Competition Act

-​ Vertical and horizontal agreements - kinds - Particularly Associations - which creates

barriers in markets
-​ TU activities not covered - however exceptions if they effect ,market
-​ Case - Travel agent associations barred members dealing with singapore airline
tickets - CCI still fined - In the matter of Uniglobe Mod Travel - 03/2009
-​ Abuse of dominance is IMP
-​ Comp law 10-15 marks

COMPETITION LAW NOTES

Competition leads to competitiveness. Competition encompasses a market and competitiveness
is amongst firms. Perfect competitiveness can be anticompetitive because of collusion. We
study the relation between the players in the market

What is market failure?

Market failure occurs when the market fails to give efficient allocation of resources, due to
non-fulfilment of any of the above conditions.
It is a scenario where individual pursuit of self-interest leads to inefficient results – which can be
improved upon from a societal point of view.
Government can play a crucial role to improve the inefficient market outcomes.

Causes of Market Failure -

1. Nature of Market: inefficiency and externalities.
2. Nature of Goods: public goods lead to free riding. [BRDR calls public parks freeriding –
belongs to no one and is not maintained by anyone]

3. Nature of Exchange: insider information leading to market crashes. Asymmetric information.

1
Moral hazard: overinsurance and underinsurance – the lack of incentive to behave rationally as
the cause of irrational behaviour are not internalized because of hidden characteristics. Marketis
not correcting itself. Market for lemons – presence of bad lemons increases the risk for
purchasing other lemons

4. Externalities: Action on the wellbeing of another which is uncompensated. Regulators use

command and control – do this directly; and nudging and signaling – top 1000 need to do ESG.
There can be policy measures to internalize these externalities.

The ‘Nine Principles’ of Competition Policy are:

I. Foster Competitive Neutrality between public and private sector enterprises
●​ In cases of friction between protecting IPR and Competition - CCI decision will prevail
over IPR but CCI has mandate to prevent IPR. However if you do not protect IPR you
will kill innovation. Therefore Need to balance comp and IPR.

●​ Can be allowed to bypass competition for overriding concerns such as the environment.
In India
●​ trade unions are exempt from competition law – unlike in the US. Competition policy
restricts its interaction with labor.

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 ●​ Comp law is one of many answers to market distortions - However -
○​ Cannot curb market distortions emanating from policies and practices of
government (central as well as states)
○​ Examples: government procurement policy and rules, anti-dumping measures,
reverse tariff escalation, public sector policy, SSI reservation policy, state excise
policy
○​ Cannot facilitate ex-ante assessment of government policies to check market
distortionary elements

II. Ensure Access to Essential Facilities

III. Facilitate easy movement of goods, services and capital

IV. Separate policy-making, regulation and operation functions

V. Ensure free and fair market process

VI. Balance competition and Intellectual Property Rights (IPRs)

VII. Ensure transparent, predictable and participatory regulatory environment

VIII. Notify and publicly justify deviation from competition principles - CCI has somewhat
allowed green companies to evade competition law principles - thus public interest exceptions
are allowed to operate

IX. Respect for international obligations

MOVING ON
Schools of thought in competition law -

1.​ Harvard -

3
In the US the first school of thought was the Harvard School of thought - if there is economic
concentration of power, if we find you to be holding certain relevant areas in a particular market
- you will be guilty of antitrust violations this was a structural theory
•​ This theory is more protectionist

Note - It mirrors the approach taken by the MRTP Act - protectionist towards smaller players

•​ One drawback is that the translation of economies of production - which they term as
concentration of economic power - the benefit of cost reduction is not transferred to the
•​ US v Aluminium Co. of America - ALCOA was found liable for monopolizing the Al
manufacturing market - taking advantage of its economies of scale by increasing its production
capacity it was able to capture a large portion of the market - this was penalized for being
aggressive competition even though it benefited customers
•​ At the same time in 1963 - the government persuaded the Supreme Court to preclude a
merger between two banks in the Philadelphia area that together held only thirty percent of the
relevant market. The Court deemed irrelevant the defendants' arguments that the merger might
have enhanced their ability to provide better services to their Philadelphia customers.

2.​ Chicago School of thought -

merely removing the big player in the market will not solve the problem
•​ The courts and agencies now required specific proof of specific anti-competitive effect
•​ Critique of the Chicago school of thought is essentially that judges and courts are not
technically competent to decide these issues

MOVING ON

MRTP Act
●​ Twin goals
○​ Markets have to be protected from concentration of economic power
○​ Consumer welfare
●​ Under MRTP Act the general registration of agreements is necessary - not necessary
under Competition Act

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 ●​ MRTP Act governed restrictive trade practices and unfair trade practices - under
Competition Act it was realized that unfair trade practices were the domain of consumer
act - therefore the two must be distinguished
●​ Abuse of dominance was required to be proved under Competition Act
●​ Size of the firm: not relevant under the Competition Act; it is a determining factor under
the MRTP Act
●​ MRTP Act - concerned with consumer interests at large - consumer interest is the goal;
the Competition Act is more concerned with market players and market correction -
public interest is the goal
MRTP Act - advisory role; CA had punitive, preventative etc powers

Another difference between MRTP Act and Comp Act

●​ Per se rule followed in MRTP Act - Under per se rule, the acts or practices specified by
the Act as deemed or presumed to have an appreciable adverse effect on competition are
by themselves prohibited. It is unnecessary, under the per se rule, if they limit or restrict
competition (Basically you dopnt need to demonstrate an Adverse effect on comp under
MRTP)
●​ Rule of reason - CA - you have to be in connivance or collusion

Another difference -
the MRTP Act also looks at the securities market, real estate - the Consumer Protection
Act does not cover shares, securities, only housing was covered
Raghavan Committee said that there was a lot of forum shopping because of the
difference between these two acts

Another difference - scope of "enterprise"

