COMPETITION LAW

 Anti-competitive agreements, abuse of dominance, and mergers – crux of competition

law.

History can be traced to US Sherman Act. But even before this, competition law was being
practiced in Canada. Competition law is a market driven law. Competition law is a set of laws,
policies, regulations, rules, etc. to keep a check on the fact that the prices for products are
determined based on demand-supply and cost-price ratio. The end result is welfare of the
consumer by giving them an optimum price for a particular product. The optimum price
maintenance is done by competition law. Neo-classical economist Alfred Marshall talked about
economy being dependant on demand and supply and cost and price ratio. While classical
economists (Adam Smith) focussed on efficient utilization of resources as one of the prime
factors for good economic growth.

In Indian law, both an economic and socialist concept is given to competition law. Competition
law looks after two people: people and the competitors. It ensures consumer welfare – choice
and diversified price range and qualities, as well as interests of competitors – preventing unfair
business practices and allowing the competitors to undertake free trade and business.
Agreements between few companies can act as a hindrance to the other competitors or new
entrants.

Natural monopoly – because of nature of job or business, natural monopoly can be there, and
not because of entry barriers. When the competitors are doing something i.e., an act is being
done by the existing players in order to hinder other players from entering the market, then it is a
monopoly, and the sectoral regulator CCI has to stop them.

In recent years, competition law is also entering into whether consumer privacy is being ensured
or not. Thus, consumer welfare has diversified from ensuring the price range of products to
valuation of privacy of the consumers. Suo motu cognizance has been taken by the CCI.

However, in the Indian jurisprudence, we are only thinking from consumer welfare perspective,
without considering that presence of competition in the market leads to an automatic
repercussion of consumer welfare. While EU emphasizes on ensuring competition in the market.
At the time of MRTP Commission, India felt the need to control restrictive trade practices, as
there was a lot of concentration of economic wealth in few hands. However, the mindset for
MRTP Act and competition Act is different. For MRTP, concern was to distribute economic
wealth and break up monopolies. While for Competition Act, focus was not to curb monopoly or
curb concentration of economic wealth. Around the time Competition Act came, we had various
international agreements, and were part of WTP. Therefore, we wanted to create a market where
companies from all over the world can enter and sustain in the Indian market, and domestic
companies should be able to survive on their own without any protection. We wanted to invite
foreign players, and provide a conducive atmosphere for them to operate, and to enable the
domestic industries to survive on their own.

When MRTP Act was formed, a lot of activities were considered out of the ambit of competition
law. To protect indigenous industries and public sector, a lot of industries were kept outside the
purview of competition law. The only aim was to prevent restrictive, monopoly and unfair trade
activities. The genesis of MRTP was Article 39(b) and (c). Objectives were – there should be no
concentration of economic wealth, and economic resources should be efficiently distributed.
Thus, following were the objectives of MRTP Act:

1. That the ownership and control of material resources of the community are so distributed
as to best subserve the common good.
2. That the operation of the economic system does not result in the concentration of wealth
and means of production to the common detriment.

However, these objectives were desirable during that time. But later because of trade
globalization and opening up of economy, Raghavan Committee was formed and Competition
Act was brought. In this manner, as the market and economy changes, the laws also change with
them.

The fundamental right under Article 19(1)(g) was there, and reasonable restrictions were placed
on them. In order to limit freedom of trade of two companies, reasonable restrictions were there.
This power comes from Article 301, 303 and 304(b) which empowers the Parliament to enact
suitable laws to reasonably restrict freedom of trade throughout the territory of India. As a result,
Competition Act, 2002 came. Comparison of MRTP and Competition Act:
 1. Genesis for MRTP came from Article 39(b) and (c), while for Competition Act, Item 21
of List III of VII Schedule, and above articles. Also, focus shifted from curbing
monopolies to promoting trade-related competition. From consumer welfare, we shifted
to general welfare.
2. In MRTP, monopolistic, restrictive and unfair trade practice were considered illegal per
se. There was no chance given to violator to defend himself. While in competition law,
chance to defend themselves if accused was given. Also, MRTP Act didn’t discuss
combinations between enterprises, and there was no regulatory oversight. While in
competition Act, there was regulatory oversight and anti-competitive agreements between
enterprises and abuse of dominance were prohibited, but combinations could be
permitted.
3. Mandatory registration of prohibitory clauses of agreements by the DG, I & R was there
in MRTP, while no such provision in Competition Act.
4. In Competition Act, competition advocacy is a statutory mandate under section 49, while
not so in MRTP.
5. Under MRTP, section 55, cease and desist order was the only remedy. And appeal only to
SC. While in competition act, two tiers of appeal were there. Also, pecuniary fines and
division of dominant undertaking were remedies besides cease and desist.
6. No leniency programme in MRTP, but it is there in Competition Act.
7. In MRTP, no non-obstante clause, while it is part of law in Competition Act.
8. In MRTP, overlap between MRTP commission and sector regulators neither existed nor
was needed to address since most of the regulators didn’t exist. But in Competition Act,
there is overlap – TRAI, petroleum regulators, etc. Therefore, sections 21 and 21A
provide statutory mandate to harmonize overlap between regulatory regimes. Also, for
dispute, the regulators can contact CCI for any advice.
9. In MRTP, international cooperation policy was not part of law, while it is in Competition
Act. This relates to the effects doctrine under section 32.

COMPETITION ACT, 2002

Objectives, as per Preamble:

 1. To prevent practices having adverse effects on competition.
2. To promote and sustain competition in markets.
3. To protect interests of consumers.
4. To ensure freedom of trade carried by other participants in markets.

Total welfare – not just consumers, but manufacturers, sellers, distributors, and other players in
the market. While consumer welfare – whether consumer gets a wide variety of quality and
quantity of products at best possible prices. The question arises is whether the drafters of
Competition Act aimed at total welfare or consumer welfare. At present, there is no clear answer
to this. We, as a country, are confused as to the objective with which Competition Act came. The
objective with which a competition law came is very important in deciding case laws. This is the
antitrust paradox – are we looking at consumer welfare or total welfare. Consumer welfare refers
to a quality of products, price determined by market forces, innovation, multiplicity of choices
for consumers, etc. Total welfare refers to efficiency in allocation of resources in market,
freedom of trade to be restricted under reasonable restrictions through a proper law, and
maintaining competition in the market. Consumer welfare is 1 part of total welfare concept,
along with other parts.

If we look at the 4 objectives, we can conclude that we are moving towards total welfare as
ensuring freedom of trade, etc. is there i.e., we are focusing on economic efficiency, optimum
utilization of resources, freedom of trade, meaning a wholesome understanding of welfare.

In CCI v. SAIL, the Supreme Court has interpreted the objectives of the Indian Competition law.
The SC emphasized the pursuit of efficiency as the objective of the Competition Act. We have a
diversified range of cases where one on hand, objective of economic efficiency has been
fulfilled, while on other hand, the objective has been neglected. The application of this objective
in case laws is diverse. In this case, the Court observed regarding the MRTP Act that it was not
only inadequate, but also obsolete, in the light of international economic developments. The
main objective of competition law is to promote economic efficiency using competition as one of
the means of assisting the creation of market responsive to consumer preferences. The
advantages of perfect competition are threefold:

i. Allocative efficiency, which ensures the effective allocation of resources.

ii. Productive efficiency, which ensures that costs of production are kept at a minimum.
 iii. Dynamic efficiency, which promotes innovative practices.

These factors have been accepted all over the world as guiding principles for effective
implementation of competition law. All these together enable creation of a market which caters
to consumer preferences – lot of products to choose from, and best quality products at best
prices.

In this manner, the Court observed that both total welfare and consumer welfare have to be
looked together. Consumer welfare forms a part of the economic efficiency that we are looking
for, and it is not the sole objective. Ensuring multiplicity of choices, and quality of products at
best prices is not the sole objective of competition law. We also need to pay equal emphasis on
what happens to the competition in the market.

Restrictive trade practice – a trade practice which has or may have the effect of preventing,
distorting or restricting the competition in any manner, especially restricting the flow of capital,
money or goods in the chain of production. This term was used under MRTP. Now, section 3
covers it under anti-competitive.

Unfair trade practices – it is now mainly covered under consumer protection Act. It refers to
false or misleading advertisements, disparagement, offering gifts, product safety standards, etc.
which deceives or confuses the customers. Competition law does not cover it because it does not
regulate consumers or unfair trade practices, but to regulate competition so that there is
consumer welfare.

Monopolistic trade practices – practice aimed at creating a monopoly for the company/business
by dominating the market. This is similar to abuse of dominance under section 5 of Competition
Act [CA, 2002].

Then the shift was from curbing monopolies to promoting competition. The CA, 2002 came into
picture. Fostering competition and trade and restricting anti-competitive practices was the aim.

EFFECTS DOCTRINE

This refers to extra-territorial application of Indian competition law. Haridas Exports v. All India
Float Glass Manufacturers Ltd. The case is at the time of MRTP Act. The MRTP commission
received a complaint against 3 Indonesian companies which were manufacturing float glass.
These glasses were exported to India and it was alleged that they were sold at predatory price
i.e., the cost of production (say 100) was much more than the sale price (say 50). Only the sale
was in India, rest everything was abroad. However, the cost of production of float glass by
Indian companies was high only (say 100). This led to problems as it amounted to unfair and
restrictive trade practice. The end result was that Indian companies could be prevented from
competing in the market, hence restrictive trade practice.

Section 1, 2(e) – goods as including those supplied, distributed or controlled in India or imported
into India (didn’t talk about export). The commission discussed that section 2(e) discussed goods
imported into India and goods exported into India. Thus, commission didn’t provide remedy. We
need to see that although the products were imported in India, the adverse effect was felt in the
Indian market. Had it been competition commission, remedy would have been provided, as we
have now incorporated the effects doctrine in the competition law.

Competition law v. competition policy

Competition law – specific statute in a country. It refers to the framework of rules and
regulations designed to foster the competitive environment in a national economy. It consists of
measures intended to promote a more competitive environment as well as enactments designed
to prevent a reduction in competition.

Competition policy – all policies relating to competition and trade in the country. For instance,
PNGRB Act, section 27 – competition in petroleum and natural gas industry. Any policy in this
regard would also be under competition policy. It refers to all laws (not only competition law),
government policies and regulations aimed at establishing competition and maintaining the same.

Objectives of competition law

The main objective of the Competition Act is to promote free competition in Indian and to
protect the interests of consumers. Competition law is a market driven law i.e., according to
changes in the market. In CCI v Steel Authority of India, the SC discussed objectives of
competition law. As per the Statements of objects and reasons, this enactment is India’s response
to the opening up of its economy, removing control and resorting to liberalization. The natural
corollary of this is that Indian market should be geared to face competition from within the
country and outside. The Bill sought to ensure fair competition in India by prohibiting trade
practices which cause appreciable adverse effect on the competition [AAEC] in the market
within India and for this purpose, establishment of a quasi-judicial body was considered
essential. AAEC refers to any anti-competitive practice, or which hinders competition. Even if a
foreign company is there, but it is leading to an AAEC in India, it would fall under jurisdiction of
Indian competition regime.

Another object was to curb the negative aspects of competition through CCI which has the power
to perform various kinds of functions, including passing of interim orders and even awarding
compensation and imposing penalty. At the time of CCI, people and businesses wanted
minimum governmental intervention. This was incorporated in the membership of CCI. If any
governmental appointment is there in CCI, he should perform a specialized function, otherwise
there should be no government appointment, as the aim was separation of powers and to have an
executive and judicial wing.

Competition Act, therefore seeks the following:

1. Ensure fair competition in India by prohibiting trade practices which cause AAEC in
markets in India.
2. Promote and sustain competition in markets.
3. Protect the interests of consumers.
4. Ensure freedom of trade carried on by other participants in markets i.e., other
competitors.

Ambit of Competition Act, 2002

It has the following ambit:

i. Regulates anti-competitive agreements [section 3].

ii. Regulates abuse of dominant position [section 4].
iii. Regulates combinations [section 5 and 6].
iv. Repeals MRTP, 1969.
v. Has extra-territorial reach i.e., even if foreign entity causes AAEC in India, it would
be governed by Indian law.
vi. Covers both goods and provisions of services.
Non-applicability of Competition Act

i. Public financial institutions.

ii. FIIs.
iii. Banks.
iv. Venture capital funds.
v. Agreements regarding IPRs such as trademarks, patents, copyrights, etc.
vi. The central government may exempt any class of enterprises from the provisions of
this Act in the interest of national security or in public interest.

Thus, it is an inclusive list and government can bring in other classes of enterprises and exempt
them.

Administrative structure

There is the CCI, and the Competition Appellate Tribunal [COMPAT], which has now been
taken over by NCLAT. The Competition Act has two statutory bodies. First is CCI. Initially,
there is inquiry stage – if complaint, or if suo motu action, a prima facie opinion is formed. A
preliminary inquiry is there as to whether there is a case or not. Next stage is investigation stage.
The Director General under section 16 takes evidences and does seizure, etc.

Then there is a case before CCI which the Director General represents. Order is passed, and if
appeal, it can lie to NCLAT and then SC.

The CCI has been entrusted with the responsibility of examining and regulating instances of anti-
competitive agreements, abuse of dominance and combinations in order to ascertain AAEC. The
CCI is an expert body which functions as a market regulator against anti-competitive practices
and in addition to its adjudicatory role, also has advisory and advocacy functions as such
regulator. Market regulator means that to regulate any anti-competitive practice, and if merger
crosses a threshold, analyzing its impact on competition. In adjudicatory role – the case
presented before CCI. Advisory and advocacy functions – if any parallel regulatory authority
such as SEBI, TRAI, etc. comes, CCI can give advice.

In advocacy, there is competition advocacy as well i.e., to generate awareness about competition
law. It involves conferences, comments, publications, etc.
Appeal against order of CCI lies with NCLAT. Under section 53A(1) of the Act, the NCLAT:

a. Hears and disposes appeals against orders of CCI.

b. Adjudicates claims for compensation and passes orders for recovery of such
compensation.

CCI consists of a Chairperson, and not less than 2 and not more than 6 other members appointed
by central government. The Act requires chairperson and every other member to have knowledge
and experience of not less than 15 years in subjects such as international trade, economics,
commerce, law, management and public affairs. The CCI shall be assisted by the office of the
Director General in conducting enquiries into contravention of any provisions of the Act. The
CCI can also call on experts and professionals in key disciplines for assistance in discharging its
various functions.

There was also an amendment in this. In Brahm Datt v. Union of India, appointment of judicial
members was discussed (later).

Scope and exercise of jurisdiction

Section 18 read with section 32 discusses this. If foreign company has adverse effect on relevant
market in India, there would be extraterritorial application of law. The CCI can pass orders
notwithstanding the following:

i. An anti-competitive agreement under the Act has been entered into outside India.
ii. Any party to such agreement is outside India.
iii. Any enterprise abusing the dominant position is outside India.
iv. A combination has taken place outside India.
v. Any party to combination is outside India.
vi. Any other matter arising out of such agreement/dominant position/combination is
outside India.

Concurrent jurisdiction

Two authorities having jurisdiction in the same area. A statutory authority, if receives a case
where a decision can go against provisions of Competition Act, can make reference to CCI. CCI
will give its opinion within 60 days of receipt of reference. The statutory authority would
consider the opinion of CCI and give its findings.

The CCI can take suo motu reference as well.

