lilly & Company’s appeal to the COMPAT against the penalty imposed by the CCI for belated filing now lies before the NCLAT. The penalty was imposed on Eli Lilly on the basis that the relevant trigger document in the transaction was the global sale agreement, and not the local sale agreement that was signed after the global sale agreement. The final decision in this appeal is still pending.
IV OTHER STRATEGIC CONSIDERATIONS
Since the coming into force of the Indian merger control regime, the CCI has entered into cooperation agreements and memoranda of understanding with several of its overseas counterparts, including the FTC, the EC, the Australian Competition and Consumer Commission and the Russian Federal Anti-Monopoly Service. Through such agreements, the CCI has sought to strengthen international cooperation and share information related to fair trade practices. The CCI has demonstrated its intention to reach out to and coordinate with global regulators in the recent past, especially in multijurisdictional filings. Given the multi-jurisdictional nature of global transactions, the CCI has become an important regulator to factor in given its length of review and substantive assessment of the filings made before it. One of the key features of the CCI’s review in the past year is that it has considered transactions in the context of consolidation in the sector in which a transaction has taken place and this has generally entailed a more detailed review of all filings notified in the sector. As evident from the CCI’s decisional practice in the pharmaceutical, agro-chemical and Industrial gas sectors, the CCI is increasingly examining transactions in sectors that are sensitive to the Indian political economy with greater scrutiny. Further, parties to competitively significant global transactions should factor in longer review timelines and the possibility of divestitures to attain the CCI’s approval, e.g. the Linde/Praxair merger which is still under review, has been filed three times with the CCI (the parties’ notification was once withdrawn and invalidated the next time).
V OUTLOOK & CONCLUSIONS
The CCI has been faced with complex transactions in the telecommunications and agrochemical sectors but has proved itself to be a proactive and important regulator despite being critically understaffed. The amendments to the Combination Regulations have been a significant and welcome development in the last year. These amendments will likely mean that the CCI will not review ‘no issues’ cases that were previously notifiable and will focus its attention on only those transactions that involve more in-depth competition law analysis. Also, transacting parties will be able to provide complete notifications to the CCI without the pressure of filing in 30 working days. With the introduction of the Insolvency and Bankruptcy Code, 2016 (“IBC”), the new legislation aimed at streamlining insolvency procedures, the CCI has had to deal with transactions executed pursuant to the IBC process which must adhere to accelerated completion timelines. To its credit, even in the absence of any formal obligation to do so, the CCI appears to have prioritized the review of such transactions. The CCI has taken steps towards adapting its processes to best practices and applying lessons learned in more mature merger control jurisdictions. Although the Indian merger control regime remains relatively new, the CCI’s evolution over the past year shows a propensity for continuous development, in keeping with an overall objective to facilitate the concerns of notifying parties while asserting its role in developing competition law jurisprudence.