The Indian Competition Regime is primarily influenced by enforcement cum advocacy measures of competition regulator, finality of jurisprudence laid down by apex court/appellate tribunal and also by the policies and changes effected therein by the Government to drive and thrive competition in existing and upcoming markets, The year 2021 saw the Competition Commission of India (CCI) ably adapting with the grim realities of the pandemic and also going ahead with its vision and mission of ensuring markets free of anti competitive structure or practices. Government, on its part, also stepped up its efforts to infuse higher level of competition in several markets and also aligned its inititives to ensure fair and free competition in newer/upcoming markets in India.
Not letting the pandemic to slow it down, in 2021, the CCI passed 7 orders initiating investigation by DG, 6 of which dealt with abuse of dominance and it dismissed 37 information , depicting the level of scrutiny undertaken by the CCI before initiating investigation. Furthermore, 14 orders were made under Section 27 where violations of the Act were found and the CCI went on to impose an aggregate penalty close to 1,100 Crores. In relation to structural changes in corporates, 57 combination were approved by the CCI.1
2021 also marked the completion of 12 years journey of the CCI and in this span, the CCI has adjudicated over 1,100 antitrust enforcement matters and approved about 900 combinations (in 11years) making its name amongst comity of market regulators. To bolster the business confidence, the CCI issued an advisory to take swift commercial decisions without unduly worrying about regulatory actions. Further, CCI promoted the electronic filing mechanism and digital payment of fees besides virtual hearings with parties in order to eliminate the risks posed by physical contact.
Varying trends of the CCI while dealing with Cartels
Recognising adverse impact on businesses especially the MSMEs, CCI adopted varying approach i.e., either it levied no penalty or imposed token penalties, however, in certain cases it did not follow soft touch approach. For instance, the CCI took an empathetic approach in cases of cartelization in domestic automotive and industrial bearings market;2 brake block manufacturers supplying to Indian Railways;3 axle bearings manufacturers supplying to Indian Railways;4 manufacturers of low density poly-ethylene covers5 and manufacturers of carbon brushes supplying to Indian Railways6 and closed the cases with adverse sanction of 'cease and desist orders'. Similarly, a symbolic fine of INR 5 Lakh was imposed for fixing prices of writing and printing paper.7
The CCI also ordered the associations of Tamil and Telugu film producers8 to cease and desist from limiting and controlling the production, supply and provision of services etc. in Tamil cinema by way of strike and boycott calls. However, no penalty was imposed. However, the CCI imposed heavy fines of Rs. 871 crores on beer suppliers and their Association for cartelization in beer price in India. A symbolic fine of INR 200 Crores was imposed by the CCI on Maruti Suzuki India Limited (MSIL) for indulging in resale price management (RPM) of its vehicles by restricting auto-dealers from offering discounts beyond the limit prescribed by the company.9
Curbing the abuse of dominance
Taking suo moto cognizance, CCI passed a prima facie order directing investigation against WhatsApp for exploitative and exclusionary conduct under the garb of new privacy policy.10 The change to the privacy policy and terms of service make it mandatory for users to accept the terms and conditions in order to retain their WhatsApp account information and provides the manner in which it will share personalized user information with Facebook and its subsidiaries.11
Vide judgement dated 23.07.2021, a Division Bench of the Karnataka High Court dismissed the writ appeals filed by Flipkart and Amazon against the decision of a single judge, who had dismissed the writs filed by the two e-commerce giants against the probe ordered by the CCI in relation with providing favourable treatment to select sellers on their platforms and using business practices that restrict competition.12 Further, the Supreme Court also refused to interfere with the Karnataka High Court's ruling and observed that big organizations like Amazon and Flipkart should voluntarily submit for enquiry.13
2021 also saw a number of antitrust investigations being initiated against Google. In the CCI investigation into Google for anti-competitive vertical agreements and abuse of its dominance by imposing restrictive obligations in its contracts with smart TV and mobile original equipment manufacturers, in the market for licensable smart television device operating system in India,14 the Delhi High Court dismissed Google's petition against CCI for leak of confidential information as CCI undertook to recall the impugned order and accept its confidentiality claims. CCI Also initiated investigation into Google's control over the Play Store and Android Operating System and abusing its dominant position by favoring Google Pay over other competing apps,15 to the disadvantage of both i.e. apps facilitating payment through UPI, as well as users.16
Investigations were also launched by the CCI against sports associations in relation to abuse of dominance. The CCI found the Amateur Baseball Federation of India17 and The Suburban Table Tennis Association18 abusing their dominant position by restricting their players from participating in tournaments organized by unrecognized bodies.