●​ MRTP
●​ Consumer protection law - only a person who buys a good/service
●​ CA - 2(h) broadens the scope of enterprise - against who a complaint can be made and
who can make a complaint - individual, company, HUF etc - even if it is an MNC that has
its headquarters outside India - it is the effect that matters - if it has an anti-competitive
effect in India then it is within the ambit
○​ Exception is made for sovereign functions
○​ Competitive neutrality - competition in altering market structure is prohibited for
public and private companies - only sovereign functions are exempt

Competition Act deals with unfair trade practices and restrictive trade practices - MRTP
only dealt with the latter

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DLF v. CCI - CCI 1/2014 (4 Jan 2017) - Basically on the different scope of MRTP and Comp
Act - now consumer matter etc that used to fall within MRTP don't fall under Comp Act
When MRTP transitioned to the CCI - the case got transferred to the CCI
●​ Facts: The real estate agents when they promise a commodity they mention some
specifics like amenities - after the investment was made a lot of changes were made to the
specifications - the R Committee said that ideally the case should have been dealt under
the ambit of consumer protection and not anti-competition - but because of forum
shopping CCI ruled
●​ The Committee therefore felt it was important to separate these regimes and then move
towards the next phase in the competition regulation in India - hence the CA

Brahmadutt v. UOI 2005 2 SCC 431 case - On establishment of a Apellate body for Comp act
decisions - COMPAT
●​ The DG under MRTP could take suo moto cognisance of offences - the CCI does not
have this power
●​ The challenge was on the basis that the CCI was a judicial body with adjudicatory powers
- hence it must have some appellate body for redressal also - the COMPAT (Comp
Appellate Tribunal) was established for this reason - the case held that a single body
cannot have legislative, executive, judicial and appellate jurisdiction
●​ There was a need to have a technically sound appellate body

MOVING ON

COMPETITION ACT 2002

An Act to provide, keeping in view of the economic development of the country, for the
establishment of a Commission to prevent practices having adverse effect on competition, to
promote and sustain competition in markets, to protect the interests of consumers and to ensure
freedom of trade carried on by other participants in markets, in India, and for matters connected
therewith or incidental thereto.

DEFINITIONS
Note - ​Appreciable Adverse Effect on Competition (AAEC) is not defined - by precedent - the
effect that your behaviour has on the market is the determinant for AAEC.

Note - Definition of Agreement is wider in CA 2002 than contract act - includes even collusive
behaviour qualifies as an agreement- no need for documentation/formally putting it into writing.

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2(c) - “cartel” includes an association of producers, sellers, distributors, traders or service
providers who, by agreement amongst themselves, limit, control or attempt to control the
production, distribution, sale or price of, or, trade in goods or provision of services

-​ Merely on the presence of a cartel the CCI can take action

(r) “relevant market” means the market which 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;

(s) “relevant geographic market” means a market comprising 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;

(t) “relevant product market” means a market comprising all those products or services which
are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of
the products or services, their prices and intended use;

•​ Competitive/dominant behaviour must be located and investigated within the relevant

market
Note - 3 types of efficiencies are aimed for in any market -
•​ Allocative efficiency - efficiency in allocation
•​ Productive efficiency - minimum effort
•​ Dynamic efficiency - this is what competition law is concerned with

MOVING ON

SECTION 3 - Anti-competitive agreements

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3.

(1) 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 within India.

(2) Any agreement entered into in contravention of the provisions contained in subsection (1)
shall be void.​

(3) 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
identi-cal or similar trade of goods or provision of services, which—

​ (a) directly or indirectly determines purchase or sale prices;

​ (b) limits or controls production, supply, markets, technical development, investment or
provision of services;
​ (c) 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:​

​ Provided that nothing contained in this subsection shall apply to any agreement entered
into by way of joint ventures if such agreement increases efficiency in production, supply,
distribution, storage, acquisition or control of goods or provision of services.

Explanation.—For the purposes of this sub-section, “bid rigging” means any agreement,
between enterprises or persons referred to in sub-section (3) engaged in identical or similar

8
production or trading of goods or provision of services, which has the effect of eliminating or
reducing competition for bids or adversely affecting or manipulating the process for bidding

(4) Any agreement amongst enterprises or persons at different stages or levels of the production
chain in different markets, in respect of production, supply, distribution, storage, sale or price of,
or trade in goods or provision of services, including—

​ (a) tie-in arrangement;

​ (b) exclusive supply agreement;
​ (c) exclusive distribution agreement;
​ (d) refusal to deal;
​ (e) resale price maintenance,

shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to

cause an appreciable adverse effect on competition in India.

Explanation.—For the purposes of this subsection,—

​ (a) “tie-in arrangement” includes any agreement requiring a purchaser of​

goods, as a condition of such purchase, to purchase some other goods;
​ (b) “exclusive supply agreement” includes any agreement restricting in any manner the
purchaser in the course of his trade from acquiring or otherwise dealing in any goods
other than those of the seller or any other person;
​ (c) “exclusive distribution agreement” includes any agreement to limit, restrict or
withhold the output or supply of any goods or allocate any area or market for the
disposal or sale of the goods;
​ (d) “refusal to deal” includes any agreement which restricts, or is likely to restrict, by
any method the persons or classes of persons to whom goods are sold or from whom
goods are bought;
​ (e) “resale price maintenance” includes any agreement to sell goods on condition that
the prices to be charged on the resale by the purchaser shall be the prices stipulated by
the seller unless it is clearly stated that prices lower than those prices may be charged.

(5) Nothing contained in this section shall restrict—

9
 ​ (i) the right of any person to restrain any infringement of, or to impose reasonable
conditions, as may be necessary for protecting any of his rights which have been or may
be conferred upon him under—
​ (a) the Copyright Act, 1957 (14 of 1957);
​ (b) the Patents Act, 1970 (39 of 1970);
​ (c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks
Act, 1999 (47 of 1999);
​ (d) the Geographical Indications of Goods (Registration and Protection) Act,
1999 (48 of 1999);
​ (e) the Designs Act, 2000 (16 of 2000);
​ (f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);
​ (ii) the right of any person to export goods from India to the extent to which the
agreement relates exclusively to the production, supply, distribution or control of goods
or provision of services for such export.