Power to make regulation

CCI can make regulations under section 64. However, the regulations cannot override the Act.
The CCI cannot make substantive regulations. For instance, when a company A merges with
another company B, the company has to take approval of CCI to see whether market is harmed.
So in the regulations, no such thing can be brought exempting the companies from the check or
turnover threshold.

Brahm Dutt v. Union of India – regarding membership of CCI, there was a debate in this case.
The composition of CCI was under scanner. Section 1(3) of Act provides that it shall come into
force on such date notified by central government. Some provisions came into force in 2003, and
some later on. The initial notification was in 2003 to set up CCI, but an amendment was there in
that regard which came into effect in 2007.

For section 7 and 8 (which deal with set up of CCI), to bring these sections in force, government
had to make prescription as to appointment of chairman and members of the CCI as to be
composed under section 9. The government made CCI (Selection of Chairman and Other
Members of Commission) Rules, 2003. Here, government was to constitute a committee to
choose the members of CCI.

Regarding the membership of the committee to decide the members of CCI, the committee
consisted of retired judges of SC and HCs, retired chairperson of Tribunal established under the
Act, senior advocates, etc. In the last point, the central government was to nominate 1 executive
member who would have 25 years of experience in the committee. This member was also to
choose the chairperson of the committee. This was in conflict with the objective of the Act,
which aimed at minimal interference of central government. However, if an executive member is
put in charge of selecting persons for a quasi-judicial body, there would be no separation of
powers. Hence, the constitutionality of the committee to appoint the members of the commission
was called into question.
The constitutional validity of the competition commission was mainly challenged on the ground
that the commission envisaged by the Act was more of a judicial body having adjudicatory
powers on questions of importance and legalistic in nature and in the backdrop of separation of
powers, the right to appoint judicial members should rest with the CJI or his nominee. Further,
the Chairman of the commission had necessarily to be a retired Chief Justice or Judge of SC or
HC. The Chairman of the Commission had to be a person connected with the judiciary picked for
the job by the head of the judiciary and it should not be a bureaucrat or other person appointed
by the executive without reference to the head of the judiciary. Central government executive
should not be appointing a chairperson who would be taking an adjudicatory role.

By the time this case reached the SC, the SC refrained from giving a judgment as there were
affidavits filed by Union stating there are some proposed amendments on the matter.
Government passed Competition (Amendment) Bill, 2006 in the light of the above judicial dicta.
Necessary changes were made under the Act through the Competition (Amendment) Act, 2007:

1. CCI was made as an expert body – it will work as a market regulator for preventing anti-
competitive practices in the country and it would also have advisory and advocacy
functions in its role as a regulator.
2. Adjudication by CCI – the amendments provided for the omission of the provisions
relating to adjudication of disputes between two or more moth parties by the CCI and to
provide for investigation through the Director General in case there exist a prima facie
case relating to anti-competitive agreements or abuse of dominant position under the
Competition Act 2002 and conferring power upon the CCI to pass orders on completion
of an inquiry and impose monetary penalties and in doing so the CCI would work as a
collegium and its decisions would be based on simple majority. Thus, first there would be
a prima facie case, then investigation under DG, and then case would come before CCI
for trial where CCI would be sitting as an adjudicatory body and work as a collegium.
3. Establishment of COMPAT (now NCLAT) – this also came through 2007 Amendment.
The amendments provided for the establishment of the Competition Appellate Tribunal
(Tribunal) which shall be a three-member quasi-judicial body headed by a person who is
or has been a retired Judge of the Supreme Court or the Chief Justice of a High Court and
selection of the Chairperson and other Members of Tribunal to be made by a Selection
 Committee headed by the Chief Justice of the Supreme Court of India or his nominee,
and having Secretaries of Ministries of Company Affairs and Law as its members. The
amendment provides for hearing and imposing of appeals by the Tribunal against any
direction issued or decision made or order passed by the CCI. The Act provided for
appeals from the CCI directly to the Supreme Court of India. This provision has been
successfully challenged in India. In line with case law on the matter, the amendment
provided for appeals against orders passed by the CCI by providing for the establishment
of the Tribunal. The Tribunal also has the power to pass orders awarding compensation
resulting from violations of the provisions of the Act.

In this manner, constitutionality discussion was resolved.

COMPLAINT FILING PROCEDURE UNDER THE ACT

For initiation of case before CCI, there are various ways. One is under section 19 – informant. A
person informs the CCI of any anti-competitive activity. Earlier, the word was complaint. But to
make the scope broader, it was changed. Second mode is suo motu cognizance by CCI. Third is
reference by the government or any other authority.

Once an information is received, next stage is the prima facie inquiry. The CCI sees whether
there is a case or no case. Prima facie opinion is made by the CCI. If there is a case, then CCI
informs the Director General to proceed further with the investigation under section 26(1).

Here, it is under question whether the enterprise has a right to defend itself in the prima facie
inquiry i.e., before the investigation stage. This issue was discussed in CCI v. SAIL.

There can be three scenarios. Under section 26(1), if there is a prima facie case, the CCI directs
the DG to cause an investigation to be made. Here, no mandate of informing or giving notice to
the enterprise is there. While under section 26(2), if the CCI is of the opinion that there exists no
prima facie case, it shall close the matter forthwith and pass such orders as it deems fit and send
a copy of its order to the Central Government or the State Government or the statutory authority
or the parties concerned, as the case may be. Thus, there is no requirement of informing or
calling the enterprise at the time of prima facie inquiry.
In CCI v. SAIL, when the CCI decided to seek the response of opposite parties on the
information received by the CCI, it is a discretionary power on part of the CCI and not a matter
of statutory right. Thus, under section 26(1), it is not a matter of right to the enterprise to respond
to the information received by the CCI. As a statutory right, an enterprise cannot claim to be
heard at inquiry stage.

There have been 2 regulations of 2017 and 2019 which provide for notice to be given to opposite
party regarding information received against it. Thus, nowadays, as a matter of norm, CCI has
been giving notice to the opposite party. However, still, it cannot be said that there is a statutory
right to claim such a notice, as the Act does not provide for it.

CCI v. SAIL, 2010 SC.

Jindal Steel and Powers Ltd. submitted an information before the CCI alleging that SAIL had an
exclusive supply agreement with Indian railways for supply of rails and thereby leading to anti-
competitive practices and abuse of dominant position. After finding that a prima facie case
prevailed, the CCI (without giving an opportunity to SAIL to file a detailed reply) referred the
matter to the DG for investigation.

Order of CCI directing the DG to investigate under section 26(1) – this order was challenged by
SAIL before the COMPAT. The first question was whether the dictums passed by the CCI in
exertion of its power under section 26(1) of the Act establishing a prima facie opinion would be
appealable in terms of section 53(A) of the Act.

Section 53(A) is very clear as it provides for NCLAT to hear and dispose of appeals against any
direction issued or decision made or order passed by the Commission under sub-sections (2) and
(6) of section 26.

CCI v. SAIL discusses section 26(1). The intimation received by the Commission from any
specific person complaining of violation of Section 3(4) read with Section 19 of the Act, sets into
the motion, the mechanism stated under Section 26 of the Act. Section 26(1), as already noticed,
requires the Commission to form an opinion whether or not there exists a prima facie case for
issuance of direction to the Director General to conduct an investigation. This section does not
mention about issuance of any notice to any party before or at the time of formation of an
opinion by the Commission on the basis of a reference or information received by it. Language
of Sections 3(4) and 19 and for that matter, any other provision of the Act does not suggest that
notice to the informant or any other person is required to be issued at this stage. In contra-
distinction to this, when the Commission receives the report from the Director General and if it
has not already taken a decision to close the case under Section 26(2), the Commission is not
only expected to forward the copy of the report, issue notice, invite objections or suggestions
from the informant, Central Government, State Government, Statutory Authorities or the parties
concerned, but also to provide an opportunity of hearing to the parties before arriving at any final
conclusion under Section 26(7) or 26(8) of the Act, as the case may be.

This obviously means that wherever the legislature has intended that notice is to be served upon
the other party, it has specifically so stated and we see no compelling reason to read into the
provisions of Section 26(1) the requirement of notice, when it is conspicuous by its very absence.
Once the proceedings before the Commission are completed, the parties have a right to appeal
under Section 53A(1)(a) in regard to the orders termed as appealable under that
provision. Section 53B requires that the Tribunal should give, parties to the appeal, notice and an
opportunity of being heard before passing orders, as it may deem fit and proper, confirming,
modifying or setting aside the direction, decision or order appealed against.

SAIL claimed absence of principles of natural justice, as they were not given notice of the
inquiry against them. In this regard, court discussed that exclusion of the principles of natural
justice is also an equally known concept and the legislature has the competence to enact laws
which specifically exclude the application of principles of natural justice in larger public interest
and for valid reasons. Generally, we can classify compliance or otherwise, of these principles
mainly under three categories:

1. Where application of principles of natural justice is excluded by specific legislation.

2. Second, where the law contemplates strict compliance to the provisions of principles of
natural justice and default in compliance thereto can result in vitiating not only the orders
but even the proceedings taken against the delinquent.
3. Where the law requires compliance to these principles of natural justice, but an
irresistible conclusion is drawn by the competent court or forum that no prejudice has
been caused to the delinquent and the non-compliance is with regard to an action of
directory nature. 
Thus, natural justice comes when there is conclusion of a proceeding. Here, there is no
conclusion, rather the start of a proceeding.

The Court held that it is not obligatory on the part of the CCI to issue notice or grant
hearing to the opposite parties prior to the issuance of direction to the Director General to
commence investigation on an complaint under section 26(1) of the Act, still the Commission
may hold preliminary conference to seek assistance with the concerned parties before framing a
prima facie opinion under Section 26(1) of the Act, with regards to the General Regulations,
however, no party can assert it as a matter of right.

As to whether the CCI would be a requisite or at least a proper party in the proceeding before the
Tribunal in an appeal brought by any party, it was held that in cases where the Commission
commences a proceeding on its own motion then CCI shall be the dominus litis (the master of
the proceedings or the necessary party) whilst in other proceedings, it shall be a proper party.

In which phase and in what manner, the CCI can exercise power to issue interim orders under
section 33 – The Court ratified the power of the Commission to pass an interim restraint order
until the conclusion of the inquiry, without giving notice to the party but this power must be
exerted sparingly and under exceptional cases.

Whether it is mandatory on the part of the Commission to record reasons for shaping prima facie
opinion in terms of Section 26(1) of the Act – It was held that the Commission must record least
reasons to corroborate the prima facie view in no uncertain terms.

What directions are required to be issued by the Court to ensure proper compliance of the
procedural requirements whilst keeping in mind the scheme of the Act and the legislative intent –
It was directed that all the proceedings (including investigation and inquiry) be discharged by the
CCI/ Director General expeditiously and wherever in the course of an enquiry the Commission
issues an interim order, it should issue the final order in that behalf as expeditiously as possible
(in any case not later than 60 days). The Director General should present the report in terms of
Section 26(2) of the Act within the stipulated time frame as directed by Commission, but in other
cases not later than 45 days from the date of the directions issued under section 26(1) of the Act.
ANTI-COMPETITIVE AGREEMENTS AND COMPETITION LAW

Definition of agreement under Competition Act has been deliberately kept wide. It is an
arrangement, understanding or action in concert. It includes both written and oral agreements. It
need not to be enforceable by law. Any communication among competitors, either in person or
by telephone, letters, e-mail or through any other means even a wink or a nod can be construed
as an agreement.

If any anti-competitive conduct is done or a cartel is created, no one would write a proper
agreement for the same. Thus, understanding of agreement in contracts is not required. Any
arrangement which can cause an appreciable adverse effect on competition can be an agreement.

Enterprise means a person or a department of the Government, who or which is, or has been,
engaged in any activity, relating to the production, storage, supply, distribution. acquisition or
control of articles or goods, or the provision of services, of any kind, or in investment, or in the
business of acquiring, holding, underwriting or dealing with shares, debentures or other
securities of any other body corporate, either directly or through one or more of its units or
divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place
where the enterprise is located or at a different place or at different places, but does not include
any activity of the Government relatable to the sovereign functions of the Government including
all activities carried on by the departments of the Central Government dealing with atomic
energy, currency, defense and space.

Thus, any activity of government which comes under sovereign function would not be included
in Competition Act. Any government activities under atomic energy, currency, defense and
space are excluded from ambit of Competition Act.

However, for non-sovereign functions, Competition Act would be applicable. For instance, if
RBI makes certain monetary policies, it is sovereign function. But if it takes a tender to supply
furniture, it is non-sovereign functions.

Consumers – the Act defines “consumers” as any person who purchase goods either for personal
use or for resale or for any commercial purpose. It also includes those consumers who hires or
avails any service either for personal or commercial purpose.
Practice includes any practice relating to the carrying on of any trade by a person or an
enterprise.

Section 3(1) provides that no enterprise or association of enterprises or person or association of

persons shall enter into any agreement in respect of production, supply, distribution, storage,
acquisition or control of goods or provision of services, which causes or is likely to cause an
appreciable adverse effect on competition [AAEC] within India.

There are various categories of anti-competitive agreements defined in section 3(3) and 3(4).
Even if an agreement is not included in 3(3) and 3(4), it would still be included in ambit of
section 3(1). This was held in Heerachandani case.

AAEC is not defined under Competition Act so as to keep its ambit broad. Section 19(3) merely
gives the factors to judge AAEC:

1. Creation of barriers to new entrants in the market – for instance, if Amazon and Flipkart
undertake any arrangement to create a barrier for any new entrant in the market, it is an
AAEC.
2. Driving existing competitors out of the market – if because of an activity of an enterprise,
the existing competitors are driven out of market, it is AAEC. For instance, supplying the
commodity worth Rs. 500 at Rs. 100. As a result, competitors become unable to sustain
the loss, and are forced to leave the industry. However, it is not the case that every such
activity would be AAEC. It only gives a chance to CCI to see whether it will cause
AAEC in future or not. Whether it will cause AAEC or not will differ from case to case.
3. Foreclosure of competition by hindering entry into the market – for instance, in
messaging app services, WhatsApp and Facebook were the market leaders. When they
merged, they became clear monopoly. As a result, new entrants became unable to
compete with them. The reliance of consumers of these platforms is so much that no new
entrant can make a market. Thus, any activity which forecloses the market is prohibited.
The first three points are negative. The next points are positive.
4. Accrual of benefits to consumers – this will not amount to AAEC. However, it also has to
be seen is whether in the long run, the natural and organic growth of market is hampered.
As goods offered at low costs are not always beneficial to consumers in long run.
 5. Improvements in production or distribution of goods or provision of services – this is also
a positive aspect that would not generate AAEC.
6. Promotion of technical, scientific and economic development by means of production or
distribution of goods or provision of services – this also would not amount to AAEC.

Section 3(3) provides that any agreement entered into between enterprises or associations of
enterprises or persons or associations of persons or between any person and enterprise or practice
carried on, or decision taken by, any association of enterprises or association of persons,
including cartels, engaged in identical or similar trade of goods or provision of services.

There can be 4 levels of supply chain – suppliers, manufacturers, distributors, retailers. When
one manufacturer enters into any arrangement with another manufacturer, it is a horizontal
agreement.

When at the same level of supply chain, the competitors combine together, then it comes under
horizontal agreements. If they collude amongst themselves, it results in heavy damage to the
market, as it would lead to a monopoly. There is a presumption that if the nature of agreement
falls under section 3(3)(a-d), then it is presumed to be anti-competitive. This means that burden
of proof would be on the defendant to show that the arrangement is not anti-competitive i.e., it is
not causing AAEC.

