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Part 10: Competition Compliance in India - trends


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This is part 10 of a ten part series - that was authored by AnantLaw and published by Lexology on 30 April 2020. All laws stated in this series were accurate on 24 February 2020.


 
 

Part10: Updates & Trends


Key developments of the past year

What were the key cases, decisions, judgments, policy and legislative developments of the past year in Competition Law?


Proposed Reforms
The Competition Law Review Committee (CLRC) was established by the government to review the Competition Act along with the rules and regulations framed thereunder.  The recommendations of the CLRC were captured in its report, which was submitted to the Ministry of Corporate Affairs on 26 July 2019. Several key proposals suggested by the CLRC Report included, inter alia, the constitution of a separate governing body, appeals from the order passed by the Competition Commission of India (CCI) to be heard by a dedicated bench formed under the Competition Act, insertion of provisions in relation to settlements and commitment to align the Indian competition law regime with the prevalent practices in jurisdictions such as the European Union. Apart from these, the CLRC report also recommended that the CCI should be mandated to issue guidance on the calculation and imposition of penalties under the Competition Act. The recommendations also include expanding definitions, such as ‘cartel’ to include buyers’ cartels, and expanding the cause of action under Section 53N of the Competition Act to file a compensation claim pursuant to the order of the Supreme Court.

A draft of the Competition (Amendment) Bill 2020 (the Competition Bill) was proposed on 12 February 2020 in furtherance of the recommendations of the CLRC report. The Competition Bill was released in the public domain on 20 February 2020 for public comments. Although the Competition Bill captures most of the CLRC’s recommendations, it still leaves out certain major items desired by stakeholders, such as the constitution of a specialised tribunal at the appellate stage, and adds certain items that go beyond the recommendations of the CLRC report; for instance, the CLRC recommended adding a combination threshold on the basis of transaction or deal value to capture combinations in the digital markets, which mostly escape notification under the traditional thresholds. However, instead of introducing a deal value threshold, the Competition Bill introduced a provision that empowers the central government, in consultation with the CCI, to formulate any criteria to make any transaction a notifiable combination. Although, it can be seen as an attempt to capture transactions in the digital markets, the scope however, is expanded beyond certainty. In this regard, several key features of the Competition Bill are as follows.


Buyers’ Cartels

The Competition Bill expands the definition of cartel to include buyers' cartels. This amendment will empower the CCI to inspect and investigate the conduct of enterprises, persons and associations that are collaborating on the demand side. The proposed amendment, however, is likely to also capture certain efficiency enhancing agreements, such as joint tendering and joint-procurement, which in past decisional practices of the CCI were held to be pro-competitive.


Widened scope of ‘enterprise’

The definition of enterprise has been broadened to include any entity that is engaged in economic activity. This proposed amendment is in line with the decisional practice of the CCI in various judgments, including the BCCI case and the recently decided Next Radio Limited and Ors v Prasar Bharti. The broadening of the definition of enterprise is likely to capture a larger number of activities that cause or are likely to cause an appreciable adverse effect on competition in the market. However, the scope, or for that reason the meaning, of ‘economic activity’ has remained unclear.


Expanded scope of horizontal agreements and vertical agreements

The scope of section 3(3) of the Competition Act has been proposed to be expanded to include any active role played in the furtherance of any agreement under it by the players that are not horizontally placed. Further, the scope of section 3(4) has also been widened to include any other agreement that may or may not be among enterprises or persons at different stages. The proposed amendment seems to be introduced to capture any and all agreements that were earlier considered to be outside the purview of sections 3(3) and 3(4) and were regulated by the CCI by invoking section 3(1).


Extension of protection afforded to the holders of intellectual property rights

The Competition Bill, in addition to section 3 of the Competition Act, confers the protection on holders of intellectual property rights, even against any alleged conduct under section 4 (abuse of dominance) of the Act. This proposed amendment, however, is likely to raise concerns where dominant enterprises are the holders of standard essential patents.


Amendment to merger control provisions

Major amendments have been proposed in the merger control regime, which, inter alia, include:


  • the empowerment of the central government in consultation with the CCI to prescribe any criteria, the fulfilment of which will be deemed to be a combination in terms of section 5 of the Competition Act and, hence, notifiable;

  • statutory recognition of a ‘green channel’ process, which was introduced on 15 August 2019 by an amendment to the Combination Regulations;

  • the widening of the definition of ‘control’ to include an ability to exercise material influence, in any manner, over the management or affairs and strategic commercial decisions. This is likely to have an impact on the existing definition of ‘group’;

  • insertion of a new provision 6(A), which dilutes the standstill obligation under section 6(2A) for public bids and hostile acquisitions; and

  • the shortening of the timeline for a combination coming into effect from 210 calendar days to 150 calendar days from the date of notice to the CCI.