—--------------
SECTION 3(3) - VERTICAL AGREEMENTS
●​ Section (3) Speaks of horizontal agreements - where two
companies/associations/manufacturers/retailers have an agreement - they are
homogenous and competitive entities

●​ It details four specific types of agreements

○​ Price fixing
○​ Output restriction
○​ Market allocation
○​ Bid Rigging
■​ JVs which increase efficiency are an exception to the above,

●​ Every mode of behaviour which involves a meeting of minds must be investigated into -
●​ The section has to be read with S 19 - to understand what is meant by appreciable
adverse effect on competition (AAEC)​

19 (3) The Commission shall, while determining whether an agreement has an appreciable
adverse effect on competition under section 3, have dueregard to all or any of the following
factors, namely:—

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 ​ (a) creation of barriers to new entrants in the market;
​ (b) driving existing competitors out of the market;
​ (c) foreclosure of competition by hindering entry into the market;
​ (d) accrualofbenefitstoconsumers;
​ (e) improvements in production or distribution of goods or provision of services; or
​ (f) promotion of technical, scientific and economic development by means of production
or distribution of goods or provision of services.

●​ One main difference between horizontal (3(3)) and vertical agreement (3(4)) - there is a
preponderance of probability threshold wrt cartels - if there is a cartel there is a
presumption that anti-competitive activities - therefore circumstantial evidence is used

Note, in Vertical agreements – there is no assumption of AAEC. The burden is on CCI to prove
AAEC.

1. Rajasthan Cylinders and Containers Ltd. v. Union of India and Ors. [2018(13)SCALE493]
Taken up by CCI – market has many many buyers but very few sellers. This was upheld by
COMPAT that there was an anti-competitive case. SC overturned it – meeting of minds in a
unique market.

11
12
Note - Standard of proof in Horizontal Agreements is Preponderance of probabilities.
Basically held that given the nature of the industry, even if there was an agreement (which was
not found), such would not have an adverse impact on competition.
Note that SC decisions back and forth on this issue has created certain compliance complexity -
unsure what standards of competition are applicable.

2. BID RIGGING CASE INSURANCE COMPANIES -

The CCI found that:
1.​ The insurance Companies did not constitute a single economic entity

The Insurance Companies argued that since each of them was wholly owned by the Government
of India and controlled and managed through the Department of Financial Services in the
Ministry of Finance, they constituted a single economic entity and that therefore, an allegation of
cartelisation was unsustainable against them.

The CCI held that the Insurance Companies did not constitute a single economic entity because
the regulatory intent of the Government of India with regard to the Insurance Companies was for
them to act independently and to compete with the private operators in the insurance sector to
offer better services to consumers. Further, each of the Insurance Companies had placed
separate bids in response to the Tender and all decisions with regard to the bids were taken
internally at company level without any ex ante approval of or ex post notification to the
Ministry of Finance.

It was also observed that the Ministry of Finance did not exercise de facto control over the
business decisions of the companies and as such cannot be considered as a single economic
entity. Ergo, the present case is a stark example of supervisory control as opposed to regulatory
control on part of the Government of India.

The decisions of the CCI and the COMPAT show us that a common shareholder, management or
enterprise would not be sufficient for the SEE defence to apply. It is evident that the defence of
“single economic entity” will be gauged on a transaction basis and not on an entity basis.

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 2.​ The conduct of the Insurance Companies amounted to ‘bid rigging’ and resulted in the
contravention of Section 3(1) read with Section 3(3)(d) of the Act

3. Uniglobe Mod Travels Pvt. Ltd vs Travel Agents Association Of India

Three largest travel agent associations of India formed a cartel and colluded against a single
travel agent by collectively boycotting him from the trade association.

2 issues framed by CCI

o​ Whether CCI had jurisdiction - held in the affirmative even though it was an issue in the
aviation sector - important for inter-sectoral issues - it was held because the actions
o​ Whether there was a violation of 3 - this communication by the association had an effect
on ticket prices and therefore qualified as an anti-competitive agreement

CCI held that, if any actions taken by the trade association are consequences of an agreement
which causes or are likely to cause an appreciable adverse effect on competition, the
Commission is empowered to inquire into such acts. On the issue of contravention of section 3 of
the Act, CCI held it has been fully established that the associations, namely TAFI, TAAI and IAAI
by giving a call for boycott against Singapore Airline have contravened the provisions of section
3(3)(b) read with section 3(1) of the Act.

SECTION 3(4) - HORIZONTAL AGREEMENTS

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(4) Any agreement amongst enterprises or persons at different stages or levels of the production
chain in different markets, in respect of production, supply, distribution, storage, sale or price of,
or trade in goods or provision of services, including—

​ (a) tie-in arrangement;

​ (b) exclusive supply agreement;
​ (c) exclusive distribution agreement;
​ (d) refusal to deal;
​ (e) resale price maintenance,

shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to

cause an appreciable adverse effect on competition in India.

Explanation.—For the purposes of this subsection,—

​ (a) “tie-in arrangement” includes any agreement requiring a purchaser of​

goods, as a condition of such purchase, to purchase some other goods;
​ (b) “exclusive supply agreement” includes any agreement restricting in any manner the
purchaser in the course of his trade from acquiring or otherwise dealing in any goods
other than those of the seller or any other person;
​ (c) “exclusive distribution agreement” includes any agreement to limit, restrict or
withhold the output or supply of any goods or allocate any area or market for the
disposal or sale of the goods;
​ (d) “refusal to deal” includes any agreement which restricts, or is likely to restrict, by
any method the persons or classes of persons to whom goods are sold or from whom
goods are bought;
​ (e) “resale price maintenance” includes any agreement to sell goods on condition that
the prices to be charged on the resale by the purchaser shall be the prices stipulated by
the seller unless it is clearly stated that prices lower than those prices may be charged.