The nature of horizontal agreements under section 3(3) is such that there is supposed to be
competition and rivalry between the enterprises. It defeats the purpose when they combine
together. The market suffers as a result, because competition drives innovation. Consumer
welfare is affected because there should be competition to provide better quality products to the
consumers.

This is a rule of presumption and not a rule of evidence. It means that a chance is given to the
defendant to show that the arrangement is not causing any AAEC.

There can be 4 ways in which the anti-competitive arrangement can culminate:

(a) directly or indirectly determines purchase or sale prices – this refers to price determination.
For instance, price parallelism is used to show that an anti-competitive practice is there – various
competing businesses raising the price of their products at the same time.
(b) restricting the availability of goods and services in the market – limits or controls production,
supply, markets, technical development, investment or provision of services;

(c) market allocation – shares the market or source of production or provision of services by way
of allocation of geographical area of market, or type of goods or services, or number of
customers in the market or any other similar way;

(d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an
appreciable adverse effect on competition.

Cartelization

It is an agreement, whether explicit or implied, between the existing market players with two
primary objectives:

i. Reduce competition among themselves.

ii. Maximizing profits by avoiding marketing wars.

In cartel, establishing the evidence for existence of cartel is difficult.

The possibility of cartel is highest in oligopolistic markets.

There can be two kinds of cartels – traditional cartels (explicit) and tacit collusion. In traditional
cartels, on putting the evidence together, the aims and intent of the cartel is clear. In tacit
collusion, the intent is not clear. Even the nature of arrangement cannot be confirmed. Explicit
collusion or any conduct suggesting an explicit intent is absent.

Sometimes there can be conscious price parallelism – where similar prices are set due to natural
causes, and operation of market forces.

Under the MRTP Act, cartel was defined. Under Competition Act, a cartel is considered as a
violation in accordance with per se rule i.e., by virtue of its existence itself, it is in violation of
Competition Act.

We need to see how to detect a cartel.

Leniency programmes were introduced to facilitate easier detection of cartels, and to ensure
defection of the cartel members. The enterprises which are to become or have been a part of the
cartel come to the CCI to acknowledge the existence of cartel, in exchange for some leniency
granted to them.

Vertical agreements [section 3(4)]

Agreements which belong at different levels of production i.e., it can be between supplier and
manufacturers, or between manufacturers and distributors. They are not per se illegal, because
they are not presumed to cause AAEC.

When we apply rule of reason, the burden of proof lies on the CCI to show that the arrangement
will cause AAEC in the market. For instance, in Ajay Devgn Films v. Yash Raj Films, CCI, a
movie had to be released and two types of theatres were there – multiplex where multiple
screens, and small towns where single screen theatres. There was an agreement between Yash
Raj Films and single screen distributors that if they wanted to exhibit Ek Tha Tiger which was to
be released soon, they would have to simultaneously agree to exhibit the other film Jab Tak Hai
Jaan also which was to be released a few months later. Any single screen theatre who did not
agree to booking of his theatre for both the films would not get the right to exhibit the single
film. This was objected to by Ajay Devgn since his movie Son of Sardar was to be released in 1-
2 months. He claimed that Yash Raj Films was using dominant position and abusing the
dominant position.

However, here, the distributors were not forced to purchase airing rights for Jab Tak Hai Jaan
along with Ek Tha Tiger, or to keep slot open to air other films. Since Salman Khan’s movies
were more famous and it promised huge profits, Yash Raj Films used this competitive advantage,
and the distributors were willing to enter into agreement for the exhibition of both the films.
Here, Yash Raj Films didn’t affect the distributor’s right to choose between the two options.
Rather, it was the big name of Yash Raj Films which attracted them. Moreover, Yash Raj Films
argued that how are we having dominant position in market, since yearly 600-700 films are
released, and only 5-6 of them are released by Yash Raj Films.

The act of booking theatres by a distributor for its two films simultaneously when the
theatre owners have the liberty either to agree or not to agree, is not a restraint on the
freedom of business of theatre owners. The theatre owners can wait for other films and can
refuse to book their theatres simultaneously for two films. Even otherwise the non-significant
position held by the single screen theatres does not cause any adverse effect on the
competition. The choice lies with the theatres and each theatre is at liberty to book its theatre
even in advance and it cannot be said that this had appreciable adverse effect on the market. 

AAEC does not mean losses suffered by competitors. It may be one factor, but it doesn’t mean it
is anti-competitive, because this is how the market normally functions. Thus, competitive
advantage cannot be said to have caused AAEC in the market.

Kinds of vertical agreements

1. Tie-in agreement – suppose Godrej has 4 products P1, P2, P3 and P4. P4 product is not
selling in the market, and others are popular. Godrej tells to distributor that I will give
you 1, 2 and 3 only if you sell 4 as well. At this stage, manufacturer is attaching the
unsuccessful product with the successful products. Distributor will take this deal because
market demand for 1, 2 and 3 is high, and he may lose out on profit otherwise. This is
time arrangement – a not commercially working product in the market is forced to be
sold along with profitable products. A tie-in arrangement is not anti-competitive unless
AAEC is proved.

Tie-in arrangement is different from bundling/combo offer (on purchasing 1 product, some other
product is given free). In combo offer, the manufacturer himself has decided which product
would be sold in the combo. Also, the consumer has the option to buy either of them separately
also. Thus, it is a marketing or sale technique.

While in tie-in agreement, there is no option, as the P1, 2 and 3 products can only be bought if
P4 is also bought.

2. Exclusive supply agreement – manufacturer selling the distributor that he will sell only
the manufacturer’s products i.e., franchise agreements. This is also not anti-competitive
per se. This is because in such an agreement, the profit margin is significantly more (30-
40%). Here, a purchaser (distributor here) is restricted in the course of trade from dealing
with any other seller (manufacturer).
3. Exclusive distribution agreement – suppose there are 4 distributors D1, D2, D3 and D4 of
a single manufacturer. They divide the areas amongst themselves. Restricting supply of
goods, or allocate an area or market to this restriction. D1, 2, 3 and 4 all are supplying to
 different specified markets, and cannot supply in one another’s market. Suppose all are
selling Apple laptops at Rs. 60,000. D4 increases the price to 70,000. This will attract the
consumers of D4’s market to others’ market. To prevent this, there is exclusive
distribution agreement where distributors are prevented from interfering in each other’s
market.
4. Refusal to deal – suppose a product is sold by manufacturer to distributor. Distributor
gives the product to retailers 1, 2, 3 and 4. The manufacturer imposes a condition on the
resale (from distributor to retailer) in order to control the distribution chain. For instance,
the distributor is prohibited from selling to R1.
5. Resale price maintenance – suppose manufacturer M, and distributors D1, D2 and D3,
situated very far geographically. Suppose an industrial product is being sold by D1 at 1.7
lakhs, D2 at 1.5 lakhs and D3 at 1 lakh. D1 complains to the manufacturer that D3 is
selling at very low price. As a result, M puts a minimum retail price at say 1.5 lakhs,
below which no distributor is allowed to sell to retailers. Selling goods with a condition
on retail at a stipulated price. However, stipulated price is not anti-competitive if the
seller has allowed the distributor to resale at a lower price.

Cartels

They are horizontal agreements/arrangements. Any arrangement between two enterprises

engaged in supply certain products with the intent of some profit motive. Intent is important
because we are examining a conduct. It is very hard to find direct evidence in cartel to show its
existence. We rely a lot on indirect evidence in the nature of circumstantial evidence. Conduct of
the parties, text messages, etc. are looked at. There is a chain of events which has to be inferred.

Thus, it is not simply an agreement, but a nature of activity where all aspects are examined.
There is some profit motive or pecuniary interest attached with it.

OPEC is the world’s largest cartel, where all oil producing countries are members. It has 13
members, and its objective is to organize and regulate the activities of exporting petroleum.
There are questions over its legality, but some protection is accorded to it.
In Competition Act, 2002, it strictly deals with cartels. Section 27 of the Act discusses how in
case a cartel is proved, penalties for the same can be charged. Penalties can be charged in 3
forms:

i. Cease and desist order for anti-competitive conduct.

ii. Paying a penalty up to 3 times of the total collective profits for the period of cartel, or
10% of the turnover.
iii. To modify an agreement in contravention of section 2. The Commission examines the
agreement and restricts the enterprises from doing certain things.

These are the civil actions. Criminal action can also be taken against persons engaged in
cartelization under section 48. It can be of two kinds:

i. Non compliance of orders of CCI.

ii. Breaking an order of NCLAT without any reasonable grounds.

In these cases, criminal proceedings can be initiated.

Explicit cartel – direct evidence, or have done something showing explicit intent of collusion.

Implicit cartel – intent is not explicit, inference has to be made.

Types of cartels

1. Price fixing – it occurs when competing businesses make an agreement which has the
effect of fixing, controlling or maintaining the price of products. This also includes
giving certain types of discounts. For instance, all retailers come together and decide to
give a similar kind of discount. An agreement to fix prices is unlawful per se i.e., there
can be no excuse for it. When an activity has an obvious risk of anti-competitive impact,
then just because of the fact that activity turns out to be harmless, it would not make the
activity lawful. Thus, such activities have no redeeming value. Whether the activity has
achieved the profit motive or redeeming value is irrelevant. This was held in Catalono
Inclusive v. Target Sales in US wherein court observed that agreement among
competitive wholesaler to refuse to sell unless the retailer pays the amount in cash is
unlawful without further examination into whether there was a profit or redeeming value.
The conduct by its nature per se is illegal.
 2. Market sharing – collusion has happened in such a way that a geographical location or
market has been divided. For instance, Intel sells chip sets all over the world. Suppose for
India, it charges higher prices as compared to EU or US. Also, every device sold is
attached with warranty. The conditions for warranty vary. It can also amount to market
sharing collusive practices.
3. Output control and limiting production – this is the most common and easily
understandable. Restricting the output or limiting the production, or hoarding in the
market even when there is demand, just to hike the price of products.
4. Bid rigging.

Cement cartel case – there were 11 major cement companies which came together to form a
cement association. They decided the price of cement, and also controlled what quantity of
cement would be made available in market at what period of time. Thus, price fixing along with
controlling the output, hoarding of material, etc. was involved. Case was brought up by Builders’
association to CCI.

Cement association used to have continuous meetings though exchange of emails, which in turn,
were supplied by price parallelism. It means that when the 11 companies together decide the
price for cement (they first decided when the cement should enter the market). And cement is the
basic requirement of any construction activity. The companies hoarded the cement and sold it
when the demand increased at 30% price hike.

Looking at the chain of events, CCI found that there was a cartel. The companies were heavily
fined. Thus, in this case, output control was involved.

The cement companies restricted supply of cement even when demand was high (Nov-Dec,
2010), and then they increased the prices of cement in Jan-Feb, 2011, in times when high
demand was outlined. It was also seen that output limitation was after a high-powered meeting of
cement association. This showed that prices were increased and output was limited as a result of
cartelization. Thus, heavy fines were imposed.

Uniglobe case – this was in relation to association of travel agents. The association started
boycotting Singapore Airlines. The boycott mail was sent to all the members of association.
Travel agents in India sell more than 3/4th of tickets of international flights. Thus, market power
of travel agents association was looked at to determine whether their concerted efforts could
have led to AAEC. Even when agreement was not explicit, since it was a tacit arrangement, the
intent of the activity and conduct was looked at. To answer this, it was noted that market power
of travel agent’s association was 3/4th in relation to international tickets. Their role was
indispensable. It meant that if the travel agents association boycotted an Airline, the Airline
would be heavily affected. Thus, there was market power which could have affected Airlines.

The boycott was only aimed to get more remuneration from Singapore Airlines and deprived
consumers of their choices to choose tickets of any airline and didn’t lead to any benefit. Hence,
it was considered an anti-competitive activity. When the boycott order was sent, the travel agents
deprived the consumers of their choice to purchase tickets of Singapore Airlines.

Motive was clear – more remuneration from Singapore Airlines. For this, the conduct was they
boycotted the airlines in relation to buying of tickets of these Airlines, which in turn, harmed the
consumers. Even if taken all over the world, Singapore Airline was not affected much i.e., there
was no redeeming value. Still, the conduct by its very nature was illegal.

Hence, the cease and desist order was passed.

Bid-rigging cartel – when two or more competitors agree that they would not genuinely
compete with each other for a particular tender. They have already decided who will get the bid,
and they manipulate the bid price for that motive. In bid rigging, suppose price of a product is
between 100-150. But just because the competitors have decided on bid rigging, the bidding
starts from 300. Thus, this negatively affects the market.

They are agreements among potential bidders to manipulate prices or secretly influence
contracts. Bid rigging is illegal per se. It is irrelevant to see repercussions of rigging to the person
winning the bid or the industry. It is presumed that agreements in the nature of section 3(3) will
have anti-competitive effect, because they are affecting the market in a harmful way by having
collusive practices among competitors. Since competition Act aims to protect competition, such
bid rigging which is presumed to affect competition is considered illegal per se.

Burden of proof to the contrary lies on the enterprises accused of the anti-competitive practices
in section 3(3).
In Re Aluminum Phosphite Tablets case – bids were called for aluminum phosphite. 3 firms
came for the bid. They had completely different cost structure, sale prices, etc., but despite these
differences, they bid for similar prices. This suggested bid rigging. CCI said that setting of
identical prices in bids goes against spirits of commercial prudence – as even though companies
had completely different cost structure and sale price, how can their pricing in the bid be so
identical. This was evidence enough to show that competition was killed by concerted efforts of
the competitors.

Doctrines evolved based on what evidences are looked into

When a cartel is formed to do anti-competitive trade practice, we generally have to see indirect
evidence, as direct evidence is generally not available. For cartels, we look into circumstantial
evidence and communication evidence.

In CE, we set up a chain of events which leads to a common understanding or plan. For instance,
if a meeting/telephonic conversion happened, content of which is not known. But if after such
meeting, a uniform price is set for products, it is evidence of anti-competitive practice. Thus,
there has to be a chain of events followed by a common understanding for there to be a concerted
practice. The underlying principle is that meeting of minds, either directly or circumstantially
shown to show a restrictive effect on competition.

RRTA v. WH Sons Ltd. – it was stated by Lord Denning that people who are combining together
to regulate prices would not shout it out. They would not put it in writing. Therefore, not just an
agreement, but an arrangement, however informal. For India also, there is a specific purpose to
keep the definition of agreement very wide to include any kinds of arrangement, however
informal. This is because a business strategy can be anything. And as a regulatory body, it is the
CCI’s duty to examine them. But to encompass the wide range of business strategies, a wide
definition is required so that all such arrangements can be put in that.

Communication evidence – it indicates that cartel operators met or otherwise communicated, but
did not indicate the content of the communication. We try to figure out the intention from the
evidence. Thus, but circumstantial and communication evidence together form part of evidence.

Economic evidence – it is categorized as either a conduct or structural evidence. If there is

evidence of a parallel conduct – if everyone is closing demand in market, or price parallelism,
identical increase in sale price, etc., these are economic evidences – any change in the financial
aspect of a particular product. This is seen with communication and circumstantial evidence to
give conclusive evidence of a cartel formation.

Alkali and Chemical Corporation of Indian and Bayer Ltd. – both were engaged in
manufacturing and sale of rubber chemicals. Both commanded a dominant share of the market.
Occupying a dominant share gives further force to the evidence showing cartel. When
commission was looking at these companies, it recorded that these companies had dominant
shares. They were charged with making identical increase in prices on the same or similar date.
However, there was no direct evidence available. At the time of this case, MRTP was there.
Commission observed that in absence of direct evidence of cartel, and CE not going beyond
price parallelism, and no proof to bolster the price parallelism, existence of cartel could not be
concluded.

