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1 October 2024

Competition Law | August 2024 - High Courts

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On August 31, 2024, Guwahati High Court ("GHC") quashed an investigation initiated by Competition Commission of India ("CCI") against 3 (three) cement companies...
India Delhi Antitrust/Competition Law

Guwahati High Court quashes Competition Commission of India's investigation against cement companies

On August 31, 2024, Guwahati High Court ("GHC") quashed an investigation initiated by Competition Commission of India ("CCI") against 3 (three) cement companies i.e., Calcom Cement India Limited, TOPCEM India and Star Cement Limited ("Petitioner") (collectively referred to as "Cement Companies") for indulging in alleged cartelisation, in contravention of Section 3(3) of the Competition Act, 2002 (as amended) ("Competition Act"). GHC also set aside the penalty of INR 5,00,000 (Indian Rupees five lakh) imposed by CCI on the Petitioner for non-cooperation with Director General's ("DG") investigation.

Brief Background

The complainants alleged that the Cement Companies inter alia indulged in cartelisation whereby: (a) they increased the price of cement in the north-eastern region without any corresponding increase in the input cost; and (b) they availed subsidies from the Government but did not pass on the benefit to the consumers. Basis the complaint, CCI directed the DG to investigate the matter ("Investigation Order").

During the investigation, DG issued notices to the Cement Companies, seeking certain information from them. After reviewing the Investigation Order, the Petitioner filed an application with CCI, seeking review/recall of the Investigation Order arguing that CCI failed to establish the prima facie case against it, which was rejected by CCI vide order dated August 8, 2018 ("Recall Order").

Subsequently, on August 27, 2018, CCI also imposed a penalty of INR 5,00,000 (Indian Rupees five lakh) on the Petitioner for failing to provide complete information requested by DG ("Penalty Order").

Proceedings before GHC

Aggrieved, Petitioner filed the writ petition challenging the aforesaid orders inter alia contending that CCI while passing the Investigation Order failed to establish a prima facie case against the Cement Companies, which is a pre-condition before initiating an investigation.

Agreeing with the Petitioner's submissions, GHC inter alia noted that establishing a prima facie case against a party is an essential pre-condition, which needs to be fulfilled by CCI before ordering an investigation. Further, GHC reviewed the evidence against the Cement Companies and noted that in the absence of a uniform price increase, coupled with variations in price hikes and sale prices, it cannot be concluded that the Cement Companies indulged in cartelisation. Rather, the evidence indicates the presence of competitive practices among the Cement Companies. Accordingly, GHC quashed CCI's investigation against Cement Companies and also set aside the Penalty Order.

(Source: GHC judgment dated August 31, 2024)

Delhi High Court quashes CCI's investigation against JCB India Limited and affirms sanctity of mediation process

On August 14, 2024, the division bench of Delhi High Court ("DHC") held that CCI must respect mediation outcomes and settlements reached between the parties and quashed the investigation against JCB India Limited ("JCB")1.

In November 2011, JCB filed a suit before DHC against Bull Machines Private Limited ("Bull Machines") for design infringement. In response, Bull Machines filed cancellation petitions before the Controller of Designs.

In December 2013, while negotiations were ongoing, Bull Machines complained to CCI, accusing JCB of abusing its dominant position through bad faith litigation/vexatious litigation, which amounted to denial of market access in contravention of Section 4 of the Competition Act.

CCI ordered an investigation and subsequently DG conducted a 'search and seizure' operation against JCB, which JCB contested in a writ petition before DHC.

During the pending petition, Bull Machines' attempt to dismiss the design infringement suit was rejected, leading to an appeal and subsequent referral to mediation by the Supreme Court. On August 26, 2021, DHC recorded the settlement between the parties. Following this, JCB and Bull Machines jointly sought to quash CCI's investigation against JCB. CCI argued against the closure of the pending investigation. Its primary contention was that the terms of the settlement could be unfair and anti-competitive, just as litigation could be abusive/predatory.

Despite CCI's opposition, DHC allowed the said application and terminated the proceedings before CCI on the ground that mediation, as a part of dispute resolution, brings finality to disputes, and allowing an investigation before CCI to continue would undermine the significance of the same. It further discouraged CCI against pursuing investigations relating to sham or vexatious litigation, particularly when the underlying intellectual property dispute is pending before DHC. It clarified that CCI's intervention would be appropriate only if the underlying dispute were proven to be frivolous.

(Source: DHC judgment dated August 14, 2024)

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