Insertion of new provisions regarding settlements and commitments

This is in line with the practices followed in jurisdictions such as the European Union. The alleged parties will have the option to propose commitments and settlements, allowing the CCI to close the investigation. Orders passed by the CCI under these sections are made non-appealable. In addition, there remains a lack in clarity as to whether the right to claim compensation survives pursuant to a settlement.


Significant amendments to the Competition Act and rules, regulations made thereunder

The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations 2019, which came into effect on 15 August 2019, added a new Regulation 5(A) to the pre-existing Combination Regulations. Regulation 5(A), among other things, introduces a ‘green channel’ route that allows the combinations of certain types to pass through a route with lesser procedural requirements and restrictions. The combination – wherein the parties to the proposed combination (including their respective group entities or any entity in which they, directly or indirectly, hold shares or control) are not operating at the same or different levels of the production chain nor are engaged in any activity that is complementary to each other – can benefit from the ‘green channel’ route. In other words, parties to the combination that, after considering all plausible alternative relevant market definitions, do not have any horizontal, vertical or complementary overlaps can benefit from the ‘green channel’ route Further, notifying the CCI about a proposed combination has become an expensive affair. The cost of Form I and Form II has increased to 200,0000 rupees and 6.5 million rupees respectively.


The Competition Commission of India (General) Regulations 2009 (the General Regulations) have also gone through certain significant changes. The 2019 amendment to the General Regulations decreased the cost of filing information by a company whose turnover in the preceding year is up to 20 million rupees. It has also classified different classes of informants and accordingly amended the General Regulation to include non-governmental organisations, consumer associations or cooperative societies, and trusts.


 

Decisional trends


Procedural
The competition authorities also gave significant decisions which ushered clarity on certain procedural aspects concerning the Competition Act and the CCI itself. The Mahindra Judgment was passed by a division bench of the Delhi High Court, directing the CCI to ensure the presence and participation of a judicial member at all times while passing adjudicatory orders (especially final orders). The Mahindra Judgment also directed the central government to take expeditious steps to fill all then existing vacancies in the CCI. The Mahindra Judgment, however, slightly deviates from Brahm Dutt, which observed that a separate body with the presence of a man of law as a member is to be created for the adjudicatory functions performed by the CCI. Further, on 22 January 2020, the division bench of the Delhi High Court passed another landmark order concerning procedural delays by the CCI without providing justified reasoning. The division bench, while dismissing the application of condonation of delay and the appeal, held that the lackadaisical and casual approach adopted by the CCI in processing the case cannot not be justified. Further, the division bench also held that where the CCI has committed to produce all the documents (without setting a precedent), it is on the CCI to adhere to the same, and, thus, the High Court of Delhi found no case, even on merits.

Behavioural

The year 2019 was also significant in terms of behavioural orders passed by the CCI concerning technology driven, big data companies. The CCI directed an investigation into alleged anticompetitive and predatory conduct of Flipkart, which is owned by Amazon and Walmart. Among the allegations were (1) anticompetitive vertical agreements between Flipkart and Amazon with their respective preferred sellers, leading to foreclosure of the online marketplace for other non-preferred sellers, and (2) joint abuse of its dominance by offering deep pocket discounts, engaging in targeted advertisement and preferential treatment. The investigation proceeding directed by the CCI has been stayed by the Karnataka High Court.


In another case concerning technologically driven cab aggregators, the Supreme Court on 3 September 2019 dismissed an appeal filed by Uber against the order of the erstwhile Competition Appellate Tribunal (COMPAT) directing an investigation into the abusive conduct of Uber. The Supreme Court, while upholding the order passed by the COMPAT, directed the Director General to investigate, among other things, (1) whether in competition law economics Uber can be termed as a dominant player in the market for radio taxis in Delhi or in the National Capital Region; (2) whether the conduct of Uber (exclusivity arrangements with drivers and heavy incentives to the drivers by incurring loss) can fall under the purview of predatory pricing.


Combinations

In combination jurisprudence, the CCI highlighted that cooperation that confers exclusivity cannot be approved along with the combination and the same needs to be modified. In the then proposed acquisition of a minority stake of ANI Technologies Pvt Ltd (Ola) and Ola Electric Mobility Pvt Ltd (OEMPL) by Hyundai Motor Company (Hyundai) and Kia Motors Corporation (Kia), the CCI observed that the transaction involved certain strategic cooperation in relation to Ola’s fleet operation and OEMPL’s e-mobility business in India (eg, promotion of leasing Hyundai vehicles to Ola’s drivers). To address the possibility of Ola preferring drivers who own Kia or Hyundai vehicles on its platform, the parties offered certain voluntary modifications that primarily required that the strategic collaboration among the parties would be on a non-exclusive basis and that Ola would ensure that its taxi marketplace algorithm would not discriminate any drivers based on the brand of their vehicle. Accordingly, the combination was approved with modifications.

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