Majority of last year throughout the world was spent coping, dealing and reacting to situations created by COVID-19 pandemic. The much-coveted GDP growth rate of the Indian economy showed a southward movement; that is, from 4.04% in 2019 to -7.96% in 2020-2021. One would like to associate the Competition Commission of India's (CCI) lack of imposition of monetary penalties in several cases during this time period as being linked to the grim economic conditions. CCI charged with imposing excessive penalties; chose to pass 'cease and desist orders instead, in several cartel cases.
Several news agencies (digital as well as print) reported Covid-19 pandemic causing hurdles in, inter alia, the supply chain in respect of certain product groups such as pharmaceuticals, medical devices and/or essential goods/services, which necessitated a certain degree of coordination (as to allocation of geographic areas, distribution channels etc.) between players existing in these markets.
In this regard, some foreign competition regulators had issued exemption parameters to ensure inter alia a fair distribution of scarce products, continuance of essential services etc. There were no such reported/ notified measures that CCI undertook or exemption it granted in view of the pandemic, in respect of any coordinated efforts to overcome the hurdles posed by the pandemic.
Be the above as it may, one must take note that as per CCI's prevailing practice CCI does not release prima facie orders in respect of cartel cases (on its website) until after the final decision; thereby making it difficult to gauge if any measures or exemption were indeed undertaken/granted by CCI (including initiation of fresh investigations) in the view of the pandemic, in respect of any coordinated efforts to overcome the hurdles posed by the pandemic.
The pandemic also resulted in most courts including the constitutional courts (including the Supreme Court of India and various High Courts) in India transitioning to 'online mode of hearing' cases. 'Regular hearings' of jurisprudential value in the antitrust sphere were deferred; therefore, development of jurisprudence by the constitutional courts in the antitrust sphere has been relatively slow in the preceding year. The pandemic necessitated that the hearings before the competition regulator i.e. CCI be conducted by way of video-conferencing. CCI issued standard operating procedures for such hearings by way of video conferencing; which required strict adherence to the in-camera nature of proceedings. Soon thereafter, the office of the Director General, which initially seemed reluctant to record statements of the concerned parties by way of video conferences, also transitioned to conducting proceedings by way of online video conferences.
As the Indian economy seeks to recover from the ill-effects of the pandemic, the consumer digital economy pegged at USD 85-90 billion in 2020 is estimated to continually grow over the course of this decade. It is only natural that the advent and growth of digital markets pose antitrust challenges. In this sphere, the decisions passed by CCI last year reflect its intention of closely regulating and investigating into conduct of technological companies in these digital markets.
The recent trends and developments are divided into 3 parts; first, dealing with procedural aspects of antitrust law; second, dealing with substantive issues which were adjudicated upon by the judicial fora in the previous year; and third, dealing with other policy and legislative affairs.
PART-I - TRENDS AND DEVELOPMENTS IN PROCEDURAL MATTERS:
The concept of Locus Standi: Correcting the Anomaly
The decisional practice by CCI was to keep the locus/ credentials of the informant as subservient to the allegations made in the information. CCI in an earlier case in 2019 (In re Madhya Pradesh Chemists and Distributors Federation) held that informant is a mere information provider and its credentials are insignificant. This was reaffirmed once again by CCI in Matrix Info Systems Private Limited v. Intel Corporation, wherein it was observed that the antecedents of the informant have no bearing on the proceedings before CCI owing to the in rem (and not in personam) nature of such cases.
However, in May, 2020, National Company Law Appellate Tribunal's (hereinafter referred to as the 'NCLAT') decision in Samir Agarwal's case held that only a person who has suffered invasion of legal rights as consumer or beneficiary of healthy practices was permitted to approach CCI. In an appeal against the aforesaid decision, the Supreme Court of India in December, 2020 held that the Competition Act, empowers CCI to act in rem, in public interest and therefore, any person may approach CCI.
