India: Competition Law (October 2016 - December 2016)

Competition Commission of India ("CCI") directs the DG to cause an investigation for the allegation of abuse of dominance against GAIL (India) Limited

An information was filed by one Rico Auto Industries Ltd., Omax Autos Ltd., and Rico Castings Ltd. ("Informants"), primarily engaged in the business of auto components manufacturing. It was alleged that GAIL (India) Ltd. ("GAIL"), had imposed unfair and discriminatory conditions under the Gas Sale Agreement ("GSA"), in contravention of the provisions of Section 4 of the Competition Act, 2002 (Abuse of Dominant Position).

The CCI inter alia observed that the mysterious silence by the opposite party in not replying to the Informants for reduced contracted quantity, not replying to the proposal of the Informants for amicable settlement of the alleged dispute in spite of there being a provision of the same within the GSA and not divulging the reasons for suspension of gas, together appear to be pima facie unfair. The CCI also noted that suspension of gas supplies without prior notice, denial of dispute resolution when an informant contests the legality of take or pay liability, also suggest pima facie that GAIL has abused its dominant position in the relevant market.

Consequently, the CCI vide its order dated October 03, 2016 directed the Director General ("DG") under the provisions of Section 26(1) of the Act, to cause investigation into the alleged contravention.

CCI directs DG to investigate into unfair price discrimination by Association of Man-made Fibre Industry of India

An information was filed by a non-profit organisation ("Informant") against Association of Man-made Fibre Industry of India and several others inter alia alleging for the abuse of dominance with regard to practice of unfair price discrimination and following non-transparent practice by refusing to disclose discount policies to the customers, thereby contravening the provisions of Section 4 of the Act (Abuse of Dominant Position).

The CCI on perusal of the information filed by the Informant inter alia observed that the opposite party, in order to protect its business interests, alogwith its entire value chain in the domestic market, had adopted discriminatory pricing policy by segmenting the buyers in the VSF market, which was unfair and discriminatory in terms of Section 4(2)(a)(ii) of the Act.

Based on the above discussion, the CCI vide its order dated November 10, 2016 directed the DG to cause investigation into the matter and file a report of the same.

CCI Closes the Case against Indian Oil Corp. Ltd. for alleged abuse of dominance

An information was filed by Shri Prem Lal and Shri Amrish ("Informants") against Indian Oil Corporation and others inter alia alleging that arbitrarily transferring their LPG consumer numbers from one opposite party to the other without their consent amounted to the abuse of dominance, which is in contravention of the provisions of Section 4 of the Act (Abuse of Dominant Position).

The CCI vide its order dated November 10, 2016 identified the relevant market as the market for the provision of services for distribution of LPG cylinders in Badaun district of UP, and concluded that the market share of Indian Oil Corporation Ltd. was very low to be a dominant player in the relevant market and hence no case can be made out for abuse of dominant position.

CCI closes case against M/S Super Cassettes Industries Pvt. Ltd on Account of no Competition issue

An information was filed by one Mahendra Kumar Rathore ("Informant"), sole proprietor of "Baran Cable Network (BCN)" and authorised to run cable signals in the town of Baran, Rajasthan. It was alleged that M/S Super Cassettes Industries Pvt. Ltd. had imposed a unilateral MOU on the informant as a pressure tactic to enter into an understanding with it to broadcast its copyrighted work, which the informant does not require.

The CCI on perusal of the information filed by the informant inter alia observed that the MOU was primarily a copyright infringement notice, which was issued against violation of copyright and for protecting the Intellectual Property Rights of the copyright holder. The CCI concluded vide its order dated November 10, 2016 that the allegations raised by the Informant did not raise any competition concerns and the matter was dismissed under Section 26(2) of the Act.

CCI closes case against DLF Universal Ltd. on grounds of Lack of Retrospective Effect

An information was filed by Shri Abdul Basit and Shri Abdul Azim ("Informants") against DLF Universal Ltd. inter alia alleging for the abuse of dominance by DLF with regard to refusal to give possession of the apartments to the Informants and forfeiture of the 75% of the entire sale consideration.

The CCI vide its order dated December 05, 2016 observed that the apartments were allotted to the Informants, possession was offered subject to payment of outstanding dues, completion of paper work, cancelation of allotment and forfeiture of amount related to a time when either the Act itself was not enacted or Section 4 of the Act was not in force. Thus, the CCI dismissed the matter on the grounds that the alleged abuses were made prior to enforcement of Section 4 of the Act.

COMPAT affirmed the CCI order against the car manufacturers for anti-competitive conduct in the spare parts market

The Competition Appellate Tribunal ("COMPAT") vide order dated December 09, 2016 found that Ford India Pvt. Ltd ("Ford"), Nissan Motor India Pvt. Ltd ("Nissan") and Toyota Kirloskar Motor Pvt. Ltd ("Toyota") are guilty of anti-competitive conduct in the spare parts market, ruling that there could not be any restrictions on the supply of spare parts.

COMPAT upheld a 2014 order of the Competition Commission of India ("CCI") pertaining to 14 car makers. The penalty imposed by COMPAT differs from that levied by CCI. The COMPAT imposed a 2% penalty on the companies' annual average turnover from spare parts for the three financial years proceeding the year of inquiry into the issue of their anti-competitive activity.

In its order, the COMPAT said that the three companies—Ford, Nissan and Toyota—denied independent workshops access to spare parts. The companies also entered into agreements which led to restrictions being placed on third-party workshops.