The year ended on the enforcement front with the CCI directing the DG to initiate investigation against Apple for abuse of dominance in the market for app stores for iOS in India by forcing developers to use its proprietary in-app purchase system.19
Increasing trend of granting interim reliefs under Section 33 of the Act by the CCI
In light of the Supreme Court's ruling in CCI Vs SAIL wherein it was noted that the power to grant interim measures should be used very sparingly and only under rare and exceptional circumstances which must be higher than those required for forming a prima facie opinion, until 2021, the CCI has always shown reluctance in issuing interim measures. However, the CCI came up with 3 orders in 2021 where interim reliefs were granted.
In Federation of Hotel & Restaurant Associations of India (FHRAI) vs. MakeMyTrip India Pvt. Ltd. (MMT) & Others,20 interim measures were granted against MMT after considering the fact that MMT was a dominant entity the market for online intermediation services for booking of hotels) and delisted certain hotel chains like Treebo and FabHotels, from its website in pursuance to an agreement with OYO Hotels.21 CCI directed MMT to re-list Treebo and FabHotels until the matter is disposed off by CCI.22 Similarly, interim measures were granted against Amateur Baseball Federation of India and The Suburban Table Tennis Association where the CCI restrained these associations from imposing any restrictions on the players from participating in leagues not recognized by these associations.23
First ever revocation of a Combination Order by CCI
In a first of its kind, the CCI, vide order dated 17.12.2021 stayed the approval granted on 28.11.2019 to Amazon's acquisition of 49% shares in Future Coupons Private Limited (FCPL).24 It was alleged that Amazon had taken a completely contradictory stance during proceedings before arbitration and constitutional courts, with regards to the nature of its investment in FCPL, in contrast to the representations it had made before the CCI during the approval process in 2019.25 It was further alleged that such contradictions amounted to false representation and suppression of material facts before the CCI.26
In light of these facts, the CCI directed Amazon to give a fresh notice in Form II, within 60 days.27 The CCI further ordered that till the decision of the fresh notice, the approval granted in November 2019 would remain in abeyance. A penalty of INR 202 crores was also imposed on Amazon.28 The NCLAT is seized of appeal against the order.
Financials of controlled entities to be taken into consideration during the acquisition of investment management business by an investment manager: Section 43A Order against Investcorp India Asset Managers Pvt. Ltd. (Investcorp India)
The order is in relation with the acquisition of the real estate fund management business and private equity fund management businesses of IDFC Alternatives by Investcorp India.29
The CCI held that that by acquiring real estate and private equity fund management businesses, the acquiring entity becomes manager of the concerned Venture Capital Funds and Alternative Investment Funds, and such an acquisition gives the investment manager of these funds, the control over the management of the funds, thereby giving the acquirer control over portfolio entities of the fund and thus, the financials of the portfolio entities should have also been taken into consideration.30
As a result, through this order, the CCI has mandated that one is required to add the financials of all the 'controlled entities' to those of the Target's numbers when undertaking a merger control analysis for the purposes of Section 6(2) of the Act. By virtue of this order, a clarity has been provided by the CCI with respect to the basis for computation of the de minimis threshold in relation with combinations pertaining to acquisition of an investment management business. Moreover, the Indian Competition Law Regime has been aligned with the Global Best Practice as the European Commission also mandates that the holding investment company assumes indirect control through its funds in the portfolio entities/companies and hence, the turnover of all the portfolio entities should be taken into account for the purpose of assessing whether the thresholds are met or not.