Trends in Grant of Interim Relief:
It is uncommon for CCI to pass interim orders to restrain anti-competitive practices during the pendency of proceedings before it. The power to issue interim order have been resorted to by CCI only in a handful of cases. In 2010, the Supreme Court in the case of CCI v. Steel Authority of India, had stated that the power to issue interim orders must be exercised sparingly and under compelling and exceptional circumstances after recording reasons which must be of 'higher degree' than required for formation of prima facie opinion. The principles laid down by the Supreme Court were reiterated by CCI in 2018 in Indian National Shipowners' Association v. Oil and Natural Gas Corporation Limited.
Continuing this trend, CCI in March, 2021 passed an 'interim order' in the case of Federation of Hotel & Restaurant Associations of India (FHRAI) vs. MakeMyTrip India Pvt. Ltd. (MMT) & Others, wherein CCI emphasised the principles laid down earlier by the Supreme Court. In the aforementioned case, it was alleged that a digital platform (i.e. MakeMyTrip, which has been alleged to be a dominant entity in the market for online intermediation services for booking of hotels) delisted certain hotel chains like Treebo and FabHotels, from its website in pursuance to an agreement with OYO Hotels. CCI passed interim order directing FabHotels and Treebo to be listed on Makemytrip's online portal during the pendency of proceedings before CCI. However, in June, 2021 the Gujarat High Court set aside CCI's interim order on the ground that OYO was not given opportunity of being heard by CCI when the latter passed the interim order.
Notwithstanding the Gujarat High Court's intervention, the antitrust jurisprudence in India reflects a consistent trend with respect to adjudication of applications seeking grant of interim orders – where CCI first undertakes the assessment of likely harm that has been caused or can be caused to competition in the market if the impugned act/conduct is not restrained; and resorts to grant of interim relief only in exceptional cases where there exists every likelihood of suffering irreparable damage, or a definite apprehension of causing adverse effect on competition in the market.
The issue of cross-examination:
Another procedural issue that parties have faced whilst dealing with the antitrust regulator relate to grant of opportunity of cross-examination. The cross-examination of witnesses, under the Competition Act, is still a matter of concern and litigation before the courts in India. The erstwhile Competition Appellate Tribunal (COMPAT and now NCLAT) in several orders has categorically stated that the cross-examination cannot be refused by CCI and should be granted, when sought by the parties. It was also held that purpose of cross-examination is to bring-out the truth. The said understanding of was also affirmed by the High Court of Delhi in the case of Cadila Healthcare Ltd. & Ors v. CCI. It is pertinent to mention that Supreme Court of India in CCI v Steel Authority of India [SAIL] has held that CCI is bound by the orders of the Appellate Tribunal i.e. NCLAT/ COMPAT. Accordingly, CCI is bound to grant cross-examination, when requested by the opposite parties.
In the recent past, it has been witnessed as and when the cross-examination is being sought by the opposite parties, CCI has taken a stand not to grant such cross examination by stating that all such statements will not be relied upon by CCI during the course of proceedings/ hearings (even if the same were part of the investigation report prepared by the Director General). CCI has gone to an extent to suggest that the relevant portions, where the Director General has relied upon the statements of witnesses (against whom the cross-examination has been sought) will be expunged from the investigation report. This, however, means that in many cases the opposite parties will not be able bring-out the truth and showcase the nature of witnesses so examined and the evidence so collected by the Director General. Also, it raises questions on the effectiveness of the investigation by the Director General, when the witnesses as examined and relied upon by the Director General are not taken into consideration by CCI and also such statements expunged from the investigation report.
PART – II - DEVELOPMENTS IN SUBSTANTIVE ANTITRUST LAW
Emerging Trends in the Area of Data Privacy vis-à-vis Antitrust Law:
There are several cases alleging 'dominant' enterprises' control over sensitive data belonging to consumers which is capable of granting them an edge over their competitors whilst, at the same time, give rise to privacy issues. The case against WhatsApp in 2017 wherein it was alleged that 'WhatsApp' was compelling its users to share data with 'Facebook' – is one such case. CCI dismissed the information received then on grounds that consumers could 'opt out' of sharing information with 'Facebook'. CCI was also of the view that data privacy concerns which relate to breach of the Information Technology Act, 2000 are beyond the sphere of CCI.