Here, in indirect evidence, the only thing found was price parallelism. There was no other plus
factor which could bolster the circumstances of price parallelism. Traders unilaterally pursue an
action looking at the actions of the competitors. This is normal and natural and there is no
agreement or arrangement behind it. Therefore, price parallelism has to be shown to arise as a
result of some concerted practice which happened before. Moreover, there was oligopolistic
market, where it is common to have price parallelism. Therefore, without any other evidence,
cartelization or concerted practice could not be show.

As indirect evidence should constitute a chain of evidences leading to some particular

conclusion. A single practice in isolation cannot lead to such conclusion.

Existence of cartel can be proved by direct evidence – written agreement among cartel
members, statement by cartel members, records of telephonic corporation, memorandum, etc. or
indirect evidence – chain of events leading to formation of an intention or motive. Indirect
evidence can be shown by circumstantial or communication motive.

Re Sugar Mills – 2010 case, suo motu CCI cognizance. CCI had a different stance. For a cartel
to exist, there must be evidence to show that cartel participants met and decided to take a
concerted action, and the participants implemented that concerted action. till now, we were
giving low importance to the repercussions (in terms of implementation). But here, it was
observed that for cartelization to be concluded:

i. There must be evidence to show that cartel participants met and decided to take a
concerted action.
ii. Such concerted action must have been implemented.
iii. Conclusive action of meeting of minds is present.

Thus, implementation is not related with repercussions (where impact on the industry and
participants is seen). Here, since there was no conclusive action of meeting of minds, the CCI
dismissed the case.

After this case, Aluminum Phosphate case came, and CCI clarified that preponderance of
probabilities is the requirement and proof beyond reasonable doubt need not be established. In
case of collusive bidding, the concerted conduct of cartel members may provide evidence of the
type that conclusively points to existence of cartelization. For instance, common price in bids
along with a common entry in the visitors’ register. This was shown in the case of Aluminum
Phosphate. Also, common negotiations in this regard have to be shown.

Since we are depending a lot on CE, we do not have to prove beyond reasonable doubt.

Dawn raids – they are a search and seizure operation when CCI suspects any anti-trust violation.
The aim is to collect any relevant information. The DG conducts such raids when there is a
strong suspicion of anti-trust violations, and possibility of destruction of evidence is there. DG
has been given various powers in terms of conducting raids. The raids can be conducted during
any time of the day. There is requirement of a search warrant from chief metropolitan magistrate,
with two independent and respectable witnesses. Also, the documents being searched for and
premises being searched should be clearly stated in the warrant.

The witnesses are third parties who are not interested in the raid.

The enterprise can inform senior management and get legal help. However, there is no statutory
rights of enterprise for raid to be conducted in presence of a lawyer. They can only request the
DG to wait till legal counsel arrive, but no right is there. The investigator should have
identification. Also, it is allowed for two company people to shadow the investigator i.e., to see
whether they do acts in accordance with warrant. Enterprises should not make any external
communication regarding the raid. At the end, whatever is done in the raid, and documents and
devices seized, etc. have to be given in report and signed by the enterprises and DG.

After dawn raid is conducted, CCI members sit together, debriefing is done, and implications are
discussed in terms of documents and evidences seized.

Shamsher Kataria v. Honda Siel Cars Pvt. Ltd. – in relation to exclusive supply agreements
and refusal to deal. When competitors come together, a lot of market power is gathered
together. However, in relation to vertical restraints, the Chicago School of thought believes that
they are not anti-competitive. This is because the goods have substitutes available. Also, it is part
of business strategy which every competitor would want to do. While the other school of thought
states that vertical restraints are exercised by entities with huge market power, leading to anti-
competitive effect.

In this case, 3 automobile companies were selling cars and had huge market power individually.
They indulged in anti-competitive practices by:

i. Not making available the genuine spare parts of automobiles freely in the open
market manufactured by them.
ii. Controlling and regulating the operations of various authorized workshops and
service stations which are in the business of selling automobile spare parts, besides,
rendering after sale automobile maintenance services.
iii. Not making freely available the technological information, diagnostic tools and
software programs required to maintain service and repair the technologically
advanced automobiles manufactured by them to the independent repair workshops.
The repair, maintenance and servicing of such automobiles could only be carried out
at the workshop.

After sales service were 40 times higher than those prevailing in the market. This was brought
under sections (4)(b), 3(4)(c) & (d) of Competition Act.

They sold spare parts only to their specific distributors. No other local service stations were
given the spare parts or after sales services. This became a big issue as only at the authorized
showroom, after sale services could be done. Consumers’ choice was restricted, and they were
forced to go to these companies’ service stations.

CCI analysed the structure of the Indian automobile repairs market and found that car makers, by
routinely restricting independent repairers/garage owners from accessing their own brand of
spare parts and repair tools, ensure that their authorized dealer network is the only available
service option for their customers. Such foreclosure of competition in the repairs market allows
each car maker to exploit its monopoly market power by charging exploitative high prices for
spare parts and ancillary repair services (with a mark-up as high as 40 times).

Thus, this amounted to exploitation of monopoly through restrictive supply and distribution
agreements along with refusal to deal.

The CCI also found that while car prices are being progressively reduced, car makers are
cunningly recouping these lower margins by exorbitantly pricing spare parts and repair services.
On detailed investigation, CCI found that the conduct of the Car Companies was in violation of
the provisions of s. 3(4) of the Act with respect to its agreements with local Original Equipment
Suppliers and agreements with authorized dealers whereby it imposed absolute restrictive
covenants and completely foreclosed the aftermarket for supply of spare parts and other
diagnostic tools.

CCI concluded that since most of clauses in agreements requiring authorized dealers to source
spare parts only from OEMs or their approved vendors is anti-competitive in nature and by
restricting access of independent repairers to spare parts and diagnostic tools and by denying the
independent repairers access to repair manuals, the agreements entered into between OEMs
and authorized dealers have violated sections 3(4)(b), 3(4)(c) & (d) of the Act.

Hence, it was held to be anti-competitive practice.

Single economic entity doctrine – when a company enters into agreement with another
company which is a subsidiary or part of that company, then it is taken as one single economic
entity. No definition of enterprise would be applicable to it, and no anti-competitive practice
would be attributable to it.
Shri Sonam Sharma v. Apple Inc. – in relation to tie-in agreement. Apple had exclusive
agreements with Vodafone and Airtel for sale of iPhones in India. They had certain blocked
services – network operators for iPhones can be Vodafone or Airtel only. If any apps
downloaded, prior permission from Apple. If any third-party app downloaded and any problem
with phone, the warranty was taken away. According to the informant, apple entered into some
secret exclusive agreements with Vodafone (OP3) and Airtel (OP4) for sale of iPhones in India,
even prior to its launch. As a result of this OP-3 and OP-4 got exclusive selling rights for
undisclosed number of years. The iPhones sold by OP-3 and OP-4 were compulsorily locked,
thereby meaning that the handset purchased from either of them shall work only on their
respective networks and none other. If any other network provider was being used, then on
purchase of iPhones, the person had to shift to these providers. Thus, the choice of consumers
was restricted – consumer harm and appreciable adverse effect was caused.

The Informant has further averred that OP-3. in order to maximize its profit, tweaked its internet
services and introduced iPhone-specific plans. This was a problem because this was higher in
price than other competitors in the market. The iPhone-specific internet plans of OP-3 and OP-4
were costly than their normal internet plans, thus compelling not only existing customers to pay
extra for using internet on their iPhone but also prospective iPhone purchasers to leave their
respective network providers and to compulsorily opt for expensive mobile telephony services.
Thus, competitive prices were not given to consumers and they didn’t have option to choose.

It was also submitted that OP 1 and OP 2 permit iPhone users only those applications on their
iPhones that have been approved by them and available through their own online application
store namely 'App Store. If a purchaser of iPhone unlocks it to use the network service of other
cellular service provider, or 'jailbreaks' it to use any unapproved third-party applications, the
purchaser loses all warranties on the handset. Further, no other third-party applications can be
run on iPhone unless the same has been approved by Apple. If, however, operating system of
jailbroken iPhone is upgraded, the iPhone gets re-locked and all third-party applications are
deleted by the servers of OP-1 and OP-2 permanently.

Jailbreak is when a phone is unlocked and other service providers are tried to be put.
Losing warranty is also important here. This is because for consumer welfare, warranties should
be equivalent under all spheres of market in respect to those products.

DG, in his report, said that agreement entered by Apple in India with various MNOs were for a
specified period of two-three years at a given point of time. This means that when we are looking
at AAEC, we are looking at time consideration. DG concluded that the agreement of Apple India
and Apple Inc with Airtel and Vodafone for distribution and sale of 3G and 3GS models of
iPhones was neither exclusive nor for very long/undisclosed duration. Accordingly, these
agreements do not breach provisions of s 3(4)(c) of the Act (exclusive distribution agreements).

Vodafone and Airtel accepted iPhone’s proposals. IPhone had gone to all service providers for
this, which shows that no exclusivity was sought to be given by Apple. Also, the agreement was
not for undisclosed period, but for 2-3 years. This is important because if it is for a long time,
other market competitors can be eliminated. Also, at that time, market for iPhones was not
enough to have AAEC.

Further, DG report suggested that expiration of the agreements with Vodafone and Airtel, the
agreement entered by Vodafone was not renewed, while agreement with Airtel was renewed with
certain amendments. Also, an agreement with Aircel was entered by Apple on 11.03.2011. DG
also submitted that Apple had approached other network operators like Reliance
Communications, Idea Cellular, Tata DoCoMo to enter into a distribution agreement for selling
iPhone but it did not materialize.

The report suggested that iPhones sold in India were in a locked state. While Apple contended
that locked iPhones were supplied based on specific orders placed by Airtel and Vodafone, the
latter have submitted that there was no such option available to them in terms of the arrangement
and that they were to purchase only locked iPhones. In view of the lock-in, the purchaser of an
iPhone was necessarily required to subscribe to the cellular service of the MNO through whom it
was bought. According to DG, this arrangement between Apple. Airtel and Vodafone to be in the
nature of tie-in arrangement as specified under section 3(4) of the Act.

This means that the specific iPhones had not yet come into Indian markets by that time. Thus, if
not through Vodafone and Airtel, people could not have bought them in India. secondly, people
could always have bought iPhones from outside India.
Once it is looked that an agreement is in the nature of a tie-in arrangement, the next thing looked
is whether the company which has tied the product has sufficient market power to leverage the
tied products to be brought together. Secondly, whether the arrangement has led to AAEC for the
competitors and people.

Further, on the understanding appreciable adverse effect on competition, DG is of the view that
the tie-in arrangement, to some extent, did have an adverse implication on the purchaser of
iPhones in terms of their ability to choose and switch between various cellular service providers
and data plans. To that extent, DG is of the view that there has been denial of business
opportunities to other cellular service providers i.e., when we are looking at the effect, we look at
the effect on other competitors.

Apple had a market share of 1.5% in the year 2008; less than 1% in 2009 and 2010 and 2.4% in
2011. Additionally, DG submitted that at the time of launch of iPhone in India, there were about
250 million GSM mobile subscribers which subsequently rose to about 600 million in the year
2011. The report concluded that, the sale of 3G and 3GS iPhones of Apple in India since its
launch in 2008 till 2011 was small in absolute terms as well as in terms of percentage of the
overall sale of smartphones of various brands and that the corresponding number of subscribers
using iPhone to the total number of GSM subscribers is miniscule enough to cause an AAEC.

Thus, apple had a very small market for it to have AAEC in the market in the nature of
foreclosure of market or entry barriers for other competitors.

Issues and findings – 2 important conditions for delineating an anti-competitive tie-in

arrangement:

1. Presence of two separate products or services capable of being tied – in order to have
a tying arrangement, there must be two products that the seller can tie together. Further,
there must be a sale or an agreement to sell one product or service on the condition that
the buyer purchases another product or service (or the buyer agrees not to purchase the
product or service from another supplier). In other words, the requirement is that
purchase of a commodity was conditioned upon the purchase of another commodity. This
shows that there was a tie-in arrangement.
 2. The seller must have sufficient economic power with respect to the tying product to
appreciably restrain free competition in the market for the tied product – an
important and crucial consideration for analysing lying violation is the requirement of
market power. There has to be market power which is leveraged to put two products
together to result in AAEC. The seller must have sufficient economic power in the tying
market to leverage into the market for the tied product. Seller has to have such power in
the market for the tying product that it can force the buyer to purchase the tied product.
3. The tying arrangement must affect a “not insubstantial” amount of commerce – linked
with the above requirement, tying arrangements are generally not perceived as being anti-
competitive when substantial portion of market is not affected.

Based on the above understanding, the Commission held the agreements in question as anti-
competitive agreement. However, it noted that because agreement under the ambit of 3(4) are not
per se anti-competitive, therefore there is a need to assess whether there exist any anti-
competitive effects.

Concerning the market share the Commission observed that, no operator has more than 35%
market share in an otherwise competitive mobile network service market. As none of the
impugned operators (OP3/OP4) have market share exceeding 30%, that smartphone market in
India is less than a tenth of the entire handset market and that Apple iPhone has less than 3%
share in the smartphone market in India, it is highly improbable that there would be an AAP in
the Indian market. Thus, there would be no AAEC with such a small market share.

Further, the Commission also noted from the DG's investigation that Apple iPhone had
approached several service providers to sell its handset without exclusivity as regards the service
provider. This shows that the intention was not to create exclusivity.

Apart from service providers, these handsets were also sold through the Apple Premium
Resellers (APRS). Thus, in view of the Commission the agreements entered into by Apple
were not of an exclusive nature as is the requirement of section 3(4), The Commission
further observed that, none of the OPS have a position of strength to affect the market
outcome in terms of market foreclosure or deterring entry, creating entry barriers of
driving any existing competitor out of the market and within the theoretical.
Consumers thus had choice to buy the apple products from different sources also. If this is so, it
does not lead to anti-competitive position.

Fx Enterprise Solutions India v. Hyundai Motor India – this was the first case where a penalty
was given to Hyundai in relation to resale price maintenance [RPM]. Fx Enterprise was one of
the distributors for Hyundai. In resale price maintenance – the sale is sought to be controlled in
resale. Here, in the resale, controlling the sale in terms of putting maximum amount of discount
limit that could be made available to consumers. This was equivalent to saying that there was a
particular minimum amount beyond which sale could not be made. This is the only case in India
where RPM between manufacturer and dealer has been penalized by CCI.

When there is RPM, and there are 3-4 agreements, they have to be looked from rule of reason
analysis. Even if there is approved RPM, we have to see whether there is AAEC or not i.e.,
section 19(3) factors. Here, the case is criticized on the ground that it failed to establish AAEC.

The dealership agreement contained three vertical restraint arrangements, one of which involved
the imposition of a maximum discount at which dealers could sell Hyundai vehicles. This was
enforced through mystery shopping agencies which monitored the discounted prices and reported
them to the Opposite Party (OP). In cases of non-compliance to the RPM agreement, the dealer
was made to pay a penalty. The Director General identified this arrangement as a violation of the
Act, a view that was upheld by the CCI.