Policy/regulatory changes and legislative amendments
CCI hosted BRICS competition authorities meeting where 'model recommendations on waivers' were deliberated and pursuant thereto it came out with a notice inviting public comments on draft amendment to Regulation 35 of the CCI (General) Regulations, 2009 which govern confidentiality claims made by parties to proceedings before the CCI.31 The proposed amended Regulation seeks to empower the CCI to set up confidentiality rings who would be granted access to unredacted case records and other material used in the course of investigation, thereby addressing concerns of parties who expressed inability to prepare a suitable defense with access to only redacted versions of filings made. This is expected to minimise litigation.32 Another issue relating to confidentiality of informant's identity was also examined and CCI may consider such request in exceptional cases.
Regulation 3A was inserted in the CCI (Meeting for Transaction of Business) Regulations, 2009 w.e.f. 02 March 2021 to provide that the hearings and quorum 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.33
To expand its reach regionally and establishing a Pan – India presence, the CCI opened its first regional office in Chennai and on its inauguration, the FM said "a futuristic regulator will have to have a positive and proactive approach and in a large diversified country like India, it is important that the CCI gets the pulse and feel of every region, so that it is closer to work ethics and the business culture of the region".34
Market studies and discussion papers undertaken by the CCI
The CCI released its Report on the pharmaceutical sector in India.35 to understand the factors which influence price competition and also dealt with issues in pharmaceutical distribution, prevalence of branded generic drugs in India and online pharmacies. It was noted that pharmaceuticals contribute 43.2% to the total out-of-pocket expenditure on health in India. Therefore, the prices of pharmaceuticals have a significant and direct link with access to healthcare.
Another Market Study 'Telecom Sector in India',36 the purpose of which was to trace the recent evolution of the industry, analyzing 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.
In keeping up with the advent of new-age technologies and the antitrust issues, a discussion paper on Blockchain technology was released to create awareness and to engage with blockchain stakeholders at a nascent stage while the technology is yet evovlving.
1. MoUs with overseas regulators: CCI signed a Memorandum of Cooperation with JFTC (Japan Fair Trade Practice Commission) which underscores its commitment towards international cooperation and understanding. By doing so, the CCI with the approval of Government, has by now entered into such arrangements with 8 overseas competition authorities which are India's major trading partners.
2. Jurisprudence laid down by Appellate Tribunal/High Courts and Apex Court:
While the judgement in the matter of SAIL covered almost all aspects in regard to nature and scope of Section 26(1) order, the Hon'ble Supreme Court through its judgement in Bharti Airtel held that the order under Section 26(1) is only an administrative and non quasi judicial direction and that the High Courts would not be competent to adjudicate the validity of such an order on merits.37 Once again, the Hon'ble Supreme Court held in the matter of Amazon/Flipkart that a Section 26(1) order is only the starting point of the process which ought not be crushed at the threshold. It reiterated that it is an administrative direction and should not be stayed at an early stage and the CCI should not be restrained from proceeding with the matter.38
CCI ordered investigation into the new privacy policy of WhatsApp which allows it to share user's personalized information data with Facebook in a manner that is neither transparent nor based on voluntary and user's specific consent.39 Aggrieved by the order, WhatsApp/Facebook moved Delhi High Court which inter-alia held that merely because an issue is pending in the Supreme Court or High Court, the CCI would be divested of jurisdication that it otherwise possess and further reliance on Bharti Airtel judgement is completely ill founded as that case involved scope and ambit of two regulaltors while in this case the 2016 policy and 2021 policy is pnding and the CCI need not wait for the outcome of such proceedings.
Justice Ashok Bhushan has been appointed as Chairman, NCLAT and perhaps it may now decide to establish dedicated bench to hear competition matters as recommended by the CLRC.
3. Government's initiatives to spur competition in different markets in India:
Fiancial autonomy is key to independent functioning of a regulator and for that the law mandates establishment of 'competition fund' to meet its expenses. With adequate grants in aid annually from Government and also by steep rise in the quantum of fee etc., the Competition Fund has to its credit Rs.888940 lakhs in 2020-21 as against Rs 665 lakhs in 2011-12.41 Robust financial health suggests that competition regime is receiving good vibes from all directions.
