The nature of regulations, enforcement authorities and their ability to enforce regulations has been known to have a profound effect on innovation.

As the internet transforms industrial processes, regulators across sectors and geographies are trying to achieve the right balance on regulating innovation – enough so that it is under effective control yet not stifled from growing.

In a recent policy brief on behalf of the Penn Wharton Public Policy Initiative, Kevin Werbach, a professor at the Wharton School of the University of Pennsylvania, advises policy makers and regulators that the next stage of digital advancement will lead to a phenomenon that he calls “Internet of the World” – an intersection of the on-demand/sharing economy, the Internet of Things and Big Data. He suggests that this stage would represent “the final destruction of artificial divisions between real and virtual”.

As we approach this stage at a rapid pace, law-making and regulation needs to evolve accordingly. Laws need to reflect the rapidly blurring boundaries between the physical and digital so that regulators are suitably equipped to accomplish their tasks across all mediums and sectors.

Continue Reading Emerging Trends in Market Power: An Update

Non-compete clauses form an important part of various corporate transactions. They provide purchasers some protection against competition from sellers so that they may benefit by obtaining the full value of the transferred assets (both tangible and intangible). Such non-compete clauses can be necessary for purchasers to gain the loyalty of customers and to fully utilise the know-how acquired. In the case of Joint Ventures (JV), such clauses can be necessary to ensure that the JV partners are committed to the JV and do not, independently, end up competing with it.

However, these clauses, as they are essentially agreements not to compete, can give rise to competition law concerns and lead to scrutiny by the Competition Commission of India (CCI).

Continue Reading Non-Compete Clauses: CCI Issues Guidance Note

Clear skies emerge as competition authorities across jurisdictions become more sure-footed in dealing with the ever growing (new) digital economy.

The Competition Commission of India’s (CCI) confidence in dealing with apps and technologies is reflected in its relevant market[1] determination in cases concerning instant messaging apps.

On 1 June, 2017, the CCI passed an order[2] under Section 26(2) of the Competition Act, 2002 (Competition Act), holding that the case did not warrant an inquiry into alleged abuse of dominant position by WhatsApp Inc (WhatsApp).

Continue Reading Where Do They Belong? Relevant Market Determination for Instant Communication Apps

On 14 June 2017, the Competition Commission of India (CCI) imposed a penalty of INR 87 crore (approx. USD 13.54 million) on Hyundai Motor India Limited (HMIL), which is engaged in the sale and distribution of Hyundai cars and its parts in India. This was for engaging in the practices of resale price maintenance (RPM) and tying in, in contravention of the provisions of Sections 3(4)(e) and 3(4)(a) read with Section 3(1) of the Competition Act, 2002 (Act).

Continue Reading CCI’S First Substantive Order on Resale Price Maintenance

On 8 May, 2017, in a landmark judgment, the Hon’ble Supreme Court (bench consisting of Hon’ble Mr. Justice A.K. Sikri and Hon’ble Mr. Justice N.V. Ramana) upheld the principle of “relevant turnover” for determination of penalties in competition law contraventions; and settled a critical issue in India’s antitrust jurisprudence, which was heavily debated amongst all stakeholders for over five years.

Background

The above ruling arises out of a proceeding involving an alleged contravention of Section 3(3) of the Competition Act, 2002 (Competition Act) in the public procurement of Aluminium Phosphide (ALP) Tablets by the Food Corporation of India (FCI). The Competition Commission of India (CCI) found a violation of Section 3(3) of the Competition Act and imposed a penalty at the rate of 9% of the total turnover of the concerned ALP manufacturers – namely, Excel Corp Care Limited (Excel), United Phosphorus Limited (UPL) and Sandhya Organic Chemicals Private Limited (Sandhya).

Continue Reading Supreme Court Limits CCI’s Penalty Powers: “Relevant Turnover” Upheld

In a judgment that has far reaching consequences, the Delhi High Court (Delhi HC) has adjudicated upon the constitutional validity of various regulations formulated under the Competition Act, 2002 (Act) addressing confidentiality of sensitive information that is submitted to the Competition Commission of India (CCI).[i]

The petitioners in the Writ Petitions are opposite parties in a suo moto investigation by the CCI for alleged participation in a bid-rigging cartel in the conveyor belt sector in India. The CCI found prima facie evidence of violation of the provisions of the Act and directed its investigative arm, i.e., the office of the Director General (DG), to commence an investigation against the petitioners, amongst others.

In the course of the investigation, the petitioners filed an application before the CCI for inspecting the information relied upon by the CCI to arrive at its prima facie view and procure copies under Regulation 37 of the Competition Commission of India (General) Regulations, 2009 (General Regulations). The above application by the petitioners was denied by the CCI on the grounds that the information/documents requested by the petitioners formed part of the confidential records of the CCI and accordingly could not be disclosed to the petitioners at this stage of the investigation.