15
 ●​ Vertical agreements go upstream or downstream. This occurs at different stages of
production (horizontal are the same stage), products are heterogeneous (horizontal are
homogeneous), and the onus of proof is on the CCI in a vertical agreement
●​ Exception - direct customer is outside the ambit of S 3(4) - limited to different stages of
production
○​ NOT WHAT THE CASE SAYS - Consumer Online Foundation vs Tata Sky
Ltd. & Ors. Main Order, Per R. ... on 24 March, 2011 -
○​ One objection that can be raised is that a consumer is not covered in this
definition. This view is erroneous because person mentioned in the Section
includes both the service provider and the service taker in accordance with
Section 2(l) of the Act. In this particular case, there is an agreement, the service
provider is the DTH operator and the service taker is the consumer.
●​ Standard of proof - Rule of Reason - agreements have to be assessed in both its legal
and economic (if it is done for charity, social purposes etc) perspectives. Requires
ascertainment of facts/features particular to the business.
○​ To assess this, the CCI Looks at S 19(3) to chevl if there is AAEC -

19 (3) The Commission shall, while determining whether an agreement has an appreciable
adverse effect on competition under section 3, have dueregard to all or any of the following
factors, namely:—

​ (a) creation of barriers to new entrants in the market;

​ (b) driving existing competitors out of the market;
​ (c) foreclosure of competition by hindering entry into the market;
​ (d) accrual of benefits to consumers;
​ (e) improvements in production or distribution of goods or provision of services; or
​ (f) promotion of technical, scientific and economic development by means of production
or distribution of goods or provision of services.
​
●​ Here - Here a, b, c are Negative Factors, while d, e, f are Positive Factors. Here the CCI
has to balance the first 3 (or any 1 of the first 3) and the last 3.
○​ Shamsher Singh Kataria v. Honda Siel Case 03/2011 CCI

16
 ○​ However, where such agreements are entered into by a dominant entity, and where
the restrictive clauses in such agreements are being used to create, maintain and
reinforce the exclusionary abusive behavior on part of the dominant entity, then
the Commission should give more priority to factors laid down under section
19(3)(a) to (c) than the pro-competitive factors stated under section 19(3)(d) to (f)
of the Act, given the special responsibility of such firms not to impair genuine
competition in the applicable market.

●​ WHAT IS A TIE IN ARRANGEMENT

○​ (a) “tie-in arrangement” includes any agreement requiring a purchaser of goods,
as a condition of such purchase, to purchase some other goods;
○​ See Sonam Sharma v. Apple Inc 24/2011 CCI
■​ Differentiated tying and bundling - Bundling will most likely not be anti
competitive, however tying is generally anticompetitive.
■​ The term “tying” is most often used when the proportion in which the
customer purchases the two products is not fixed or specified at the time of
purchase, as in a “requirements tie-in” sale. A bundled sale typically
refers to a sale in which the products are sold only in fixed proportions
(e.g., one pair of shoes and one pair of shoe laces or a newspaper, which
can be viewed as a bundle of sections, some of which may not be read at
all by the customers).
■​ Generally, the following conditions are necessary and essential in respect
of anti-competitive tying:

1. Presence of two separate products or services capable of being

tied:

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:

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 3. The tying arrangement must affect a "not insubstantial" amount
of commerce:

●​ WHAT IS AN EXCLUSIVE SUPPLY AND DISTRIBUTION AGREEMENT

○​ (b) “exclusive supply agreement” includes any agreement restricting in any
manner the purchaser in the course of his trade from acquiring or otherwise
dealing in any goods other than those of the seller or any other person;
○​ (c) “exclusive distribution agreement” includes any agreement to limit, restrict
or withhold the output or supply of any goods or allocate any area or market for
the disposal or sale of the goods;
○​ Under section 3(4) of the Act, an exclusive supply agreement is anti-competitive
if it causes or is likely to cause an appreciable adverse effect on competition
(“AAEC”) in India.
○​ Jindal Steel & Power Ltd. v. Steel Authority of India Ltd. and Anr
■​ Accusation of Jindal steal to CCI – SAIL has entered into anti competitive
practices with Indian Railways for providing steal. Ran into murky waters.
[talks about interim oreders – has to be used sparingly] exclusive supply
agreements to supply rails. AoD contrary to 3(4) and 4(1). Competition is
foreclosed when there are a lot of buyers but since there is only one buyer
– competition is not foreclosed. SAIL going directly to SC. It was held that
buyers choice is not a competition issue

●​ WHAT IS REFUSAL TO DEAL

○​ (d) “refusal to deal” includes any agreement which restricts, or is likely to
restrict, by any method the persons or classes of persons to whom goods are sold
or from whom goods are bought;
○​ Refusal to deal is in Shamsher Kataria/Automobile case -
○​ Agreements entered into by car manufacturers included clauses that required
dealers to source their spare parts only from the original equipment manufacturers

18
 and approved vendors. Was of the view – excl supply and distribution agreements
amounted to refusal to deal.
○​ Went on to give 3-4 general criteria

1. Product to which access is sought is indispensable to someone wishing

to compete in the downstream market.

2. Refusal to grant access leads to effective elimination of competition in

the downstream market

3. There is no objective justification for refusal to supply.

●​ WHAT IS RESALE PRICE MAINTENANCE

○​ (e) “resale price maintenance” includes any agreement to sell goods on
condition that the prices to be charged on the resale by the purchaser shall be the
prices stipulated by the seller unless it is clearly stated that prices lower than
those prices may be charged.