Competition forces existing players to innovate and enhance quality of products at lower costs. Realising that competition and innovation are inter-twined, Govt has accorded priority to 'Innovation" as an engine of economic growth. Accordingly, Niti Aayog came up India Innovation Index 2021 to rank States/UTs to enhance healthy competition amongst them. Incidentally, in Australia, grants from federal are inter-alia linked with the extent of competitive targets achieved by the States.42
The Govt. floated the Insurance (Amendment) Bill, 2021 which inter-alia seeks to raise limit of foreign investment, remove restrictions on ownership and control etc. Likewise, Govt also introduced the General Insurance (Amendment) Bill, 2021 which sought to push greater participation by private sector in the public sector insurers. To address recurring issues and to infuse more competition in generation, distribution and transmission in electricity markets, the Govt. floated the Electricity Amendment Bill, 2021 to promote competition.43
Public sector banks comprise around 60 to 70% of the banking sector. Hitherto, there has been embargo on grant of Govt's business to private sector banks. In order to ensure level playing field and also to foster competitive neutrality, the Govt lifted the said embargo and this is likely to heighten the level of competition in the banking sector and will enhance consumer welfare.44
Realising that there is need to democratize digital commerce, the Ministry of Commerce initiated Open Network Digital Commerce (ONDC) which seeks to allow all online retailors to be discoverable across multiple platforms. The RBI to boost its retail payment system decided to establish New Umbrella Entities (NUEs) to establish their own payment infrastructure inter-alia to compete with NPCI.45
Well known global makers of Covid 19 vaccine sought to impose unfair terms- (indemnification and sovereign immunity and a precondition that they will only sell and not manufacture in India).46 The Govt did not scummb to unfair commercial covenants and endevored to build local capacity and to an extent created competitive covid vaccine market.
Conclusion
2021 has clearly shown that despite pandemic the competition reforms rabbit has not been allowed to become turtle both by the CCI and the Government and this tempo needs to be maintained and sustained. Competition is ever evoloving and all those associated needs to be nimble to adapt to ever changing market dynamics and let us make competition regime sound enough the meet the challenges of envisioned US $ 5 trillion economy sooner than later.
Footnotes
* G R Bhatia is Partner & Head of Competition Law Practice, L & L Partners Law Offices, New Delhi. He is former Additional Director General of CCI and erstwhile MRTPC. The views are personal and author can be reached at gbhatia@luthra.com
1. Competition Commission of India, Fairplay: VOLUME 36 : JANUARY-MARCH 2021; Fairplay: VOLUME 37 : APRIL-JUNE 2021; Fairplay: VOLUME 38 – JULY-SEPTEMBER 2021; Fairplay: Volume 39 – OCTOBER-DECEMBER 2021.
2. Suo Motu Case No. 05 of 2017, In Re: Cartelisation in Industrial and Automotive Bearings.
3. Reference Case No 03 of 2016, Chief Materials Manager, South Eastern Railway v/s Hindustan Composites Ltd. & ors.
4. Reference Case No. 02 of 2016, Eastern Railway, Kolkata Vs. M/s Chandra Brothers and others
5. Reference Case No. 07 of 2018, Food Corporation of India Vs. Shivalik Agro Poly Products Ltd. and others
6. Reference Case No. 02 of 2016, Mr. Rizwanul Haq Khan, Dy. Chief Material Manager, Office of the Controller of Stores, Southern Railway Vs. Mersen (India) Pvt. Ltd. and Another
7. Suo Motu Case No. 05 of 2016, n Re: Anti-competitive conduct in the paper manufacturing industry, para 216.
8. Case No. 07 of 2018, XYZ - Informant Vs. Tamil Film Producers Council & Others
9. Suo Motu Case No. 01 of 2019, In Re: Alleged anti-competitive conduct by Maruti Suzuki India Limited in implementing discount control policy vis-à-vis dealers.