Continue Reading Delhi High Court Upholds Constitutionality of Confidentiality Regulations

This article was first published in The Practical Lawyer

Within a short span of about six years, the Competition Commission of India (Commission) has steadily emerged as an effective merger control regulator. Since 2011, the Commission has approved over 430 transactions in diverse sectors. An overwhelming majority of the approvals have been unconditional in nature; only three transactions have been examined and cleared post a detailed Phase II investigation; and not a single one has been blocked.

Recently, the Commission approved a transaction with structural remedies in Phase I (prima facie investigation stage) itself. While conditionally approving the proposed transaction between Abbott Laboratories and St. Jude Medical, Inc. in the medical devices sector, the Commission noted that the market for small-hole Vascular Closure Devices (VCDs) was highly concentrated, with the combined market share of the parties being in the range of 90-100 percent and the market share of Cardinal Health, the only other competitor, being in the range of 0-5 percent. The Commission accepted a voluntary divestiture offered by Abbott and St. Jude Medical of the entire small hole VCD segment of St. Jude Medical on a worldwide basis to a third party, observing that such modification would eliminate the overlap in the Indian market and enable fair competition.

The Commission’s approach deserves consideration in light of the fact that this case involves a voluntary divestment of assets in Phase I against the ordinary trend of Phase II divestments. Prior to this, the Commission had accepted voluntary modifications on several occasions (such as in Orchid/Hospira, Mylan/Agila and Torrent/Elder) where it conditionally approved those transactions, subject to modifications which were predominantly in the scope of non-compete obligations. A shift in the Commission’s approach from such behavioural to structural modifications in Phase I was first witnessed in the case involving ZF Friedrichshafen (ZF) and TRW Automotive (TRW), where the Commission accepted ZF’s commitment to exit (through divestment of shares) from a joint venture operating in steering system products thereby significantly diluting the horizontal overlap between ZF and TRW. A key difference between the ZF and Abbott cases is that while ZF had already decided to terminate the joint venture prior to notifying the Commission, in the Abbott case, the parties appear to have proposed the divestiture post the Commission identifying concerns over the significant overlap in the relevant market.

Continue Reading CCI’s Roulette with Remedies

The Indian merger control regime is a suspensory one which means that, any acquisition, merger or amalgamation that is notifiable to the Competition Commission of India (CCI) may be consummated only after the CCI grants approval, or until a certain waiting period has lapsed.

Section 6(2) of the Competition Act (Act), provides that when an enterprise proposes to enter into a combination, it is required to give a notice to the CCI, disclosing the details of the proposed combination, within 30 days of executing the ‘trigger document’. Further, Section 6(2A) of the Act provides that no combination shall come into effect until 210 days have passed from the day on which the notice has been given or unless the CCI passes orders under Section 31 of the Act, whichever is earlier. In sum, the suspensory regime is an absolute one. Combinations cannot be consummated, in part or full, before either the CCI grants approval or until 210 days post the notification. Continue Reading Part Consummation of M&A Transactions: The Rhetoric of Gun Jumping

In August of 2016, the Competition Commission of India (CCI) passed an order in the case of Builder’s Association of India (2016 Order) predominantly re-affirming its earlier order of June 2012 in the same matter (2012 Order).

By way of a brief background, the case originated from a complaint filed in 2010 by the Builders Association of India (BAI) against the Cement Manufacturers’ Association (CMA) and 11 Indian cement manufacturing companies[1] (collectively, the Opposite Parties). In June 2012, based on an inquiry conducted by it, the CCI imposed a penalty of INR 63.17 billion (approximately USD 933.68 million[2]) on the Opposite Parties. This penalty was imposed for using the platform provided by the CMA to fix cement prices as well as limit and control production and supply of cement in the market, thereby contravening the relevant provisions the Competition Act, 2002 (Act). This 2012 Order was challenged before the Competition Appellate Tribunal (COMPAT), primarily on grounds of due process and violations of principles of natural justice and was set aside on these grounds. The matter was remanded to the CCI for fresh adjudication. Consequently, the CCI re-heard the Opposite Parties and passed the 2016 Order. Continue Reading The Curious Case of the Cement Cartel

The Office of the Director General (DG), being the investigative arm of the Competition Commission of India (CCI), has conducted two search and seizure operations thus far. The first of these, more popularly known as dawn raids, was on the offices of JCB India Limited (JCB India) on 22 September 2014. More recently, the DG carried out a dawn raid on the premises of Eveready Industries Limited (Eveready), a leading dry cell manufacturer.

Dawn raids such as these signify the resolve of the CCI to actively conduct intrusive operations to enforce the provisions of the Competition Act, 2002 (Competition Act). In light of such a pro-active approach, and given that the DG enjoys wide (and mostly untested) powers whilst conducting such operations, companies in India must be aware of what they should do in the course of a dawn raid to contain the consequences and fallout. Continue Reading CCI Dawn Raids – How to Act and Contain Operations