Note -

Hub and Spoke Model -

●​ Hub-and-spoke arrangements are horizontal restrictions on the supplier or retailer level

(the “spokes”), which are implemented through vertically related players that serve as a
common “hub” (e.g., a common manufacturer, retailer or service provider). The “hub”
facilitates the co-ordination of competition between the “spokes” without direct contacts
between the spokes.
●​ Hub-and-spoke arrangements may be used to facilitate various types of horizontal
agreements between the “spokes” such as price-fixing and territorial allocation.
●​ The hub has a lot of information which it shares on selective basis with the spoke on the
basis of which they decide how to affect the market

19
 ●​ Becomes relevant in the digital economy where e-commerce companies operate with this
model.
●​ Samir Agarwal v. ANI Technologies case -
○​ It was alleged that Ola and Uber were acting as ‘hubs’ for their respective drivers
(the ‘spokes’) and colluding on prices. More specifically, it was alleged that Ola
and Uber were using their respective pricing algorithms to fix prices between
their drivers thereby facilitating a cartel in contravention of Section 3 of the Act.
○​ It was contended that absent the pricing algorithm, drivers would compete on
prices which, in turn, would prevent them from commanding high prices (as
calculated by the algorithm).
○​ CCI dismissed these allegations and held that for a ‘hub and spoke cartel’ to
exist:
■​ (i) the ‘spokes’ must use a third party platform (or, ‘the hub’) to exchange
sensitive information, including information on prices which can facilitate
price fixing; and
■​ (ii) there needs to be a conspiracy to fix prices, which requires existence of
collusion. CCI then noted that although the drivers may have acceded to
the algorithmically determined prices by the platform (Ola/Uber), it did
not amount to collusion between the drivers.
○​ CCI also did not find any agreement between the drivers per se on the basis of
which they delegated pricing decisions to the platform. Instead, ride prices were
determined by algorithms using multiple factors for each rider (time of the day,
traffic situation, special conditions/events, festival, weekday/weekend) to
determine the demand/supply.

WHAT IS SECTION 3 (5)

S. 3(5) -

(5) Nothing contained in this section shall restrict—

20
 (i) the right of any person to restrain any infringement of, or to impose reasonable
conditions, as may be necessary for protecting any of his rights which have been or may be
conferred upon him under—

(a) the Copyright Act, 1957 (14 of 1957);

(b) the Patents Act, 1970 (39 of 1970);

(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks
Act, 1999 (47 of 1999);

(d) the Geographical Indications of Goods (Registration and Protection) Act,

1999 (48 of 1999);

(e) the Designs Act, 2000 (16 of 2000);

(f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);

(ii) the right of any person to export goods from India to the extent to which the
agreement relates exclusively to the production, supply, distribution or control of goods
or provision of services for such export.

In the intersection between IPR and Comp Law -

●​ S 3 (5) preserves the rights of the IPR holder to prevent infringement and protect these
rights, as long as the restrictions imposed by the agreement are reasonable, ensuring that
competition policy does not interfere with the reasonable use of IPRs. However this
protection is not absolute. If the restrictions imposed are unreasonable the same can be
tried under Competition law.
●​ The section only protects reasonable conditions imposed by the IPR holder and any
unreasonable condition imposed can be dealt under Competition Law.
○​ Amir Khan Pvt Ltd v. CCI 2010 (112) Bom LR 3778

21
 ■​ Bombay High Court held that the CCI has the jurisdiction to deal with
competition cases involving IPR.
○​ Ericsson v. CCI 2016 SCC OnLine Del 1951 -
■​ Looked at a patents case where SC held that the patents act and comp act
must be harmoniously constructed - Held that there is no irreconcilable
conflict between the Competition Act and the Patents Act.
○​ Fickey Multiplex Association v. United Producers and Distributors Forum -
■​ The CCI rightly observed that intellectual property laws do not have any
absolute overriding effect on competition law. The extent of the non
obstante clause in Section 3(5) of the Act is not absolute as is clear from
the language used therein and it exempts the right holder from the rigours
of competition law only to protect his rights from infringement.

MOVING ON!!!!!!

SECTION 4 - Abuse of Dominance

Section 4. Abuse of dominant position

(1) No enterprise or group shall abuse its dominant position.

(2) There shall be an abuse of dominant position under sub-section (1), if an enterprise or a
group

(a) directly or indirectly, imposes unfair or discriminatory—

(i) condition in purchase or sale of goods or service; or

(ii) price in purchase or sale (including predatory price) of goods or service.

Explanation.— For the purposes of this clause, the unfair or discriminatory condition in
purchase or sale of goods or service referred to in sub-clause (i) and unfair or discriminatory
price in purchase or sale of goods (including predatory price) or service referred to in

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sub-clause (ii) shall not include such discriminatory condition or price which may be adopted to
meet the competition; or

(b) limits or restricts—

​ (i) production of goods or provision of services or market therefor; or

​ (ii) technical or scientific development relating to goods or services to the
prejudice of consumers; or

(c) indulges in practice or practices resulting in denial of market access in any manner;
or

​ (d) makes 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; or
​ (e) uses its dominant position in one relevant market to enter into, or protect, other
relevant market.

Explanation.—For the purposes of this section, the expression—​

(a) “dominant position” means a position of strength, enjoyed by an enterprise, in the relevant
market, in India, which enables it to—

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

(ii) affect its competitors or consumers or the relevant market in its favour.

(b) “predatory price” 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 the goods or provision of
services, with a view to reduce competition or eliminate the competitors

(c)“group” shall have the same meaning as assigned to it in clause (b) of the Explanation to
section 5.

WHAT IS AN ENTERPRISE?