While deciding this case, the CCI ignored the unique nature of the automobile industry, where
the quality of dealer services play a vital role in the sale of cars. In this context, RPM may be a
tool used by the manufacturer to ensure that dealers render the best possible distributional
services. When there is resale, the dealer is allowed to have the best possible idea for
distributional services.

While this may effectively raise the consumer price, it acts as an incentive to improve the quality
of services offered, by ensuring that the dealer can afford to provide the resources that the
manufacturer needs to sell its cars. In this case, Hyundai justified the policy by claiming that the
RPM was introduced to prevent discount dealers from free-riding off the promotional services of
other full-service dealers. In such situations, the savings from presale service investments may be
used to lure customers and attract the demand by offering lower prices.
Hence, a restraint on price discounting is pro-competitive to the extent that it pushes dealers to
invest in satisfactory marketing to aid the manufacturer's position as against rival competitors.
When dealers have option to sell the products at discount, it is fine. But even when the level of
discount is controlled, it is also pro-competitive, as it pushes the dealers to come up with some
innovative strategies to sell the cars. For instance, after sale services can be improved. Thus,
such marketing strategies are to be promoted.

One of the parameters under Section 19(3) is the improvement of services. As a result, the CCI
ought to have addressed and analysed Hyundai's defence with respect to free-riding before
deciding if the agreement had an appreciable adverse effect on competition. However, the CCI
failed to recognize that along with price competition, the improvement of services is also an area
that benefits the consumers.

"RPM can prevent effective competition both at the intra brand level as well as at the inter-brand
level. When a minimum resale price maintenance is imposed by the manufacturer of a particular
brand, distributors are prevented from decreasing the sale prices. In other words, the mechanism
does not allow the dealers to compete effectively on price. The stifling of intra-brand
competition results in higher prices for consumers. In the instant case, the imposition of upper
limits on discounts that dealers may offer to final consumers through the discount control
mechanism of the OP leads to loss of intra-brand price competition.”

Thus, CCI concluded that since maximum discount rates were specified, the price competition
could not be done, and consumers also had to pay higher prices. So, taking the first 3 points of
section 19(3), the CCI said that RPM is not allowed in relation to maximum discount
specifications. NCLAT overturned the decision of CCI.

CCI relied heavily on DG report, but DG report didn’t talk about free-riding clause i.e., how the
dealers were free-riding. This was also not taken up by NCLAT. NCLAT didn’t go into the
merits of how it was not RPM.

Exclusive Motors v. Lamborghini SPA – relates to single economic entity doctrine. Here,
Exclusive Motors, a business involved in importing and selling sports cars in Delhi, alleged to
have been appointed as the importer and dealer of cars manufactured by Lamborghini in 2005 by
way of a dealership agreement. Thereafter, Exclusive Motors invested substantial time to
develop the Indian market for Lamborghini cars, which was negligible prior to the agreement.

In 2011, Lamborghini appointed its own group company. Volkswagen India, as the exclusive
importer of Lamborghini cars in India Exclusive Motors was requested to terminate the existing
dealership agreement and to bring in place a fresh dealership agreement with Volkswagen India.
The new agreement entitled a larger deposit amount and the notice period required for
termination was sought to be reduced from 12 months to 3 months.

Exclusive Motors did not agree to the new arrangement and in response, Lamborghini withdrew
the new arrangement and served a notice for terminating the existing dealership agreement
entered between them in 2005. It was alleged that during the notice period Lamborghini had
offered its products to Exclusive Motors at a much higher price than Volkswagen India, thereby,
among other things, adopting discriminatory pricing policy and formulating anti-competitive
agreements in violation of Section 3 the Competition Act.

DG Report: The Commission observed that there existed no prima facie evidence that warranted
any investigation to be carried out by the DG. Hence, the Commission proceeded to directly
make an order in accordance with section 26(2).

The understanding of Commission was straightforward. They observed that to establish a

contravention under Section 3, an agreement is required to be proven between two or more
enterprises. Agreement between opposite party and its group company ‘Volkswagen India’
cannot be considered to be an agreement between two enterprises as envisaged under section
2(h) of the Act. Agreements between entities constituting one enterprise cannot be assessed
under the Act, as it would be going against the established principle of “single economic entity”.
Thus, an agreement is required to be there between two different enterprises of different
companies, and should not be subsidiary or group companies.

If two companies are part of a single group company, or if one is subsidiary of other, then they
can do anything, as it is one single economic entity, and it is internal functioning only. Section
2(h) would only come into picture when there are 2 economic entities.
CONCEPT OF DOMINANCE

Here, we are not talking about economic or market power as in section 3(3) and 3(4). Dominance
in market refers to dominance of enterprise in the relevant market. We narrow down the market.
For instance, in market for pens, we look at market for stationery. Relevant market is what
products are sold to whom and in which market and the geographical location.

The Act defines dominant position (dominance) in terms of a position of strength enjoyed by an
enterprise, in the relevant market in India, which enables it to:

i. operate independently of the competitive forces prevailing in the relevant market; or

ii. affect its competitors or consumers or the relevant market in its favor.

It is the ability of the enterprise to behave/act independently of the market forces that determines
its dominant position. In a perfectly competitive market, no enterprise has control over the
market, especially in the determination of price of the product. However, perfect market
conditions are more of an economic “ideal” than reality. Therefore, the Act specifies a number of
factors to take into account to determine whether enterprise is dominant or not.

Thus, although the entity does not have an exact control over the market, but it is affecting the
market and surroundings in such a way that it can manipulate things in its favor. Whatever it
does strengthens its position in the market. The strategy is not only to enhance competitive
position, but to enhance the dominant position in the market.

Relevant market – dominance has significance for competition only when the relevant market
has been defined. The relevant market means "the market that may be determined by the
Commission with reference to the relevant product market or the relevant geographic market or
with reference to both the markets". The Act lays down several factors of which any one or all
shall be taken into account by the Commission while defining the relevant market.

We have to see the relevant market in what product, and the geographical are we are looking
into. Section 2(r) defines relevant product market. It is the smallest set of products (both goods
and services) which are substitutable among themselves, given a small but significant non-
transitory increase in price (SSNIP). There has been discussion that this concept of SSNIP
should not be used.
The market for cars, for example, may consist of separate 'relevant product markets' for small
cars, mid-size cars, luxury cars etc. as these are not substitutable for each other on a small change
in price.

Relevant geographic market is defined in terms of “the area in which the conditions of
competition for supply of goods or provision of services or demand of goods or services are
distinctly homogenous and can be distinguished from the conditions prevailing in the
neighbouring areas”.

Factors that determine dominant position

Section 19(4) talks about this. Dominance has been traditionally defined in terms of market share
of the enterprise or group of enterprises concerned. However, a number of other factors play a
role in determining the influence of an enterprise or a group of enterprises in the market. These
include:

1. Market share – this is an important criterion, but not the only one.
2. The size and resources of the enterprise – the resources that an enterprise has.
3. Size and importance of competitors – whether the competitors can reach the enterprise or
not.
4. Economic power of the enterprise – assets, turnover, etc.
5. Vertical integration – tie-in arrangement, resale price maintenance, etc.
6. Dependence of consumers on the enterprise – if the enterprise is one of the few producers
of a good, such as a pharmaceutical drug, then it is easier to have a dominant position.
7. Extent of entry and exit barriers in the market; countervailing buying power.
8. Market structure and size of the market.
9. Source of dominant position i.e., whether due to statute, etc.
10. Social costs and obligations and contribution of enterprise enjoying dominant position to
economic development – if dominance is due to the contribution of enterprise to
development and society, it is taken into consideration.

Abuse of dominance

Being dominant is not wrong. All companies aim to become dominant in the market. Problem
comes when the dominant position is used to enter into anti-competitive practices. Dominance
per se is not wrong, but abuse of dominance is. Abuse is stated to occur when an enterprise or a
group of enterprises uses its dominant position in the relevant market in an exclusionary or/ and
an exploitative manner.

Exploitative means excessive or discriminatory pricing. For instance, a very low price is given.
In exclusionary, there is denial of market excess i.e., restrictions in terms of entry and exit in
market.

The Act gives an exhaustive list of practices that shall constitute abuse of dominant position and,
therefore, are prohibited. Such practices shall constitute abuse only when adopted by an
enterprise enjoying dominant position in the relevant market in India. This is one of the most
controversial arguments. Since we have focussed so much on first establishing whether an
enterprise is dominant, and only then go into whether there is abuse, it has led to a lot of
problems. As the relevant sector and market is negatively affected.

Scholars have said that relative dominance concept should be used – dominance in relation to
other market players. But this is not used.

Abuse of dominance is judged in terms of the specified types of acts committed by a dominant
enterprise. Such acts are prohibited under the law. Any abuse of the type specified in the Acts by
a dominant firm shall stand prohibited.

Section 4(2) of the Act specifies the following practices by a dominant enterprises or group of
enterprises as abuses:

i. directly or indirectly imposing unfair or discriminatory condition in purchase or sale

of goods or service.
ii. directly or indirectly imposing unfair or discriminatory price in purchase or sale of
goods and services.
iii. Limiting or restricting production of goods or provision of services in market –
hoarding of goods.
iv. Limiting or restricting technical or scientific development relating to goods or
services to prejudice of consumers.
v. Denying market access in any manner.
 vi. Making conclusion of contracts subject to acceptance by other parties of
supplementary obligations which, by their nature or according to commercial usage,
have no connection with the subject of such contracts.
vii. Using its dominant position in one relevant market to enter into, or protect, other
relevant market.

Predatory pricing

The “predatory price” under the Act means “the sale of goods or provision of services, at a price
which is below the cost, as may be determined by regulations, of production of goods or
provision of services, with a view to reduce competition or eliminate the competitors”.
[Explanation (b) of Section 4].

The major elements involved in determination of predatory behaviour are:

i. Establishment of dominant position of the enterprise in the relevant market.

ii. Pricing below cost for the relevant product in the relevant market by the dominant
enterprise.
iii. Intention to reduce competition or eliminate competitors. This is traditionally known
as the predatory intent test.

Thus, giving goods at low prices or free of cost for a particular period of time while suffering
losses. Here, the intent is clear from the fact that since no benefit or profit is resulting to the
enterprise, the only intent is to deplete the competitors.

Predation is exclusionary behaviour and can be indulged in only by enterprises having dominant
position in the concerned relevant market.

In Reliance Jio case also, it was question whether there was predatory pricing or not. However, it
was observed that Jio was not a dominant player because it was a new entrant. Therefore, the
determination of predatory pricing did not arise.

What dominant position or position of strength means

In section 3, we were talking about market power from a standalone point of view. While in
abuse of dominance, we talk about the strength in market in comparison to the competitors, and
the nature of this power. After checking whether there is dominant position, we then check
whether dominant position has been abused.

We see how an enterprise attained dominant position, whether it had any unfair advantage, etc.
All these investigations have happened with regard to many enterprises in the market from abuse
of dominance perspective. Many technological firms are only getting stronger and stronger, and
there are no signs of stopping. We need to see the magnitude of implications if dominant is not
checked.

Regarding abuse of dominance, in MRTP Act, the approach was a constricted one wherein the
very fact of enterprise enjoying a dominant status was itself considered contravention of the Act.
However, Raghavan Committee later emphasized that dominance itself is not wrong unless some
unfair advantage is obtained by such dominant enterprise.

Group dominance – group of companies, such as Aditya Birla Group, etc. And in collective
dominance – two or three enterprises together dominate the market. This concept has not been
implemented in India.

Dominant position enables it to do either of two things:

i. Operate independently of competitive forces prevailing in the relevant market – if any

restrictions are put in competition, it doesn’t affect the enterprise because of its
dominant position.
ii. Affect its competitors or consumers or the relevant market in its favour.

These are the two identifying factors which lets us know whether an enterprise has a dominant
position or not. We then see whether such dominant position is being abused.

Article 102 of Treaty of European Union (treaty to regulate competition in EU) states that
dominant position is position to prevent effective competition being maintained on the relevant
market by affording it the power to behave to an appreciable extent independently of its
competitors and ultimately its consumers. This means that the enterprise is strong enough that
competitors or consumer outcry also does not affect the enterprise.

For instance, around the world, WhatsApp and Facebook are two of the biggest messaging apps,
and both are part of one group. In 2014, Germany had fined Facebook for breaching a condition
laid at the time of merger that Facebook and WhatsApp would not share data. Despite this,
Facebook keeps violating this condition just because of its dominant position.

In general, a dominant position derives from a combination of several factors which, taken
separately, are not necessarily determinative. Thus, there is no single determinative criteria. We
have to look from various perspectives.

Independently has been defined as the notion of independence is related to the degree of
competitive constraints exerted on the undertaking in question. Dominance entails that these
competitive constraints are not sufficiently effective and hence that the undertaking in question
enjoys substantial market power over a period of time. This essentially means that the decisions
of the undertaking are largely insensitive to the actions of the competitors and consumers in
market. This is a brazen position to take, but it means that the enterprise is fierce in maintaining
its dominant position.

In India, the position of strength is not some objective attribute that can be measured along a
prescribed mathematical equation of or index. Rather, it has to be rational consideration of
relevant facts and interpretation of seemingly unconnected principles governing the Indian
economy.

India does focus on market share as a factor a lot, but it is not a determinative factor. There can
be the following factors to determine dominance of an enterprise:

Market share of the enterprise

Market shares provide information regarding the firm's performance in the relevant market in
relation to its competitors. It provides useful indications relating to the market structure and of
the competitive importance of various market players active in the relevant market.

The higher the market share and the longer the time duration, during which such market share is
held, the more likely, the indication of the concerned player being dominant in the market.

During the assessment of the dominant position, it is necessary that the market data over a
significant period of time is considered. This means that time period should be significant to
cause some distortion in the market. On the other hand, if the market share of any firm is
consistently maintained or shows consistent increasing trend over a substantial period of time, it
reinforces the position for dominant position.

However, it is also important to note here that, the sustained market share or consistently
increasing market share of any firm, might also be indicative of the firm's ability to stay ahead of
its rivals through constant innovation and development of products that has a mass consumer
appeal.

Market Share Test consists of two steps. Firstly, the market share of the alleged dominant
company is calculated. Thereafter, in second step the same is compared to the market shares
being enjoyed by its competitors in the market. If there exists a significant gap, then the same is
indicative of a dominant position being enjoyed by the firm.

We look at significant gap. For instance, if Flipkart controls 40% of market and Amazon controls
30%, it is not a significant gap to establish dominance.

In Intel case, it was observed that Intel’s share for Market for Microprocessors for portable PCs
and Market for microprocessors for Servers) were more that 85% during the said period. The
Commission here noted that Intel was consistently enjoying very high market share in the
relevant markets. This resulted in string entry barriers on account of the significant intellectual
property rights of Intel combined with the market share resulted in Intel having a position of
dominance in the market.

In HNG Float Glass Ltd. v. Saint Gobain Glass India Ltd., the Commission observed that market
shares of Saint Gobain's were reducing over time and at the same time the competitors market
shares had increased, further, during the said time, there have been new entries in the market as
well. This indicated that Saint Gobain did not enjoy a dominant position in the market.

Size and resources of the enterprise – the superior financial strength in the market coupled
with superior resources may also result in an enterprise being a dominant position in the market.

Size and importance of the competitors – importance and size of the competitors in the market
being volume of products sold, range of products, network and acceptance with the customers in
relation to the enterprise under investigation is also a valid factor in determining the dominance
of an entity in the market. For instance, in AIOVA v. Flipkart, the Commission did not hold
Flipkart to be enjoying a dominant position in the market, even when it held 40% of the market
share The Commission instead observed that the next competitor Amazon, held 32% of the
market, which acted as countervailing measure for Flipkart taking advantage of its market share
to act as a dominant player.