However, in March 2021, CCI took suo-moto cognizance of WhatsApp 'Updated Privacy Policy' on grounds that data collection and sharing by dominant players give rise to competition concerns thereby necessitating an investigation in the matter.
The difference in CCI's approach adopted in March 2021 could arguably be traced to the 'Market Study on E-Commerce in India' conducted by CCI in January, 2020 which observed that enterprises should set out a clear and transparent policy on data that is collected on the platform, the use of such data by the platform and also the potential and actual sharing of such data with third parties or related entities. This was followed by 'Market Study on the Telecom Sector in India' in January, 2021 where CCI observed that abuse of dominance can result in reduction of privacy protection and therefore, fall within the ambit of antitrust law.
Judicial Boundaries & Overlap: CCI and Sectoral Regulators:
The issues pertaining to jurisdictional overlap with 'sectoral regulators' were once against brought to the forefront in cases relating to entities which are regulated by Securities and Exchange Board of India (SEBI).
Last year in 2020, CCI proceeded with respect to alleged collusive bid rigging notwithstanding the fact that the sectoral regulator i.e. SEBI categorically objected to CCI exercising jurisdiction. SEBI by way of its comment appointed itself as the appropriate regulatory authority to examine the allegations in respect of credit rating agencies and take appropriate action, if any, required, even in cases of unfair competition (In Re: Brickwork Ratings India Pvt. Ltd. and CRISIL Ltd. and Others, December, 2020).
Subsequently, in June 2021 in a case alleging abuse of dominance in respect of the National Stock Exchange (NSE) of India which is also regulated by SEBI, the competition regulator i.e. CCI proceeded with the matter even though the appeal was pending before the Securities Appellate Tribunal (SEBI's appellate authority).
Even in WhatsApp's case, contentions that subject of the privacy policy update was within the field of the information technology law (and not competition law) and CCI ought not to exercise jurisdiction as issues were pending before Courts and various fora, were rejected by CCI and affirmed by the High Court of Delhi.
Therefore, in light of these recent decision including in NSE's case, the trend seems to be moving towards CCI performing its adjudicatory and inquisitorial functions from the competition perspective, albeit only upon meeting the threshold that the facts and issues involved require it to proceed with the investigations.
Trends in 'Digital Markets' and 'Big Tech':
The 'digital markets' industry witnessed certain important developments over the course of last year. In September 2020, CCI dismissed allegations against 'Big Tech' giant Amazon for allegations pertaining to fashion merchandise in respect of vertical agreements and abuse of dominant position. However, Amazon's dominance could not be established due to presence of other players in the market. Further, CCI observed that the market relating to sale of fashion merchandise is replete with a number of vertical, fashion-only platforms which provide significant avenues for fashion brands and retailers to place their offerings before online consumers, and therefore, it is unlikely that the alleged conduct of granting benefits to preferred sellers would have any appreciable adverse effect on competition.
The decision in this case is in contrast to the previous decision by CCI pertaining to allegations of preferential treatment, deep discounting, exclusivity etc. against Flipkart/ Amazon in a complaint relating to smartphones whereby CCI in January, 2020 observed that the allegations were prima facie made out. CCI observed that the aforementioned two cases were different as the sale of smartphones through online marketplace platforms was considerably higher as compared to fashion merchandise. Likewise, CCI also noted that fashion products in India are different with fashion merchandise being more diverse and dispersed.
It is pertinent to mention that the order passed by CCI directing investigation into conduct of Amazon and Flipkart in respect of smartphones were challenged by the e-commerce entities before the High Court of Karnataka (at Bengaluru) which in July, 2021 refused to interfere with the prima facie assessment of the Commission on ground inter alia that the Court cannot substitute the views of the adjudicatory body (CCI) with its own views.