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●​ Barmi v. the Board of Control for Cricket in India
○​ The BCCI was an “enterprise” for the purposes of the Competition Act 2002 (i.e.,
subject to competition law principles); The relevant market is the “organization of
private professional cricket leagues/events in India;” The BCCI was dominant in
that market, and BCCI abused that dominant position.
○​ The CCI held that the BCCI was an “enterprise” under the Competition Act 2002
because the BCCI’s role as ICC governing body for cricket in India was
“custodian” for the game and “organizer” of matches. Although the BCCI was a
“not for profit” society, its activities were revenue generating (e.g., it sold media
rights as well as tickets). Accordingly, the CCI held that insofar as their
entrepreneurial (i.e., revenue generating) conduct is concerned, all sports
associations are to be regarded as “enterprises” for the purposes of the Act and
treated “at par with other business establishments.”
●​ Jindal Steel & Power Ltd. v. Steel Authority of India Ltd. and Anr.
○​ The CCI observed that since 85% of the equity stake in SAIL is held by the Indian
government, SAIL will deem to fall within the definition of an “enterprise”. The
main dispute was over the status of IR as an “enterprise” under the Act. The CCI
drew a distinction between the Ministry of Railways (“MoR”) and IR. IR was
considered as a departmental undertaking of MoR engaged in an activity
mentioned under section 2(31) of the Railways Act, 1989 i.e transport services.
After detailed analysis of the provisions under the Railways Act, 1989 and the
structure of IR, the CCI concluded that the MoR is responsible for control over
both government and non-government railways, and there is a clear distinction
between the overall functions of IR and MoR. It further held that MoR performs a
supervisory role vis-à-vis the entire railway operations in India, while on the other
hand, IR performs the economic role of an enterprise controlled mostly by the
government. Therefore, CCI held that IR is an “enterprise” under section 2(h) of
the Act.
○​ The sovereign function of a public undertaking has to be differentiated from non
sovereign function

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 ○​ Apart from the sovereign function, if non sovereign function is an economic
activity – it will fall within the jurisdiction of CCI (barring sovereign function).
○​ Indian railways does non sovereign function in the nature of economic activity -
therefdore is an enterprise.
●​ Lucknow Development Auth v MK Gupta 1994 AIR SC 787
○​ This takes us to the larger issue if the public authorities under different
enactments are amenable to jurisdiction under the Act (Consumer Protection
Act).
○​ When private undertakings are taken over by the Government or corporations are
created to discharge what is otherwise State's function, one of the inherent
objectives of such social welfare measures is to provide better, efficient and
cheaper services to the people. Any attempt, therefore, to exclude services offered
by statutory or official bodies to the common man would be against the provisions
of the Act and the spirit behind it.
○​ A government or semi-government body or a local authority is as much amenable
to the Act as any other private body rendering similar service.

IMP - NEED to read Section 19(4) along with Section 4 to determine WHETHER AN
ENTERPRISE ENJOYS A DOMINANT POSITION

(4) The Commission shall, while inquiring whether an enterprise enjoys a dominant position or
not under section 4, have due regard to all or any of the following factors, namely:—
(a) market share of the enterprise; (NOTE - will have to look at what is a relevant
market)
(b) size and resources of the enterprise;
(c) size and importance of the competitors;
(d) economic power of the enterprise including commercial advantages over competitors;
(e) vertical integration of the enterprises or sale or service network of such enterprises;
(f) dependence of consumers on the enterprise;
(g) monopoly or dominant position whether acquired as a result of any statute or by virtue
of being a Government company or a public sector undertaking or otherwise;

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 (h) entry barriers including barriers such as regulatory barriers, financial risk, high
capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale,
high cost of substitutable goods or service for consumers;
(i) countervailing buying power;
(j) market structure and size of market;
(k) social obligations and social costs;
(I) relative advantage, by way of the contribution to the economic development, by the
enterprise enjoying a dominant position having or likely to have an appreciable adverse
effect on competition;
(m) any other factor which the Commission may consider relevant for
the inquiry.

(5) For determining whether a market constitutes a “relevant market” for the purposes of this
Act, the Commission shall have due regard to the “relevant geographic market’’ and “relevant
product market”.

(6) The Commission shall, while determining the “relevant geographic market”, have due
regard to all or any of the following factors, namely:—
(a) regulatory trade barriers;
(b) local specification requirements;
(c) national procurement policies;
(d) adequate distribution facilities;
(e) transport costs;
(f) language;
(g) consumer preferences;
(h) need for secure or regular supplies or rapid after-sales services

(7) The Commission shall, while determining the “relevant product market”, have due regard to
all or any of the following factors, namely:—
(a) physical characteristics or end-use of goods;
(b) price of goods or service
(c) consumer preferences;
(d) exclusion of in-house production;
(e) existence of specialised producers;
(f) classification of industrial products.

NOTE - To determine Relevant Market - The test in India is the substitutability test. We look at
only the demand substitutability – the market's demand for a substitutable good – diff brands of
goods.

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In the EU we look at supply side substitutability.

Note - Look at definitions under 2(s) and 2 (t), which are to be read with Section 19 to
understand Relevant Market, and 2(t) to understand substitutability.

(s) “relevant geographic market” means a market comprising 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;

(t) “relevant product market” means a market comprising all those products or services which
are regarded as interchangeable or substitutable by the consumer, by reason of characteristics of
the products or services, their prices and intended use;

CASES ON SUBSTITUTABILITY

●​ Sonam Sharma vs Apple Inc. Usa & Ors on 19 March, 2013

○​ 45. In terms of the provisions of the Act, relevant market has to be defined in
terms of product-substitutability from demand perspective.
○​ 48. There are two competing technologies that offer commercial mobile telephony
(i) GSM and (ii) CDMA. The handset to be used for availing service from any of
these cannot be used to avail the service from other. Even from the supply side,
the two are not substitutable in as much as each require set of equipments that are
not compatible with other.

CASES ON ABUSE OF DOMINANCE

●​ Three D Integrated Solutions Ltd. Vs VeriFone India Sales - Case No. 13/2013
○​ The intent of the Opposite Party seems to be to exploit the VAS players by either
restricting them or sharing their revenue because VAS market is highly profitable.