Economic power of the enterprise including commercial advantage over competitors.

In MCX Stock Exchange Ltd. v. NSE case, when RBI introduced certain commodity derivatives,
it was observed that it already had dominant position in the market to allow trading in these
derivatives without charging any brokerage fees.

Vertical integration – dominant in the market, and trying to control the distribution chain.

Countervailing buying power is also important. This is from the consumers point of view.

Abuse of dominance

Test is to ascertain the dominant position of an enterprise and see the acts committed by a
dominant enterprise. Then it is seen whether the acts fall under exploitative (excessive or
discriminatory pricing) or exclusionary behaviour (for example, denial of market access).

Bajaj Corporation v. CCI – CCI found that for Almond Oil hair oil, Bajaj had allocated area of
business to every dealer and there was a vertical restraint imposed on the distributors to supply
the products in the area limited by the company and the arrangement was monitored and
enforced by Bajaj Corp Such the practice of allocation of geographical area to its distributors
amounts to exclusive distribution agreement. (EDA)

Vertical restraints were put because Bajaj wanted no restraints to be put on sale of its products.
Vertical restraints are not invalid unless there is AAEC and enterprise has the strength in the
market.

CCI observed that in FMCG market, there are a lot of competitors apart from Bajaj corporation.
Also, Bajaj didn’t have the position of strength in the market. Based on these 2 factors, even
though vertical restraint was put, it didn’t have the effect of affecting competition in the market.

Also, regarding RPM, it was negotiatory in nature and purchaser was free to sell the products at a
lower policy,
ESYS Information Technologies v. Intel corporation (2019) – this case was filed by Matrix Info
Systems which is the distributor of Intel chipsets in India. Intel has an Indian subsidiary – Intel
Technology India Ltd. Earlier, different dealers imported from Intel and warranty, etc. were
given by Intel. Later, Intel wanted to distribute by itself. Warranty was given only to chipsets
bought from authorized dealers.

Before 2016, when Intel didn’t have authorized dealers in India, the informant used to import
chipsets from authorized dealers of the world, and warranty could be availed. But after 2016,
only authorized dealers could sell chipsets with warranty.

Intel chipsets had 85% of market. Secondly, Intel chipsets had demand in the market, so chipsets
were not substitutable.

CCI found that there was AAEC – as foreclosure of market for unauthorized dealers. Secondly,
the choice of consumers was restricted as they could only buy chipsets with warranty only from
authorized dealers, even if other dealers sold at a cheaper price.

There is a 2013 case of ESYS also, but it is in relation to a different issue.

Jasper Infotech case – Kaff Appliances India Ltd. (selling kitchenware) had an own site of
selling as well as a brick and mortar shop. Snapdeal, on its own account, put a discount on the
products of Kaff. Thus, people bought from Snapdeal. Kaff claimed that products sold by
Snapdeal are counterfeit and we wouldn’t give warranty on it. Also, Kaff sought to fix a
minimum price on the products sold. Snapdeal brought a case.

First issue was whether online platform is a marketplace, and whether they belong to vertical
distribution chain. CCI found that anything that facilitates selling of products forms part of
distribution chain. If anything happens in online market, it can be vertical restraint on reading
section 3(1) with 3(4).

Another issue was whether the restraint has caused AAEC. It was stated that every company has
the right to determine the price and maximum discount. Kaff appliances is available not only on
Snapdeal, but various other avenues also. Thus, the vertical restraint didn’t affect the choice of
consumers, or restriction or foreclosure of the market.
CCI said that there is no AAEC as choice is with the consumers to buy the product or not, and to
buy it from various other sources. But it was made clear that online market forms part of
distribution channel.

M Shubham Sanitwares v. Hindustan Sanitary Ware Ltd. – it was alleged that fixing the
maximum discount is okay. We are talking about minimum retail price – the price below which
retailer cannot sell. However, this affects the competition in the market. This was clarified in this
case – if maximum retail price is fixed, it is not of concern, because it doesn’t affect the
consumer welfare or competition.

When there is a maximum discount, the retailer has to come to the manufacturer and negotiate.
CCI held this as correct because negotiation was there.

ESYS v. Intel, 2013 – it was alleged that Intel has abused its dominant position in the market.
The matter concerned with price discrimination and tie-in arrangement. Intel was compelling to
sell its low demand products with high demand products and it was alleged that denying the
distributors not to deal dictated the retail puce of its products to the distributes in contravention
of sec3(4) (e) of the act which prohibited resale price maintenance relief for intel. CCI concluded
that it had not restricted and limited the market by foreclosing the distribution network to its
competitors.

However, DG said that the agreement only talked of suggested prices, but the left the final price
at the sole discretion of the distributor. But in reality, although discretion was given, but if
distributor deviated, Intel used to remove the distributor from the agreement later.

Also, it was observed that monitoring of resale price was not a vertical restraint under section
3(4).

Thus, it was not RPM.

Predatory pricing

Factors to be established are dominant position, pricing below cost, and intent to reduce or
eliminate competition.
There is no threshold for the low price. Earlier, the threshold used to be the cost of production,
but now it depends upon the product and the market. Thus, a case to case determination has to be
made.

The first factor is to see whether dominant position is there or not, then we see predatory intent.

Penetrative pricing – there is a new entrant in the market, and in order to penetrate the market
with a new set of products, with no existing brand, the enterprise sells products at low prices in
order to build reputation and goodwill and acquire customer base. This is understandable and is a
permitted business practice for new entrants. However, if the same action is done by an
enterprise which has a dominant position in the market, and is doing it with predatory intent, it
would be called predatory pricing and would be prohibited.

Therefore, in Reliance Jio case, it was not held to be predatory pricing. However, it did distort
the market, leading to AAEC, as the then existing dominant players had to merge together to
survive in the market. This led to discussion as to whether presence of dominant position is a
correct test for predatory pricing.

MCX Stock Exchange Ltd. v. NSE – Both NSE and MCX stock exchange brought trading of new
currency derivatives. MCX charged brokerage fees, while NSE, because of its dominant position,
could afford not to charge brokerage fees for a long period of time. As a result, all people traded
through NSE only. MCX brought a case before CCI claiming that NSE is dominant player in
market and not charging brokerage fees is with predatory intent to drive out the competitors. CCI
affirmed this argument. CCI laid factors to be taken into consideration while assessing
allegations of predatory pricing. Predatory pricing has to be accompanied with the intention to
remove or eliminate the competitors from the market.

Transparent Energy Systems v. TECPRO Systems Ltd. – unfair pricing is a large set, and in its
subsets, there is predatory pricing, zero pricing, penetrative pricing. CCI gave criteria relevant
for identification of predation:

i. Prices of goods or services of enterprise are at a very low level – below the cost of
production.
ii. Objective is to drive out competitors from the market, who due to low pricing would
be unable to compete at that price. Intent is seen from the fact that if any other reason
 cannot be thought of, intent is generally to eliminate competition. Sometimes, a new
entrant, in order to create a market for itself, can keep low prices, this is penetrative
pricing and is not prohibited (as enterprise does not have a dominant position in
market, like in case of Reliance Jio). However, if no such justification can be given,
accompanied by the fact that it is a dominant player which can sustain losses for long,
helps us figure out the intent of predatory pricing.
iii. There is significant planning to recover the losses, if any, after the market rises again.
iv. The competitors have already been forced out by the enterprise.

Bharti Airtel Ltd. v. Reliance Industries Ltd. – allegation of predatory pricing was the primary
issue argued before the CCI. The issue arose from an allegation that Reliance Jio since its
inception had been providing free telecom services below its average variable cost with the
intention of eliminating competitors. The CCI noted that the alleged predatory conduct should be
investigated only if Reliance is prima facie dominant in the relevant market, and in the absence
of such dominance, there is no question of any investigation for predatory pricing. The CCI’s
observation disclosed that the informant had not demonstrated reduction of competition or
elimination of any competitor arising from Jio’s actions. The CCI also noted that Jio was a new
entrant to the market and its competitive pricing is a short-term business strategy to penetrate the
market and establish its identity. The CCI accordingly dismissed the information filed against Jio
and closed the case under section 26(2) of the Competition Act.

Uber India systems Private Limited case – SC allowed the DG to investigate into the alleged
dominance of Uber India, and abuse thereof in the radio taxi services market in the Delhi NCR
area. manates from an information filed by Meru Travel Solutions Private Limited (Meru), that
was dismissed by the Competition Commission of India (CCI) stating that Uber is not prima
facie dominant in the relevant market and thus, closing the case under Section 26(2) of the
Competition Act.

The CCI order was then challenged by Meru before the Competition Appellate Tribunal
(Compat) which reversed the findings of the CCI regarding the prima facie dominance of Uber
and expanded the relevant geographical market from Delhi to Delhi-NCR. The Compat primarily
differed from the CCI on the issue of reliance on a market research report by New Age TechSci
Research Private Limited (TechSci). Whereas the CCI did not consider the TechSci report due to
contrary findings in a 6Wresearch report, the Compat noted that the CCI in an earlier case has
relied upon a TechSci report and that the two reports showing contrary results is a good reason to
order an investigation into the matter. Consequently, the Compat judgment ordering the DG to
investigate the matter was challenged and upheld by the Supreme Court in appeal.

There are two reports, one of which has been relied upon by CCI. In such cases, we need
investigation.

Uber went to SC and filed an appeal. After 4 years, SC upheld decision of COMPAT and held
that further investigation is warranted.

The Uber Order supplements the growing competition law jurisprudence in India and highlights
“predatory pricing” as a factor for both establishing dominance and abuse of dominance. In
MCX etc. case, we saw dominance first, and then saw the conduct to see abuse. While here, the
very fact of predatory pricing establishes both dominance and abuse. One is the result of the
other i.e., they happen simultaneously and parallelly.

The primary reasons for the Supreme Court to interfere in the matter was that the information
filed before the CCI was presented has been shown to them which prima facie depicts that Uber
has been engaging in predatory pricing by offering huge discounts to consumers and high
incentives to driver-partners resulting in an average loss of INR 204 to Uber on each trip. The
Supreme Court based on this information alone stated that it would be very tough to say that
there is no prima facie case under Section 26(1) of the Competition Act, 2002. 

Uber is not the only dominant player, as Ola is also there, and both together have 95% market
share of radio taxi services. CCI said it is not dominant, therefore, no investigation is required.
While the COMPAT and SC said that the conduct of incurring losses for past 5 years and still
continuing, does warrant an investigation as to the reason for suffering losses. Company’s
commercial transaction, funding, etc. have to be seen, as how long can the company sustain
incurring losses in the market to eliminate the competition. This analysis at least warrants an
analysis, was what SC said.

SC first discussed relevant market – radio taxi services in Delhi NCR. SSNIT test – whether the
consumers would shift from radio taxi to buses, trains, etc. was seen. The answer was no – as
there was already a predetermined pick up and drop location, and not like autos. Also, comfort,
status, etc. meant that persons used to such taxi services would not shift to other modes.

In the Meca Cabs case, CCI noted that relevant market should be radio taxi services only, as
radio taxi is not substitutable with other means of transport such as buses and autos, and there is
increasing consumer dependence on these. The area of Delhi NCR is also important, as there,
people are a lot used to availing services of taxis, unlike smaller cities. The type of consumers
are also different to figure out whether products are substitutable or not. Thus, to determine
relevant market, CCI considered there is no substitute for radio taxi.

Dominant position – market competitors were analysed by DG. Uber’s financial position was
also looked into. DG said Uber was not in the position of strength, as Ola was also there. CCI
agreed, but noted that market share cannot be the sole assessment criteria. CCI acknowledged the
variance in different markets, especially in digital markets, and called for a case-to-case analysis
of market dominance and competitive strategies. Digital market comes here because the rent here
is based on algorithms and AI belonging to a company. On one side, market is for consumers,
who decide whether to avail services or not, and on the other side, there are drivers who need to
be kept incentivized.

Thus, booking is done from a digital platform. Since it is digital market, not only the criteria of
market share, but an investigation was warranted to see other aspects also.

In the market, Ola and Uber together constitute 95% of market, and act as entry barriers to
others. In digital markets, even duopoly can be considered dominance, as in case two of the
biggest companies merge with each other, it would become extremely difficult for the
competitors to enter or survive in the market. Thus, even in case of duopoly, it is a concern.
However, we have not recognized the collective dominance concept, therefore, CCI didn’t delve
into this argument, also considering that Ola was not a party to the case.

Meru claimed that Ola and Uber constitute monopoly as they cover 95% of market. But CCI
didn’t agree with this. Collective dominance is not an issue, as if there is one big competitor
surviving, it means there is healthy competition.

CCI had similar observations in Fast Track Call Cab (P) Ltd. v. ANI Technologies (P)
Ltd. (2017), wherein it noted that markets would be competitive regardless of the number of
players in it. What is important is that the incumbent competitive forces prevent use of abusive
behaviour by one player.

Network effects – they were an inherent feature of cab aggregator markets. Network effect
means that company does one thing which encourages results in another area. For instance,
giving incentive to drivers to come and work for the company is snatching them from other
competitors in the market. If a service provider has more drivers, it can give more consumer
rides, which will help it afford losses. Conversely, having an extensive network of drivers would
lead to greater market efficiencies. This has been recognized by the CCI in the fast track Ola case
and in meru Uber case. CCI has looked into digital aspects of cab aggregators market to
determine dominance.

Predatory pricing – it was claimed that Uber’s deep pockets and dominant position allowed it to
offer unreasonable discounts in the Indian setup. According to DG, since Uber was not dominant
player, it could not have abused its position. But despite this, he went into the pricing and
discount strategy of Uber. It was observed that Uber adopted a below cost pricing strategy over 4
years. However, because Uber’s pricing strategy was not a deterrent to Ola’s business, the DG
concluded that Uber’s pricing scheme was not harming market competition. If there had been
AAEC, Ola would also have been eliminated from market, which didn’t happen. This meant
there was no harming in the market competition. Also, there was no harm to consumers as they
were getting services at competitive prices.

However, only 1 competitor was looked at, and providers covering 4-5% of market were
suffering losses, which was not considered.

Thus, competitive harm in the market could not have proved.

Contravention of section 4 was a necessary precursor of adjudging an entity guilty of predatory

pricing.

Thus, we still look at dominance, and then we look at predatory content. The only thing that has
changed is that if the company is not dominant, but still has an aggressive pricing strategy and
gives heavy discount, it still warrants investigation and cannot be dismissed under section 26(2).
We have to figure out whether the relative dominance harms the other 4% of competitors in the
market, and whether it leads to AAEC. But that would only warrant investigation when we
remove dominance and predatory conduct as a precursor.

The rally of CCI has been from an object-based model to effect based model.

Relevant market and how that caters to abuse of dominance

Schott Glass India Pvt. Ltd. v. CCI, certain natural justice principles were highlighted by
COMPAT. It was reiterated that being dominant is not bad. But distorting the competition in the
market by virtue of being big is bad. The very nature of the pricing/unfairness is bad per se and
should be declared anti-competitive.

Here, CCI received information as to contravention of section 4 and 3(4) of the Act. by the
Appellant. Appellant is a manufacturer of Neutral USP-1 borosilicate glass tubes which are made
of borosilicate glass, a special type of glass having unique properties. The glass was such that for
storing pharmaceuticals, only such tubes could be used. The Appellant was alleged of engaging
in unfair and discriminatory pricing, tying two unrelated products, granting loyalty rebates and
discounts that could prevent the shift of ampoules manufacturers to imported goods.