Therefore, in the case of e-commerce entities, facing similar allegations in respect of two classes of productions, CCI weighed the conduct of the opposite parties with respect to specific class of products against the requirement of minimum threshold of evidence before forming a prima facie opinion as to whether deeper investigation ought to be conducted.
In another case in the digital market space, the complaint was filed against Google Pay for abuse of dominant position in inter alia the market for apps facilitating payment through Unified Payments Interface. CCI, interestingly, segregated allegations in respect of which evidence was adduced and those in respect of which no evidence or insufficient evidence was presented, whilst directing investigations only in respect of allegations which were supported by evidence. This is particularly interesting since the trend which emerges from the judgments of the High Courts in the recent years in respect of powers of the investigation wing of the CCI (i.e. DG Office) seems to be moving towards permitting the Director General to investigate new facts that get revealed while the investigation is carried out and therefore, the Director General may not be entirely constrained by the prima facie opinion formed by CCI. However, the Supreme Court of India in SAIL in no uncertain terms stated that CCI is bound to form a prima facie opinion in the matter before sending it to the Director General for investigation. Further, the provisions under the Competition Act categorically state that the Director General shall act in accordance with the directions of CCI. The High Court of Madras in the case of Hyundai motors also stated that once the prima facie opinion against a party has been formed by CCI and/ or CCI directs an investigation against an opposite party, the Director General is empowered to investigate such named opposite party. In order words, if a party has not been identified or named by CCI for investigation purposes, such party(ies) cannot be investigation by the Director General on suo-moto basis. Both the Supreme Court of India and other High Courts have also stated that the Director General lacks the suo-moto power of investigation. Therefore, the recent trend of Director General investigating a party; not named in the prima facie order requires greater scrutiny by the NCLAT and/ or other superior courts. The said issue is also pending adjudication before the Supreme Court of India in the case of Cadila Healthcare Ltd.
The pandemic also led to new opportunities in the digital market of specialised video conferencing services. In this market, a complaint was filed in respect of Google's integration of its video conferencing app i.e. Google Meet within its email services i.e. Gmail which was alleged to amount to an abuse of dominant position in so far as Google was using its dominant position in e-mail services to enter into the market for video conferencing services. However, in January, 2021 the allegations were dismissed by CCI on grounds that there was no compulsion on consumers of Gmail to mandatorily use Google Meet.
Another development in the 'digital markets' involving a 'big tech' company was in the market for licensable smart television operating system where CCI prima facie found substance in the allegations that Google inter alia bundles its Play Store with its licensable OS i.e. Android TV and does not allow installation of any third party App Stores on its Android TV OS. This case is significant as CCI ordered investigations in respect of vertical agreements does not want to confine itself to inquiring into alleged 'abuse of dominance' big tech companies but has provided the leeway to expand the scope of investigations to ascertain the role of other parties entering into vertical agreements with tech giants in the digital market space.
The emerging trend in respect of cases alleging 'abuse of dominant position' in light of the recent decisional practice in digital markets is to prima facie analyse the conduct of 'big tech' companies vis-à-vis (reduction in) consumer choices. A mandatory imposition of conditions which limits consumer choices would lead to raising of barriers to entry especially in the backdrop of network effects necessitating a deeper investigation. This was also evident from CCI's approach in Whats App case where the 'take it or leave it' contract proposed by What's App was held to be prima facie in contravention of antitrust rules. as well as from Google Meet's case.
Other Orders of the Competition Regulator:
The airline pricing industry also saw decisions from the competition regulator wherein allegation related to 'collusive price-fixation'. CCI noted in its decision in Shika Roy v Jet Airways and Ors that with the use of algorithms, there exists a high possibility of collusion with or without the need of human intervention or coordination between competitors. However, since no evidence of collusion was found, the matter was closed forthwith. On the issue of issue of use of algorithms, CCI's approach was consistent with its earlier decision in February 2021 wherein it had observed that although, demand fluctuations can be fed into the algorithms, they cannot be modified to capture unforeseen events like cyclones, IPL matches, etc. which also have significant bearing on price fluctuations. Thus, CCI did not find any algorithmic collusion as human personnel played a key role in determination of airfares whereas software were merely used to facilitate their decision making.
