This piece was first published in the August 2017 issue of The Practical Lawyer [(2017) PL (Comp. L) August 80]


Price fixing arrangements strike at the very heart of antitrust violations since they go against the accepted norm of price being determined by market forces. Such arrangements raise concerns in both horizontal and vertical markets. Under the scheme of the Competition Act, 2002 (Act), while horizontal pricing agreements (between competitors) are presumed to cause an appreciable adverse effect on competition (AAEC), there is no such presumption in the case of vertical agreements (between entities operating at different levels of the value chain), where the “rule of reason” approach is applied.

Interestingly, the treatment of vertical agreements and in particular resale price maintenance (RPM)[i], has been long debated in many jurisdictions. Initially, antitrust authorities in mature jurisdictions were in agreement that RPM, in principle, was a per se violation and as such, not subject to any justification. However, acknowledging the need for relaxation, the US Supreme Court and the European Commission refrained from adopting a strict per se presumptive approach in cases of RPM to apply the “rule of reason” standard. On the other hand, national competition authorities in the European Union continue to take a hostile approach towards RPM without considering any pro-competitive effects that may arise. Moreover, in the Indian context, while the CCI had reiterated the statutory construct in dealing with RPM, by stating that AAEC needs to be determined on basis of the factors provided under Section 19(3) of the Act, until recently the treatment of RPM (including its scope and standard of proof) lacked clarity.

Continue Reading Resale Price Maintenance : Has CCI Upped the Ante?

On 31 October 2017, the Competition Commission of India (CCI) passed cease and desist orders against certain national and regional trade associations of film artists and producers for engaging in practices of controlling/limiting the supply of services and market sharing. Such acts have been held to be in contravention of Sections 3(3)(b) and 3(3)(c) read with Section 3(1) of the Competition Act, 2002 (Competition Act).

Background

Mr. Vipul Shah (Informant), a producer of films, filed an information against Artists’ Associations, comprising the All India Film Employees Confederation, Federation of Western India Cine Employees (FWICE) and its affiliated associations[1], as well as Producers’ Associations, comprising the Indian Motion Picture Producers Association, the Film and Television Producers Guild of India, and the Indian Film and Television Producers Council (Artists’ Associations and Producers’ Associations are collectively referred to as the Opposite Parties). The information alleged a contravention of provisions of the Competition Act on the grounds that:

Continue Reading CCI Reprimands Film Industry Trade Unions for Engaging in Anti-Competitive Behaviour

The Competition Commission of India (CCI) has imposed a cumulative penalty of INR 120 million (approx. USD 1.87 million) on ten coal and sand transporters (Opposite Parties or OPs) for bid-rigging. The OPs were found to have rigged the bids submitted in relation to four tenders for coal and sand transportation floated by Western Coalfields Limited (Informant), a subsidiary of the state-owned monopolist, Coal India Limited.[1]

The information filed with the CCI alleged contravention of the provisions of the Competition Act, 2002 (Competition Act) on the ground that the OPs had quoted identical prices, which were suspiciously higher than the rates quoted for the same jobs in the recent past.

Continue Reading Coal Transporters Penalised for Bid-Rigging

The Ministry of Corporate Affairs, Government of India (MCA), has through a notification published on August 30th, 2017, exempt reconstitution, transfer of whole or any part thereof and amalgamation of nationalised banks under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, from merger control scrutiny for a period of 10 years (Notification).

Continue Reading Nationalized Banks Exempt from Merger Control Scrutiny

The Competition Commission of India (Lesser Penalty) Regulations, 2009 (Leniency Regulations) have been amended by a notification issued on 22 August 2017 (Notification). The Leniency Regulations supplement Section 46 of the Competition Act, 2002, which sets out the statutory provision for grant of leniency in matters involving cartels and enables parties to ‘blow the whistle’ on cartel arrangements and avail up to 100% reduction in penalties.

The amendments have been introduced after nearly seven years since the introduction of the leniency regime in India, addressing substantive issues faced by the industry. The formal amendments are largely in line with the draft amendments issued in March 2017 wherein the Competition Commission of India (CCI) invited comments from various stakeholders.

This update briefly captures the key amendments and the potential implications on the effectiveness of the leniency programme in India.

Continue Reading Leniency Regulations Amended

The latest addition to the string of changes introduced by the Ministry of Corporate Affairs (MCA) this year is an exemption to Regional Rural Banks (RRBs) from the applicability of the merger control regime. The MCA introduced a notification on August 10, 2017 (Notification), which stipulates that Sections 5 and 6 of the Competition Act, 2002 (Act), which relate to regulation of combinations, will not apply to amalgamations of RRBs for which the Central Government has issued a notification under Section 23A(1) of the Regional Rural Banks Act, 1976 (RRB Act). This exemption is applicable for a period of five years, i.e., until August 9, 2022.

The RRB Act was enacted to provide for the incorporation, regulation and winding up of RRBs in order to develop the rural economy and particularly enhance the credit facilities available to marginal farmers, agricultural labourers, artisans and small entrepreneurs. Under section 3(1) of the RRB Act, the Central Government can establish a RRB in any state or union territory, upon a request being made by a bank that proposes to sponsor the RRB.

Continue Reading MCA’s Merger Control Exemption for Regional Rural Banks

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

This article was first published in The Practical Lawyer

The Competition Act, 2002 (the Act) was brought into force inter alia with the objective of curbing anti-competitive behaviour which causes appreciable adverse effect on competition in the Indian market, to ensure a fair competitive environment.[1] Although one does not find any mention of consumer welfare in the Statement of Objects and Reasons of the Act, the preface to the Act unequivocally lays down its spirit by providing that it intends to promote and sustain competition in the markets, to protect the interest of consumers and to ensure freedom of trade carried on by other participants in the market

In furtherance of this objective, the Act empowers the Competition Commission of India (CCI) with multifarious penal powers to ensure compliance with the legal regime. However, such provisions are predominantly directed towards penalising the violators rather than compensating the parties affected by the anti-competitive behaviour of one or more market players. To ensure that the victims of anti-competitive behaviour receive their dues, the Act also lays down a mechanism for such parties to seek compensation for the losses that they may have suffered due to the anti-competitive behaviour.

The private damages regime under the Indian competition law, which came into force in 2009, lays down the legislative foundation for consumers and competitors to sue for compensation in relation to the damages suffered as a result of the anti-competitive behaviour. Considering that the Competition Law is still in nascent stages in India, there has been no ruling pronounced in this space until date. While the case involving the National Stock Exchange (NSE) and the MCX Stock Exchange (MCX- SX)[2] remains the sole case to utilise the private enforcement provisions of the Act, the matter remains sub judice. Curiously, in the celebrated case involving DLF[3], while private damages litigation was drawn up against DLF, it was consequently withdrawn.

Continue Reading Private Enforcement under Indian Competition Law – A Roadmap

The enforcement of any new law can throw many issues. These become especially prominent in the case of a law that is brought into force in phases – i.e. different provisions are made operational at different times.

The Competition Act, 2002 (Competition Act) is one such legislation. Though the statute was passed in 2003, its phase-wise notification extended up till 2011. More importantly, the sections/ provisions relating to anti-competitive agreements were notified[1] to come into force from 20 May 2009. The application of a provision/ section after an event is one such prickly issue.

The Supreme Court of India (SC) has examined the issue in the context of the Competition Act in the recent decision of Excel Crop Care Limited v Competition Commission of India & Anr[2].

Continue Reading An Antitrust Time Machine: Application of Competition Act to Pre-Enactment Conduct

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