Appellant manufactured the glass, distributors distributed the tubes, and then it is given to the
retailers. Different distributors had different pricing which was considered discriminatory.
Informant is Kapoor glass company, which was not granted as much rebates as its joint venture
Scott Kaisha company.

At least 80% of their total requirement from the appellant also should be bought from the
manufacuter. This restricted other competitors in the market.

The DG had to see whether OP was a dominant player in relevant market, whether it abused
dominant position, and whether it abused its position in the upstream market and used its JV to
leverage the downstream market.

Here, there was a market. But in the vertical supply chain, if a company is purchased or JV is
done, whether it makes the company big enough by acquiring such companies. JVs are outside
the ambit of competition law. Here, the manufacturing company acquired/entered into JV with
all the distributing companies.
The DG, on investigation, found the unique characteristics of the glass tubes making it non-
substitutable. This means that 19(4) criteria become more and more stronger. The DG concluded
that relevant product market for the downstream market was that of ampoules, vials, cartridges
and other containers. The DG took the whole of India as the relevant geographic market and
concluded that the Appellant was a dominant player having major market share of 61.49% in
2008-09 and 81 17 % in 2009-10.

This showed that its activities had the effect of becoming more and more dominant in the market.
Also, DG found that the price discrimination and discount policy of the appellant have led to
denial of market access and found the appellant guilty of contravention of most of the provisions
of section 4.

When in a dominant position, the company should enter into deals with distributors which are
equitable for all. If there is vast discrepancy in prices or discounts, then there is an intent of
denial of market access.

In its March 29, 2012 order (Kapoor Glass Pvt. Ltd. Vs. Scott Glass India Pvt. Ltd.) the CCI had
held the Appellant quilty of contravention of section 4 of the Act and had inflicted a penalty of
INR5.66 crore. It had also passed a cease and desist order with regard to the alleged anti
competitive practices of the Appellant. It is pertinent to mention here that this was the majority
view of the CCI.

Scott glass filed an appeal. The COMPAT in its April 2, 2014 order turned the majority order
upside down and upheld the minority order. It also laid down some economic and procedural
principles.

First principle delves around the principles of 'natural justice i.e. the right to a fair hearing (audi
alteram partem). The principle of audi alteram partem is the basic concept of principles of natural
justice. The expression audi alteram partem implies that a person must be given an opportunity to
defend himself. This principle is in pari materia with cross-examination. The COMPAT, though
did not refer this principle in toto, frowned upon the fact that the CC while framing the charges
and corroborating the statements of the Converters, did not give an opportunity to the Appellant
to cross-examine the same and it was found unjust on the part of CCI to straight away accept the
statements on oath by the convertors who can be biased because of its ulterior business motives.
It is a principle of evidence Act that any untested statement by the cross-examination cannot be
blindly accepted and it is bereft of natural justice principles.

Kapoor had infringed TM of Scott and fraudulently pass off glass tubes manufactured by the
appellant, and was always at loggerheads with each other. Thus, an important point which was
missed was that whether this was distortion in market, or mere corporate rivalry.

Third and last principle is that the past conduct/ behaviour of the parties to necessarily apply the
test of bona fide as well as malicious past intent. It was submitted that the informant had
previously attempted to infringe Appellant's trademarks.

Thus, in this case, though the company (Scott glass) was dominant, but looking at the market, it
was found that only the informant was affected, and appellant had a valid agreement to not enter
into agreement with Kapoor (TM infringement and passing off).

Belaire Owner's Association v. DLF Limited Haryana Drban Development Authority

Department of Town and Country Planning State of Haryana, August 12, 2011

DLF builders launched a housing complex, Belaire' which, as per initial plan consisted of 368
flats in total in 5 multi-storied residential building consisting 19 floors each to be constructed in
DLF City, Gurgaon. DLF said that with the flats, there would be different facilities such as gyms,
etc. However, the space left was utilized in making the flats only.

Payments schedule was linked to projected stage wise competition of the project with some
amount to be paid at the time of booking of the flat, 2 months after the booking date and
remaining as per scheduled stage wise competition of the project. Thus, stages are divided for
payment of money. The advertisements of the builder also guaranteed additional facilities such
as clubhouse gymnasium etc, and ensured completion of the buildings within 36 months from the
launch of the project.

When the construction began, 5 buildings itself were constructed, however each building's floor
number increased from 19 to 29 leading to an increase in total number of flats from 368 to 564
Additionally, the facilities ensured by the builders were compressed due to shortage of area and
the delivery of the apartments were delayed to the owners by 2 years, even though the apartment
owners made their payments well on time.
Thus, the facilities were not provided as promised, and the project was also delayed.

The Belaire Owner's Association (BOA) filed a complaint against the DLF Ltd. with
Competition Commission of India (CCI) accusing them of abuse of dominant position by their
use of contracts with the apartment owners The BOA alleged various clauses of the Apartment
Buyer's Agreement (ABA) entered into with the developer on buying flats as arbitrary, unfair
and unreasonable.

The agreement was very one-sided in favour of DLF.

CCI analysed this information and held that prima facie case of abuse of dominance existed and
requested the Director General (DG) to conduct further investigation DLF immediately
challenged the CCIS jurisdiction but dropped the matter subsequently. The DG conducted an in-
depth investigation and discovered that the conditions imposed by DLF did violate certain
provisions of the Competition Act.

First issue was whether the section which came into effect in 2009, could apply to the agreement
entered into prior to it. Another aspect was whether the sale of apartments is sale of goods or
services, as required. CCI concluded that there was a sale. The CCI while defining the relevant
market in this case first established that that DLF was providing services of a developer/builder
as defined under the definition of service provided under section 2(u) of the Competition Act.

Coming to the effect of provision, COMPAT stated that although agreement was prior to 2005,
still the concept of dominance was prevalent in MRTP also, so it will apply.

Regarding relevant market, CCI ordered that relevant product market is of services of builder in
respect of high-end residential accommodations and the relevant geographic market (RGM) is
Gurgaon.

a. There is no difference between luxurious or high end residential accommodation on one

hand and economic or low-end residential units on the other. Therefore, both belong to
the same product market.
b. The RGM for the purposes of the case should be National Capital Region Gurgaon in
itself does not constitute RGM.
COMPAT completely agreed with CC's finding on RPM as well as RGM COMPAT also
accepted CCI's application of SSNIP test that small increase in price does not affect the
customers as they will not move to non-luxurious apartments or outside Gurgaon. Since the
decision to buy this kind of accommodation at this location is not easily substitutable with a
decision to purchase a similar apartment in any other geographical location, it was thus decided
that high end residential apartments in Gurgaon constitute relevant market.

Whether DLF is occupying a dominant position in the above relevant market?

Sine DLF had the highest market share in the real estate sector of 45%, there were minimal
competitive constraints on DLF Moreover, DLF had an early mover's advantage in the real estate
sector which naturally had entry barriers due to high cost of land and brand value incumbent
market leaders. DLF was the first one to advance such services. Also, such market was already
having natural barriers to entry.

Thus, DLF was held to be dominant player in market.

If yes, Whether DLF has abused its dominant position in the relevant market

CCI ordered that DLF has abused the dominant position in the real estate market through their
unilateral powers to alter the provisions in the buyer's agreement without giving any rights to the
buyers, DLP's discretion to change inter se areas for different uses such as residential
commercial etc, without informing, the buyers and DLF's sole discretion to determine ownership
rights. DLF countered these orders with the following argument:

a) Alleging mere abuse is not enough unless the same is corroborated with necessary evidence

b) The conditions imposed in the agreements are standard clauses inserted as per industry
practice and are no way a reflection of abuse of dominant position Moreover, several benefits
have beert provided by DLF to the buyers and the same is not to be ignored.

If an enterprise is dominant, then there is duty on it to act in a way that it does not abuse its
dominant position. Here, dominant position was abused because of the one-sided agreements
with the buyers. Hence, DLF was held to have abused its dominant position.
Harshita Chawla case – Facebook and WhatsApp’s dominance in the market. Harshita brought
the case alleging that WhatsApp was backed by FB and when you download WhatsApp
messenger, WhatsApp pay would come with it i.e., it was bundled together. This was alleged to
be abuse of dominance. Both companies were using their dominance to enter the UPI enabled
digital payments app market by bundling their products. It was also alleged that the personal
data, information, etc. would go to parent company i.e., FB, which should not be left unchecked.

Allegations:

i. User of WhatsApp automatically gets payment app owned by Whatsapp i.e.,

WhatsApp Pay installed, which is like a pre-installed app, and is difficult to remove.
They are not available independent of each other. However, installation does not
mean usage of the app.
ii. The bundling arrangement allegedly had an element of coercion because of pre-
existing user base of 400 million monthly active users in India, who didn’t have
choice to install only one of these apps.

Facebook submitted that it was not required to be a proper party, as WhatsApp and FB were
distinct entities.

Also, WhatsApp claimed that it was not abusing dominance. Also, the relevant market was not
just internet messaging apps, but was much wider than that, such as information/photo/document
sharing, etc.

To prove abuse, it has to be shown that WhatsApp pay has been imposed upon WhatsApp users
who were forced to use WhatsApp pay, and not other payment platforms. This is important
because here, WhatsApp pay remains inoperable unless some setup is done. Thus, unless the app
is used, it cannot be called functioning. Also, users are free to use any other payments app.

WhatsApp claimed that WhatsApp pay comes as an additional feature to WhatsApp messenger,
and not a separate content. Secondly, there is no insistence upon usage of WhatsApp pay.
Neither is the use of WhatsApp messenger conditional upon usage of WhatsApp pay.

First issue was regarding locus standi – as in Samir Agarwal case, it was observed that people
who have not claimed any legal injury cannot have locus standi. CCI said that this is true, but it
doesn’t stop anybody to come to CCI in case of market harm due to any abusive practices. The
Preamble voices the ethos with which the Act was enacted to prevent adverse effects on
competition and to protect interests of consumers.

The mere fact that a case has been filed by an aggrieved party under the Act does not take away
its character of being a case in rem involving a larger question of fair and competitive markets.
The question we are asking is of a larger nature, therefore a personal legal injury is not that
important.

CCI held that informant need not necessarily be an aggrieved party to file a case before CCI.
There is no such express or implicit requirement in the Act.

Regarding relevant market, the CCI discussed OTT apps. There can be two apps – some operate
only on one operating system, and some can be used on any operating systems. For instance,
facetime and iMessage services can only be on iPhones, while WhatsApp and FB are available
on all operating systems.

Also, where the app is being used predominantly is important question. The primary or dominant
nature of usage of app has to be seen – WhatsApp is predominantly used on mobiles. WhatsApp
is primarily an OTT app linked to smartphone and mobile number. While FB is a social
messaging app where a lot of people can be connected simultaneously.

Relevant market is therefore market for OTT messaging apps through smartphones in India. the
second relevant market is market for UPI enabled digital payment apps in India.

Question of dominance – CCI noted that data provided by informant showed that WhatsApp is
the most widely used app for social messaging, followed by FB messenger, which owns the
former. There was a condition that FB and WhatsApp can merge together only when they agree
not to share data with each other. However, this was violated by FB in a few years only. Also,
FB and WhatsApp add to the combined strength of the group. Therefore, WhatsApp was found
to be relevant on the basis of FB’s relative strength and dominance. Thus, relative strength was
acknowledged as part of economic strength of WhatsApp.

Abuse of dominance – question was in relation to usage of app. Whenever WhatsApp pay comes
with WhatsApp, there is no requirement for the consumer to use the services of WhatsApp pay.
Unless the app is used, the question of abuse of dominance does not come into picture. Also, the
app was in the beta phase and it hadn’t yet come out. Therefore, it doesn’t amount to abuse of
dominance as the choice to use any payment app remained with the consumers.

This case is important because looking at the relative strength of two companies, CCI
acknowledged that companies were dominant in the market.

Till now, we were focussing on digital market and looking at abuse of dominance there. Now we
would look at the traditional markets.

If we are evolving the jurisprudence of consumer welfare standard – whenever quality has to be
provided in respect of products and services, it also forms part of consumer welfare. This is an
evolving jurisprudence of attaching consumer privacy to it.

Coal India Abuse of Dominance Case – there were two reasons for nationalizing coal sector:

i. To make necessary investment to meet future demands, as private sector was unable
to meet the demand.
ii. Private sector was using inefficient and unscientific techniques.

Thus, sector was nationalized. The Coal India Limited Company (Coal India') was created and
all the existing entities managing the coal sector were brought under its aegis. Today. (in its own
words) it "produces around 84% of India's overall coal production" and "feeds 98 out of 101 coal
based thermal power plants in India".

Thus, there is an apparent dominance in the supply of coal sector in India.

Supply of Coal Agreements are regulated by Ministry of Power and Central Electricity
Authority. The coal supply agreements drafted by these were unilateral with terms such as
deemed delivery quantity clause – Coal India had free reign to supply any quantity it decided,
and the purchaser was bound to accept. This was because there was no proper substitute for the
supply of coal.

Unfair terms – substantial inconsistencies between the billed quality grade and the actual
supplied quality were there. Since demand was high, there was no negotiation and no way to get
out of agreement. This resulted in severe losses for companies to which Coal India supplied coal.
Coal India also stopped the practice of checking quality of coal.
Matter went to CCI. CCI first discussed geographical market. Relevant geographical market was
sought to be the entire global market and not Indian market. But this was rejected, and relevant
geographical market was considered to be India where Coal India was dominant.

The substitutes was one of the joint ventures of Union of India and AP government, but it catered
to only 2% market. Thus, it could not be considered substitute. Also, informants on the other
hand established the fact that the Indian thermal plants had been built to specifications suited for
Indian supplied coal, allowing room for very little imported coal. It also noted that the imported
coal used by these companies was as a result. of an imposition by Coal India itself. The fact that
Imported Coal. being subject to a number of duties etc. resulting in much higher costs, was also
brought to the notice of the CCI.

The Commission did not accept the arguments of Coal India. showing how the homogenous
market definition under Section 2(d) was defeated when the conditions of production and supply
were itself different in India viz. abroad.

Similarly, with regards to the Relevant Product Market the Commission noted that non coking
coal was the raw material in production, and considering its structure and functions, did not have
any substitutes. The Commission did not note “any serious objections” to this and interpreted the
relevant product market to be non-coking coal.

Thus, different gradings of coal is required for thermal power plants and for cooking. Thus, no
close substitutes were there.

Dominant position – the ability of a firm to operate independently of market forces is an

indicator of dominant position. Coal India attempted to prove that it did not have a dominant
position, by showing that it lacked the ability to operate independently of market forces as its
actions were constrained/dictated by stakeholders such as the various Ministries and other State
entities. This was attempted to have been painted out to be a “lack of commercial freedom”.

As the stakeholders were the state and government entities, there was no freedom for Coal India
to determine prices, as it came as imposition of government.

This was however, countered, on account of the monopoly status granted to it as a result of the
Nationalisation Act. While the existence of the joint venture between the Union of India and
Government of Andhra Pradesh, producing coal, their market supply did not make enough of a
dent on the market share of coal india and its subsidiaries.

Secondly, even the policy making machinery claimed by Coal India to be stakeholders, were
found to exert either minimal control or control which did not affect market power. While
rejecting Coal India's arguments, the CCI noted that the priced charged by the unregulated coal
sector, were higher than unregulated markets, and there was a surge in profits once the New Coal
Development Policy was implemented.