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 Being in a dominant position in the relevant market, the Opposite Party appears
to enhance its position in the downstream market by imposing restrictive clause in
the SDK agreement and by refusing the VAS providers’ access to development
tools like SDK on reasonable terms and conditions.
○​ The Commission concluded that the conduct of Verifone in imposing unfair
condition was in violation of Section 4(2)(i)(a), restricting the provisions of VAS
services as well limiting the scientific and technical development of VAS services
used in POS service was in violation of Section 4(2)(b)(i) and (ii) and seeking
disclosure of sensitive business information from its customers in the downstream
market in order to enable it to protect the downstream market of VAS service is in
contravention of the provisions of Section 4(2)(e)of the Act.
●​ GHCL Ltd. v. M/s Coal India Ltd. - RELEVANT MARKET - IMP FACTORS
○​ Price difference between imported coal and domestically produced coal is huge –
so they were separated and considered as separate markets (idk where in the case
this is said)
●​ Faridabad Industries Association V Adani Gas Limited
○​ Natural gas supplied to diff verticals held as different markets.
○​ On a careful perusal of the material on record, the Commission is in agreement
with classification of consumers made by the DG as the intended use and price of
natural gas for each of these categories of consumers is different.
○​ The price at which natural gas is supplied to these different consumer segments
too being different and the technical considerations involved in supply and
distribution of gas to the different segments being different, further necessitates a
distinction to be made between consumers under the above categories.
○​ 58. In view of the above, the Commission is of opinion that relevant product
market in the present case may be taken as the market of supply and distribution
of natural gas to industrial consumers.
●​ Case No. 07 and 30 of 2012 - Matrimony and Google
○​ Difference made in relevant product market – web search services and url direct
search market were distinguished

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 ○​ The DG concluded that online general web search services and search
advertising did not constitute the same relevant product market on account of
wide variations in the mechanism for generation and display of results and also
the clicking behaviour. These services serve distinct goals and are perceived
differently by the various categories of users, namely, publishers (websites) and
internet users entering search queries.
○​ The Commission finds no reason to differ with the analysis of the DG and agrees
that online general web search services cannot be substituted with direct search
option by typing URL of websites in the internet browsers.

Approaches wrt Abuse of Dominant Position -

1.​ Structural approach (where you examine market structure - monopoly, oligopoly etc) and
2.​ Behaviour approach (where you assess the actual behaviour of the enterprise) - India
favours the latter, hence the emphasis on S 19 evaluation.

Economics tests for Abuse of Dominant Position -

SSNIP test - small but significant non-transitory increase in prices -
Introduces in 1982 US merger guidelines - used to determine relevant market -
The smallest set of products which can profit from a 5% non-transitory increase in prices - if you
are able to increase the prices to this small extent on your own - You have abused dominance

Cellophane fallacy -

U.S. v. E.I. du Pont de Nemours & Co -

Here the product was cellophane and according to the SSNIP test the relevant market for dupont
should be the cellophane packaging market

(FROM ARTICLE)​
The DOJ argued that the relevant market was cellophane and that du Pont had a relatively high

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market share—around 76 percent—of the cellophane market and had taken a number of
exclusionary (monopolization) actions so as to maintain that high market share.

Du Pont, in its defense, claimed that the relevant market was “all flexible wrapping materials,”
which included aluminum foil, glassine, Pliofilm, polyethylene, cellulose acetate, waxed paper,
sulphite paper, vegetable parchment, and kraft paper. In that market, du Pont had only a modest
market share—around 20 percent—and thus (du Pont argued) the company could not have been
engaging in monopolization.

The DOJ appealed directly to the U.S. Supreme Court,4 which granted certiorari. After hearing
the case (in October 1955), the Supreme Court (by a 4-3 decision) ruled (in June 1956) also in
favor of du Pont.

In turn, this determination was based on the courts’ reliance on testimony that du Pont was
constrained in its ability to raise the price of cellophane by the competition that it faced from the
sellers of these other materials: du Pont would lose too many customers to these other sellers if
it tried to raise its price. Thus the courts (at both levels) concluded that the relevant market was
this wider group of products—within which du Pont could not be monopolizing (since it had only
a 20% share of this market).

•In the sixty-five years since the Supreme Court’s majority decision, its reasoning as to the
determination of the boundaries of the market in a monopolization case has come to be known as
the “Cellophane fallacy”: the “fallacy” rests on the majority’s misunderstanding of the
profit-maximization process for a profit-seeking firm: as is explained in every “Microeconomics
101” class, that maximization process entails the firm’s choosing the price-and-quantity
combination (holding other things constant) that yields its highest level of profits in the context
of its current environment.

This outcome will mean that every firm—in any market context—should be expected to describe
itself as currently constrained by its “competitors” and is thereby unable—profitably—to
increase its prices above currently observed levels. And this will be true regardless of whether
the firm is one among many that are producing a near-perfectly substitutable commodity product
and truly has very little ability to affect the going-market price (and thus to affect the price at

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which it can sell) or whether the firm instead produces a unique product over which it has more
discretion with respect to the price— but at some (relatively high) price it loses too many sales,
as some of its erstwhile (or potential) customers decide not to buy from this firm (because the
price is too high) and instead to buy “something else” from “someone else.”

Consequently, if du Pont in the 1950s was a profit-maximizing firm, then—of course—it would
describe itself as unable profitably to increase the price of cellophane above the level that it was
already charging. But this—accurate—description of its market position doesn’t provide any
useful information to help determine whether (or not) du Pont was a monopolist and had
monopolized. This description can characterize du Pont only as a profit-maximizing firm.

IN THIS CONTEXT -

Note that the Raghavan committee stated that market share cannot be the determining factor to
determine abuse of dominance - HOWEVER it is still a factor under Section 19.