10. Suo Motu Case No. 01 of 2021, In Re: Updated Terms of Service and Privacy Policy for WhatsApp Users
11. Ibid, para 31-33.
12. Flipkart Internet Pvt. Ltd. and Ors. vs. Competition Commission of India and Ors. MANU/KA/3124/2021, para 32, 47.
13. Flipkart Internet Private Limited vs. Competition Commission of India and Ors. (09.08.2021 - SC Order) MANU/SCOR/24346/2021.
14. Case No. 19 of 2020, Kshitiz Arya and another vs Google LLC and others.
15. Case No. 07 of 2020, XYZ Vs. Alphabet Inc. and Others.
16. Ibid, para 75.
17. Case No. 03 of 2021, Confederation of Professional Baseball Softball Clubs Vs. Amateur Baseball Federation of India.
18. Case No. 19 0f 2021, TT Friendly Super League Association Vs. The Suburban Table Tennis Association and others.
19. Case No. 24 of 2021, Together We Fight Society Vs. Apple Inc. & Another, para 33, 34.
20. Case No. 14 of 2019 and Case No. 1 of 2020, Federation of Hotel & Restaurant Associations of India (FHRAI) and another Vs. MakeMyTrip India Pvt. Ltd. (MMT) and others with Rubtub Solutions Pvt. Ltd. Vs. MakeMyTrip India Pvt. Ltd. (MMT) and others
21. Ibid, para 113.
22. Ibid, para 117.
23. Case No. 03 of 2021, Confederation of Professional Baseball Softball Clubs Vs. Amateur Baseball Federation of India; Case No. 19 of 2021, TT Friendly Super League Association Vs. The Suburban Table Tennis Association and others.
24. Combination Registration No. C – 2019/09/688, Proceedings against Amazon.com NV Investment Holdings LLC under Sections 43A, 44 and 45 of the Competition Act, 2002.
25. Ibid, para 10.
26. Ibid, para 78.
27. Ibid, para 80.
28. Ibid, para 83.
29. Proceedings against Investcorp India Asset Managers Private Limited under Section 43A of the Competition Act, 2002.
30. Ibid, para 12.
31. Notice inviting public comments regarding review of extant Confidentiality Regime as provided in Regulation 35 of the Competition Commission of India (General) Regulations, 2009.
32. Ibid, pg. 3.
33. Ibid, Section 3A.
34. Competition Commission of India, Fairplay: VOLUME 36 : JANUARY-MARCH 2021, pg. 5.
35. Competition Commission of India, Market Study on Pharmaceutical Sector in India: Key findings and observations, 18 November 2021.
36. Competition Commission of India, Market Study on Telecom Sector in India: Key findings and observations, 22 January 2021.
37. Competition Commission of India v. Bharti Airtel Ltd. & Ors, (05.12.2018 – SC Judgment) (2019) 2 SCC 521
38. Flipkart Internet Private Ltd vs Competition Commission of India- SLP(c) No.11558/2021, Amazon Seller Services Private Ltd vs Competition Commission of India-SLP(c) No.11615/2021
39. Suo Motu Case No. 01 of 2021, In Re: Updated Terms of Service and Privacy Policy for WhatsApp Users
40. Annual Report FY2020-21, Competition Commission of India, K. Budget and Accounts (iv) Balance available in the Competition Fund at Pg 49 (accessible here).
41. Annual Report FY2011-2012, Competition Commission of India, K. Budget and Accounts (4) Balance available in the Competition Fund at Pg 52. (accessible here)
42. Competition Commission of India, Fairplay: VOLUME 36 : JANUARY-MARCH 2021, pg. 26.
43. Competition Commission of India, Fairplay: VOLUME 37 : APRIL-JUNE 2021, pg. 20.
44. Competition Commission of India, Fairplay: VOLUME 36 : JANUARY-MARCH 2021, pg. 26.
45. Competition Commission of India, Fairplay: VOLUME 38 – JULY-SEPTEMBER 2021, pg. 22.
46. Moneycontrol, Moderna, Pfizer Didn't Want Responsibility for Adverse Effects of Vaccines: Niti Aayog Member, February 18, 2022 (accessible here)
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.