Thus, the control of stakeholders was minimal and did not affect the market power of Coal India.
Stakeholders were not involved with what quantity of coal was provided to purchasers and on
what terms. This had to be on fair and reasonable terms. But here, contract was unilateral.

Abuse of dominant position – commission observed that a number of instances of abuse had
occurred. CCI found that the historical backdrop of formation of the FSAS pointed to the fact
that the drafting in its entirety, had been done by the Ministry of Power and CEA (Central
Electric Authority of India). There was a complete lack of involvement from any of the
shareholders. The terms were therefore accepted to have been a result of unilateral drafting.

Secondly, with respect to grading of coal, the price factor came into issue when there is import
(as higher duty had to be paid on import). But in domestic supply, quantity and grading of coal
comes into issue. There were several allegations of unfair terms in news FSAS and general
unfairness of terms. While purchasers operating under older FSAs had the right to ask for a "re
declaration of grade" if there was consistent variation in grade for over three months, purchasers
under the new FSAs did not have this remedy. The lack of this remedy was found to be
contravening Section 4(2)(a)(i) of the Competition Act.

The CCI however, was most critical of Coal India's conduct with respect to grading and
sampling of coal. The CCI found the findings of the DG "unassailable" and found that Coal India
had offered no acceptable explanation. The Commission found that the requirement of the
Purchaser to pay the transport cost, freight etc. of the wrongly graded coal supplied, as
inexplicable. Surprisingly, though, the Commission seemed to make a reference to "industry
practice". This was done by showing the practice of SCCL (the joint venture between the Union
of India and Government of Andhra Pradesh).
Thus, CCI found that Coal India was abusing its dominant position.

In this case as well, quality was being judged. Thus, in whatever service or issue concerned,
quality is entertained as a consumer welfare standard.

XYZ v. Grasim Industries – If apart from contractual obligations, if any information is

demanded, how can it be seen as abuse of dominance. Grasim was a dominant market supplier
for Viscose Staple Fibre [VSF] to spinners in India. This is a recycled, chemically treated fibre
which is breathable. It does not have any close substitutes.

Here, not exclusionary, but exploitative conduct was concerned with. Following allegations were
there:

1. Discriminatory pricing and non-transparent and discriminatory discount policy within

domestic customers and also between domestic and international customers, and
2. Imposing supplementary obligations as condition precedent to conclusion of contracts for
supply of VSF to its customers such as seeking production details and poof of export
from the spinners etc. The obligations are imposed as condition precedents and they have
nothing to do with the contractual obligations.

If there is single company, in the same month, for almost similar quantity, how can there be
discriminatory pricing.

There was non-transparent discount policy, which was not based on the quantity of material
being bought. This was coupled with Grasim being the only supplier of VSF. If an entity is the
sole supplier, it is its responsibility to ensure that they are not doing anything anti-competitive.

Here, discriminatory pricing was there which was unfair. Here, relevant market was only for
VSF Fabric. In such case, it had to be ensured that there was no discriminatory pricing. Here,
unless there is a reasonable standard for rationalizing the discount provided by distributors and
intermediaries, the discount policy should be similar, as they are purchasing VSF at similar
prices.

Also, there was no question as to any contractual obligations.

It was alleged that Grasim was charging dissimilar prices from different customers in the
domestic market and the same practice was being followed between domestic customers and
foreign customers. As per the information, Grasim was selling VSF at lower rates to its
international customers and the same product was sold at a much higher price to domestic
customers.

Secondly, informant alleged that Grasim had segmented the domestic customers into separate
categories:

i. domestic customers who manufacture and supply yarn for the domestic market; and,
ii. domestic customers who manufacture and yarn for export (deemed exporters).

It was further alleged that Grasim forces its domestic customers to submit their monthly yarn
production data for calculating the discount rate applicable to them and follows a non-transparent
practice while invoicing and refuses to disclose its discount policies to its customers.

There were no substitutes to the product as no one else supplied this fibre.

On abuse of dominance – Grasim had 85% market share. The DG observed that there was
rampant discrimination amongst the customers of the same segment who were buying the same
product for the same month in nearly the same quantity without any justifiable explanation.

Parallel prices or high discounts can be there, but they have to be justifiable. Here, when same
sector, same quality, same time period was there, so how come there were different discounts.

Thus, it was held that Grasim was abusing its dominant position. CCI held that discounts given
had no nexus with the production.

VSF is a man-made fibre. It was alleged that Grasim was charging dissimilar prices from
different customers in the domestic market and the same practice was being followed between
domestic customers and foreign customers. As per the information. Grasim was selling VSF at
lower rates to its international customers and the same product was sold at a much higher price to
domestic customers.

The informant alleged that Grasim had segmented the domestic customers into separate
categories:

(i) domestic customers who manufacture and supply yarn for the domestic market; and,

(ii) domestic customers who manufacture and yarn for export (deemed exporters).
It was further alleged that Grasim forces its domestic customers to submit their monthly yarn
production data for calculating the discount rate applicable to them and follows a non-transparent
practice while invoicing and refuses to disclose its discount policies to its customers.

On relevant market, it was observed that VSF is man-made fibre, and relevant product market
is therefore only man-made fibre. It is not substitutable with polyester staple fibre and cotton
which form different product market. DG observed rampant discrimination amongst customers
of the same segment who were buying the same product for the same month in nearly the same
quantity without any justifiable explanation.

On dominance, commission observed that Grasim's market share has been consistently above
87% during the relevant years and the remaining requirement of VSF (7%-13%) was met from
imports.

In addition, the Commission observed that during 2016-17 Grasim produced about 3.65 Lakh
MT of VSF out of which 2,07 Lakh was sold in India which indicated that a significant volume
of production was sold within the relevant market. Grasim was found to be the flagship company
of Aditya Birla Group in India with controlling stakes in many large and small companies. The
Commission also observed that the revenue and assets of the group companies of Grasim have
increased over the years. Accordingly, the Commission agreed with DG's finding that Grasim
was a dominant player.

Thus, market share was looked at. Also, for what time it sold in India, and what part of volume
goes to Indian consumers. Third, the controlling group and its size, and the increase in revenue
over the years.

On abuse of dominance, the CCI, after analysing the sales of Grasim in the month of May 2013,
May 2015 and April 2016 observed that customers were charged different base rate per Kg and
net realise valué per Kg even for transactions involving the same month, the same plant, the
same grade and the same denier.

CCI found that this conduct indicated losses to the big buyers as the customers purchasing large
quantities were paying higher base rate and net realises value per kg than customers purchasing
lesser quantity. It was further observed by the CCI that the domestic buyers of VSF were unclear
about the base rate and the discount applicable to them as well as whether the same base rate and
discount were applicable to others as Grasim used to communicate these confidentially to each
spinner. Therefore, there existed information asymmetry which adversely affected the spinners
ability to supply yarn at a competitive price.

CCI observed that the customers of Grasim i.e. the spinners were heavily dependent on Grasim
due to the absence of an alternate source of supply and were not in a position to
bargain/negotiate the policies adopted by Grasim, even if they were inherently discriminatory or
unfair.

Accordingly, the CCI concluded that the plethora of discount parameters, frequent changes
effected to pricing and discount policy coupled with non-transparency of the same to its buyers
indicated the unilateral and abusive behaviour and found Grasim to be imposing unfair and
discriminatory price in sale of VSF upon its customers in violation of Section 4(2)(a)(ii) of the
Act.

Whether breaching of privacy is a consumer harm and what role competition law plays in
this?

MNCs such as Facebook and Google are reaping benefits from their huge repository of high-
value personal data, which has not only enabled them to provide better quality services to their
customers through targeted advertising but has also positioned them as a dominant player in their
respective sectors.

Data which is specifically given to a particular platform is a valuable data. As Facebook has data
of itself and WhatsApp, it has a huge amount of data available with it. Such data is sensitive, but
data can be sold or leveraged by the company, making it very powerful.

Concerns are with respect to commercial value of data and how the company is using the data.
Company can sell the data, use data for targeted advertising (this forms exclusionary conduct
rather than exploitative conduct, as it is made difficult for other competitors to compete).

CCI took a suo motu cognizance of the Facebook-WhatsApp merger. In January, it was said that
WhatsApp will share data with Facebook. If users do not want this, they can opt out of
WhatsApp. Thus, it was a take it or leave it policy and users had to accept data sharing with
Facebook. CCI took cognizance of this when it was reported in early January through various
media reports that WhatsApp has updated its privacy policy via which it is made mandatory for
users to accept the terms and services for them to retain their respective WhatsApp accounts. It
has also stated that it will now share users’ personal information with its parent company
Facebook and its subsidiaries. This policy is in stark difference from the previous one where the
consumers were given choice whether they want to share their personal WhatsApp data with
Facebook.

Also, since WhatsApp pay has come up, WhatsApp would compete as a messenger and payment
app both.

In the prima facie opinion formed by CCI, the said take-it-or-leave-it nature of privacy policy
and terms of service of WhatsApp and the information-sharing stipulations mentioned therein,
merits a detailed investigation because of the market position and market power enjoyed by
WhatsApp, stated the CCI order. This was taken in abuse of dominance.

Under the Indian Competition Act, abuse of dominance can only be held to occur when a
dominant company is abusing its position to conduct some exploitative and exclusionary
conducts in the market for its favour. Analysing and examining section 4 of act CCI would first
have to prove that WhatsApp is dominant. Commission noticed in Harshita Chawla case that
Facebook and WhatsApp are group entities and though they may operate in separate relevant
markets, their strengths can be attributed to each other’s positioning in the respective markets in
which they operate.

CCI also noted that the data provided by the informant showed that WhatsApp messenger is the
most widely used app for social messaging, followed by Facebook Messenger in the relevant
market delineated by the Commission and is way ahead of other messaging apps like Snapchat,
WeChat etc. showing its relative strength. Further, WhatsApp messenger and Facebook
Messenger are owned by the same group and therefore do not seem to be constrained by each
other, rather adding on to their combined strength as a group. Accordingly, owing to its
popularity and wide usage, for one-to-one as well as group communications and its distinct and
unique features, WhatsApp was found to be dominant. Hence, an investigation into the alleged
abusive conduct seems a logical extension.
Under Section 4, the Commission is required to establish a well-reasoned and legally sound
nexus between consumer harm and privacy violations for establishing that the exploitative
conducts of WhatsApp amount to an abuse of dominance. Consumer harm and consumer welfare
principles have economic interface with competition law. But till now, privacy violations have
not been retained in competition law.

The Commission would need to answer the elusive question of how the mandatory sharing of
data by WhatsApp (the dominant entity in the present context) with its group companies can be
considered exploitative. How to show sharing of data under single economic doctrine with a
group company amount to abuse of dominance. As there was always a chance of stopping the
merger, which was not done. And now, the sharing of data is sought to be prohibited.

Establishing the same might prove particularly problematic because ethically two companies
belonging to the same group can share data amongst themselves. The data-sharing aspect of the
amended privacy policy being an internal policy of the company, thus if scrutinised by the
commission as imposing unfair conditions will need to prove specific violations of any legal
provision under section 4, which does not exist within India at present. There is no provision
which debars an entity to share data with another group entity. Rather, single economic entity
doctrine treats them as one entity only.

The next question which the commission would have to consider is, whether it is the aggregation
of data that entails abusive conduct or whether it is the wrongful manner, in which the personal
data that is being aggregated is amounting to abusive conduct.  Data collection cannot be
stopped. But it is the manner in which data is collected where the competition law can intervene.
This is synonymous with the stance of US and EU where the wrongful manner of data collection
and unfair advantage taken by big technological firms is sought to be curtailed. As accumulation
of data would be done by every entity.

It will also need to address the question regarding whether these companies with market power
have taken due permission from the consumers to aggregate their data in that cases will data
aggregation will be violative of competition laws?

Looking at the exclusionary conducts, it must prove that a dominant undertaking aimed at
depriving the rivals of the data. Now, if the facts are to be analysed, the user of WhatsApp was
adequately informed about the changes to the existing privacy policy in a detailed fashion, along
with the disclaimer that non-acceptance of the same would constitute deactivation of the account.
The entire process followed here, is consistent with the principles of the Competition Law. As a
choice is given, problem is that competition authority would have to see that the usage of
WhatsApp out of which opt out is provided, has become an essential facility which cannot be
done away in the market of messaging. Because these companies are so big, they cannot force
their consumers to have a privacy violation.

Thus, it would be constitutional law with privacy violation read with competition law that would
come to address this situation, rather than data protection with competition law, as we do not
have adequate law for data protection.

COMBINATIONS – SECTION 6

Any acquisition, merger or amalgamation of enterprises in the market. Concerns arise as to

whether such combination is anti-competitive. First, there is one less competitor in the market,
and second, the combined market power result in the entity becoming dominant player in the
market.

The aim of Competition Act is not to prohibit such combinations, but to regulate them.
Competition regulatory authority should have a forward-looking analysis i.e., whether the
combined entity can cause anti-competitive effect, AAEC, or consumer harm in the future.

Too big to fail theory – the government and competition authorities should guard against
combinations which would be too big to fail. We have various thresholds in this regard.

Horizontal combinations

They happen in the same level of supply chain. It has the following effects:

Unilateral, non-coordinated effects – when, as a result of combination, competition between the

product’s combining firms is eliminated. There is removal of some competitive constraints. The
critical issue is how to differentiate between the economically efficient competitive constraints
from the uneconomic ones.

Whenever horizontal merger happens – either the combined entity colludes with other
competitors to fix the prices
Vertical combinations

People in the supply chain are acquired. It is beneficial for the consumers in the market. This has
a positive impact on consumers by creating a price cut or creating more and more products for
consumers.

Conglomerate combination – combination between firms that produce different products. They
may be related products, but are in different markets. They belong to two entirely different
industries. They do not have any effect on the competition.

Regarding threshold limits, transactions where the target enterprise either holds assets of less
than INR 350 crores in India, or generates turnover of less than INR 1000 crores in India, are
exempted from the mandatory pre-notification requirement.

Timeline for combination: the trigger event for merger is the board approval in this regard.
After 30 days, X and Y will file details of merger with CCI. Form 1 for 15 lakh fees. After 30
days, CCI will investigate whether merger causes AAEC or not. If yes, CCI files form 2 with
fees of 50 lakhs.

Over the next 180 days, DG then conducts an investigation and submits his report. After DG
report, CCI can either confirm the merger, reject the merger or modify or impose restrictions on
the merger. For instance, in merger of Facebook and WhatsApp, Germany imposed restriction
that they cannot share data with each other.

Similarly, when PVR acquired DLF cinemas, CCI put a condition that in the next 5 years, PVR
cannot acquire any other multiplexes.

While looking at AAEC, we also see whether there is abuse of dominance. Such abuse is sought
to be checked through these modifications and restrictions.

Gunjumping – when the parties to a merger meeting the applicable jurisdictional thresholds do
not notify the transaction to the relevant competition authority.

Threshold limits for triggering section 5

There can be three categories in this regard:

1. When X and Y both are enterprises, both are present in India, or one is outside India and
other in India, and one company is investing in Indian entity. We are only concerned with
in bound mergers i.e., resulting entity is in India.
2. When X and Y are group companies.
3. When a person already has an investment in a company, and investment is increasing in
such a manner that there is majority shareholding, or there is acquisition of control in a
manner in which person can affect the decisions.