COMPAT directed the companies to remove all restrictions on original equipment suppliers selling spare parts in the aftermarket. The companies are also required to open additional distribution channels for spare parts. These changes have to be effected within a year. Further the COMPAT directed the companies to make information available regarding spare parts manufactured, their maximum retail price, and arrangements for their availability over the counter, and details of matching quality alternatives and maintenance costs.

COMPAT partially upheld CCI order in the Public Sector Insurance Companies matter

The Competition Appellate Tribunal ("COMPAT") vide order dated December 09, 2016 found that National Insurance, New India Assurance, Oriental Insurance and United India Insurance are guilty of cartelization and bid rigging by the Kerala government for selecting insurance service provider for Rashtriya Swasthya Bima Yojna ("RSBY") for 2010-11, 2011-12 and 2012-13.

COMPAT upheld a 2014 order of the Competition Commission of India ("CCI") pertaining to 4 national Insurance companies. The penalty imposed by COMPAT differs from that levied by CCI. COMPAT reduced INR 6.71 billion penalty slapped by the CCI on four public sector insurance companies to just INR 20 million.

The COMPAT held that "there is no hesitation in confirming that bid rigging constituting contravention of Section 3 of the Act did take place, and on the facts of the case and the legal position, we agree that the Appellants should suffer the penal consequences."

However, the COMPAT questioned the interpretation of the term "turnover" used to calculate the 2 per cent penalty imposed by the CCI and noted that "penalty has to be calculated with reference to the gross premium received by UIICL as insurance provider under RSBY scheme and penalty for each of the Appellants will be a proportion of their share in such premium."

COMPAT set-aside penalty imposed on Indian Jute Mills Association (IJMA) and Gunny Trade Association (GTA) by CCI on account of cartelizing to hike the price of jute bag

The Competition Appellate Tribunal ("COMPAT") by its order dated July 01, 2016 has over-ruled the above stated order of CCI wherein the Indian Jute Mils Association (IJMA) and Gunny Trade Association (GTA) were penalized for alleged cartelization in pricing of jute bags. It was alleged that the jute manufacturers have acquired a monopoly position as a result of the circular of the Government under the Jute Price Maintenance Act, 1987 that 100% sugar to be produced by the sugar factories is to be mandatorily packaged in the jute bags.

It was further alleged that IJMA and GTA took advantage of their monopoly, the jute mills have unreasonably hiked the prices of jute bags from INR 53.50/bag in April 2010 to INR 64.50/bag in February 2011. It was alleged that such a drastic increase in the sale price of the jute packaging material was possible only because of an agreement/understanding among all the members of the IJMA and GTA, who were quite conscious of the fact that they enjoy complete monopoly.

The COMPAT noted that "A careful scrutiny of the record shows that neither the informants produced nor the DG could collect any substantive evidence to prove that there was an agreement between GTA and IJMA about fixation of price" further the COMPAT observed that the case for proving a cartel offence essentially boils down to production of viable evidences (direct or circumstantial) which should be substantial and impactful so that an act of collusion can be established in terms of Section 3(3) of the Competition Act. Robust and modern techniques for investigations (such as e-discovery examination etc) should be developed by the DG for establishing the cartel offences.

COMPAT reverses the order given by the CCI by ordering investigation on ground of Lack of Proper Finding

The Competition Appellate Tribunal ("COMPAT"), vide its order dated November 09, 2016 reversed the decision given by the CCI on June 08, 2016 by ordering the Director General ("DG") to investigate into the allegations abuse of dominance and role of private standards in foreclosing competition against Digital Cinema Initiatives, Walt Disney Company and other producers of Hollywood films.

The information was filed by M/s K. Sera Sera Digital Cinema Pvt. Ltd., a company engaged in the business of digital cinema services involving digital projection and screening of films in India. COMPAT expressed complete disagreement with the CCI's decision to not direct an investigation into the allegation of 80% of Hollywood film producers mandating screening of their films only by the use of a particular technology, which drove out several exhibitors who want to use a different technology. While COMPAT agreed with the CCI's ruling of private standards not necessarily foreclosing competition, however, it disagreed with the pre-liberalization stance taken by the CCI in justifying this alleged anti-competitive act.

COMPAT observed that the allegations need to be examined in a broader context because it would help in validating claims and counter claims. In order to be sure of what is reasonable and to what extent restrictions can be imposed is a matter of appreciation and required fact finding. COMPAT also observed that it is imperative to adopt the approach of determining the relevant market in order to examine the issue of dominance effectively before dismissing the ground, however, this approach was not adopted by the CCI in this particular case.

COMPAT Remanded the Uber Taxi matter to CCI with a direction to DG to cause an investigation

The Competition Appellate Tribunal ("COMPAT"), vide order dated December 07, 2016 directed the Director General ("DG") to conduct an investigation into the allegations contained in the Information filed by M/s. Meru Travels Solutions Private Limited ("Meru") against M/s. Uber India Systems Private Limited ("UBER") for abusing its dominant position in radio taxi market by way of predatory pricing in Delhi-NCR.

COMPACT has heard both the parties had has referred to all the facts and allegations being provided. As per them Dominance has to be examined on the benchmark of Section 4 read with Section 19(4) in order to form a prima facie view in accordance with Section 26(1) of the Act. In order to justify the Commission's opinion, the order has considered transport as a State subject and has considered the taxi market as Delhi (Not NCR).

COMPACT has given a deadline of 60 days for investigations which can be extended with due reason and will give its judgment after giving opportunity to the parties to file their replies/objections and affording them opportunity of personal hearing.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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