Further, the real estate industry is one area which is replete with the largest number of complaints in so far as the competition regulator is concerned. Every year, number of complaints are received by CCI against real estate developers. However, the emerging trend over the years in this sector shows that most of these complaints are dismissed as real estate sector is, by and large, fragmented and neither complainants nor CCI could establish 'dominance' of real estate enterprises. The power to impose penalties have been seldom used in respect of real estate developers save in exceptional cases.
In August, 2020, the complaint against a real estate developer (Ashiana Housing) was dismissed after the CCI observed that the developer does not enjoy a position of dominance in the delineated relevant market. Even though the trend of dismissing complaints due to lack of 'dominance' of real estate developers continued, a significant feature which emerged from this case is the delineation of new type of 'relevant product' in the real estate sector i.e. 'retirement homes in the form of residential flats'. Although in earlier cases, CCI had delineated relevant market in respect of various products such as low cost residential flats, residential apartments etc. a new relevant product emerged in respect of 'retirement homes' which has further narrowed the 'relevant market' in the real estate sector.
PART – III - POLICY RELATED DEVELOPMENTS AND LEGISLATIVE AMENDMENTS
Proposed Changes to the Confidentiality Regime:
The antitrust regulator in India has recognized the need to strike a balance between the rights of the parties to adequately defend their stance by making all adverse information available to them and at the same time, prevent any injury that may be caused to a party by disclosure of commercially sensitive information. However, CCI reported that the prevailing practice of adjudicating, on a case by case basis, the claim of confidentiality over any information and the rights of the parties to have full access to unredacted information so as to effectively defend themselves, was proving to be highly onerous and unsatisfactory not only for the parties but also for the regulator resulting in litigation and delays in concluding the inquiry.
Interesting, earlier this year, the Supreme Court of India in the case of Forech Ltd v CCI dismissed CCI's appeal against the order of the High Court of Delhi. The Supreme Court of India, upheld the order of the High Court of Delhi, which directed CCI to provide all non-confidential documents, evidence, submissions filed by any party including the leniency applicant in the matter after redacting the confidential portions and order of the Director General/ CCI granting confidentiality on such documents. The Court observed that the Competition Act does not debar CCI from providing the non-confidential data, information, statements to the opposite parties and the same are required to enable the opposite party to defend the case and answer the questions as raised by the Director General. This may not create a precedence, but is likely to guide the parties/ CCI and the Director General on the issue of access to information, data, statements along with rights of defence and confidentiality.
Post, Supreme Court of India's order in Forech Ltd., CCI in April, 2021 sought to review the extant confidentiality regime in light of experience gained over the last decade and invited public comments on the proposed confidentiality rules. Some of the most glaring features of the proposed rules was the formal introduction of the concept of confidentiality rings and grant of confidentiality on the basis of self-certification.
However, the proposed rules were conspicuously silent on whether a party to the proceedings before CCI, whose information is sought to be disclosed, can oppose or object to the setting up of a confidentiality ring or not. Likewise, the proposed rules neither provided for the manner and constitution of 'confidentiality rings' nor for the eligibility and resignation of members thereof. It may be pertinent to state that the absence of specific provisions relating to these crucial aspects will foster uncertainty which is never a desirable characteristic in any legal regime. However, it remains to be seen when and in what form the proposed rules will be enforced by CCI.
The Quorum of the CCI:
The CCI amended the existing regulations by introducing Competition Commission of India (Meeting for Transaction of Business) Amendment Regulations, 2021 which state that the hearings and coram of the CCI would remain constant and such coram alone would continue to hear and participate in all subsequent proceedings on all hearing dates and would write the final orders. In case it becomes impossible to continue the hearings with the same coram, for any reason whatsoever, the matter would be heard afresh with new coram. This rule was introduced in pursuance to the principles of natural justice which require that one who hears must decide. Earlier, the High Court of Delhi in 2019 in a batch of petitions filed by car manufacturers had held that when the final hearing commences, the same members ought to be present at all hearings of that matter and the same members ought to author the final order(s).
Market Studies and Discussion Papers by CCI
CCI has over the course of last year released reports and discussion papers in various sectors to provide an overview of antitrust issues in different sectors. The 'Market Study on E-commerce in India: Key Findings and Observations' urged the e-commerce platforms to put in place transparency measures in search rankings, collection and use of data, rating mechanism and discount policy.
CCI also released its "Market study on the Telecom Sector in India: Key Findings and Observations" in January, 2021. This study seeks to trace the recent evolution of the industry, analysing threats and challenges to competition, identifying strengths and opportunities in the wake of technological innovations and recommends measures that will secure the growth of a dynamic telecom industry in the future.
Further, the 'Discussion paper on blockchain technology and competition' released by CCI in April, 2021 recognizes that relatively newer technologies such as blockchain can pose antitrust concerns whilst seeking to engage with stakeholders in this sector. According to the paper, awareness about competition issues that may emerge in the case of blockchains may help in the development and use of blockchain applications in line with the principles of the competition law. The underlying endeavour of this paper was to engage with blockchain stakeholders at an early stage while the technology is still being developed, to ensure that stakeholders are aware about the likely concerns of competition law that may arise.
In addition to the foregoing, CCI had also launched a market study in pharmaceutical sector in October, 2020 to identify and address anti-competitive practices in the pharmaceutical sector, for which the consultative process began with various stakeholders in February, 2021.
Cooperation with other Foreign Jurisdictions:
Agreements and understanding with between different competition regulators is one of the important ways for knowledge sharing and enforcement of antitrust laws. Section 18 of the Competition Act permits CCI to enter into any memorandum or arrangement with any agency of any foreign country for the purpose of discharging its duties or performing its functions under the Competition Act.
In pursuance thereto, this year, the Union Cabinet, which is chaired by the Prime Minister of India, approved Memorandum of Understanding (MOU) between CCI and Administrative Council for Economic Defense of Brazil (CADE).
Likewise, CCI entered into the Memorandum on Co-operation (MoC) with the Japan Fair Trade Commission (JFTC). The memorandum recognizes the benefit of cooperation and communication in the field of effective enforcement of competition laws and provides for exchange of information, technical cooperation as well as coordination of enforcement activities.
Conclusion:
In 2020, the Indian antitrust jurisprudence witnessed some new emerging trends on one hand, whilst CCI and appellate bodies re-emphasised the principles laid down in earlier cases, on the other. It is also equally true that the Indian antirust sphere, last year, saw a lot of litigation in the sphere of digital markets and platforms, wherein CCI has sought to intervene and investigate the conduct of technology companies which is evident from its decisions wherein prima facie orders directing that investigation be conducted, were passed.
It is interesting to note that the Finance Minister of India whilst speaking at the 10th anniversary celebrations of the CCI in 2019 noted that CCI should safeguard Indian enterprises from abuse by overseas entities. During the same period, CCI had opened investigations against technological companies in digital markets. Last year, some well-known technological companies against whom CCI passed prima orders to the effect that investigations be undertaken, challenged such prima facie orders before the High Courts.
However, these companies were not able to convince the High Courts to grant adequate reliefs and the Courts did not interfere with the prima facie orders passed by CCI. During the pendency of litigation before the High Court, against e-commerce giants Amazon and Flipkart, the Indian Minister of Commerce insisted that instead of 'forum shopping', these companies should let CCI investigate, adding that 'their reluctance showed they weren't doing it right.'
The investigations against the large/ monopolistic/ dominant entities in the digital space are on increase across the world and CCI has also taken adequate steps to ensure that the level playing field in the digital market is not disrupted by the conduct of certain entities.
Published by Chambers – Global Practice Guides – Antitrust Litigation (October 2021)1
Footnote
1. https://practiceguides.chambers.com/practice-guides/antitrust-litigation-2021/india
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