Belaire Owners Association v. DLF -

Belaire owners association was the informant that DLF had imposed arbitrary, unfair and
unreasonable obligations through agreements. The CCI held that the relevant market was luxury
apartment segment within the real estate sector. The relevant geographic market - the price that a
person pays for a luxury apartment in Gurgaon could be very different from what is paid in
Noida - this affects the decision because after determining these things, the evaluation of abuse
of dominance would be constrained within such a relevant market. The market was Gurgaon +
luxury apartments. DLF had 45% market share here, which was a big gap from the next
competitor. The CCI found against DLF and asked the DG to proceed with investigation

A.S.Sharma v. Prateek Realtors India Pvt. Ltd., [2016] CCI 21...

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•​ Residential apartments in Noida and Gurgaon was the relevant market

•​ Similar products and competitors were found in the market - hence no AoD - there may
still be consumer rights violations but outside their juris

Going back to Case No. 07 and 30 of 2012 - Matrimony and Google

●​ Parent company of matrimony.com filed a case against google - alleging that It runs its
search engine in a biased and discriminatory manner - Google used to tie their products
with algorithmic advantages.
●​ Google has a benefit in terms of invisible scale in the general web search services market
and the advertising market - this dominant position in each market was used to reinforce
the other
●​ Universal results are there in Google - these used to be manipulated before 2010 - instead
of relevancy it was predetermined - this was deceptive in nature and caused confusion in
the minds of the user - the specialised search service of google, there is a general belief
among consumers that the top results would be the most appropriate - but Google
manipulated this based on its advertising revenue - eg takes it to Googles own flight page
instead of other vertical search engines
●​ Google entered into many intermediation agreements with different websites which
inflicted unfair competition among them (intermediaries)
●​ Huge fines were imposed.

Umar Javeed v. Google 2018

●​ Allegations of the informants (consumers of Android smartphones)

●​ Google mandates smartphone and tablet manufacturers to exclusively pre-install
Google’s own applications or services in order to get any part of GMS in smartphones
manufactured in/ sold in/ exported to/ marketed in India. Such conduct was claimed to
have hindered the development and market access of rival mobile applications or services
thereby violating Section 4 read with Section 32 of the Act.
●​ Google ties or bundles certain Google applications and services. This conduct illegally
prevented the development and market access of rival applications and services in
violation of Section 4 read with Section 32 of the Act.

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 ●​ The court determined the relevant market to be: ‘market for licensable OS for smart
mobile devices comprising Smartphones & Tablets in India'. PC OSs were excluded. .
Relevant geographic market was India. Another relevant market is app stores - Google
enjoys dominant position here - determined by different press notes etc

●​ Findings: Prima facie - Google abused its dominant position, hence further investigation
required - violation ofS 4

Fastrack and Meru v. Ola (2015) -

How the local cab market is different in operations from cab aggregators like Ola -

Fastrack and Meru alleged violation of 4 by Ola by offering heavy discounts, predatory pricing
and surge pricing.
●​ Predatory pricing: pricing in such a way that you increase market share and gain control
of your brand over the market
●​ CCI - prima facie found AoD and ordered investigation
●​ Two questions post investigation
○​ Whether Ola held dominant position
○​ Whether there was AoD as per 4(2)(a)
●​ Ola claimed that they were only a tech company and not a cab company and therefore the
relevant market is different - they are only an aggregator that connects two parties
●​ The DG analysed various cab models - asset owned model (where the co owns the cab),
aggregator model (ola Uber), hybrid model (Meru etc where you aggregate self-owned
cabs and also own cabs)
●​ The DG concluded that cabs run under all three models were substitutable - forming the
same relevant product market
○​ Total fleet size was considered irrelevant but the number of trips were considered
●​ The DG concluded that for Meru etc the market share had declined and then Ola entered
the market and it increased from 3 to 61% share - significant increase. But Ola did not
hold a dominant share for a reasonable period of time. Uber plays in.
●​ The DG finally concluded that the consumers had enough choice and that the barriers of
entry were very low because there was no compulsion to buy cabs. The pricing strategy
was looked at and found that Uber was more aggressive but both had used below cost
pricing. However there was no AoD because Ola was not dominant.
●​ DG clarified that even if predatory pricing happens initially, it cannot be sustained,
market forces will act eventually if there is competition. In this market competition was
not foreclosed. At a nascent stage the CCI did not want to intervene and wanted market
forces to act

Ramakant Kini v. Dr. LH Hiranandani Hospital

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 ●​ It is a multi-speciality hospital (including maternity services) - entered into an agreement
with Cairo Bank to give umbilical cord stem cell services. A client had an agreement to
do this service with a different provider which she then disclosed to the hospital. The
hospital said that they only have an agreement with Cairo Bank and so she needs to
change her hospital. She became informant
●​ Here the DG, to determine relevant market, looked at multi-specialty hospitals with
patients in 12 km range and not gynaecology/maternity service hospitals - found that the
hospital held a dominant position and abused it
●​ CCI - the 12 km range does not make sense, also because this range was calculated per
distance by air and on road distance was much longer. 16-20 km was considered. There
were other hospitals available where rooms were available at low prices. Hence no AoD.
However the hospital was still fined for anti competitive agreements.
●​ COMPAT - reversed this decision on appeal. The whole case revolved around stem cells
not multi-specialty hospital or maternity ward. The question is whether there is access to
stem cell services. The tribunal found that there were 13 such service providers. The
agreement does not restrict Cairo Bank's options wrt hospitals. Further customers could
directly going to these service providers, they do not need to go through a hospital. The
penalty was set aside.
This judgement was critiqued also because this was not the correct jurisdiction.

Digital news Publishers v. Alphabet Inc (41/2021)

●​ The easiest thing for google to do is to redirect customers to their own news. Publishing
houses therefore loses on advertising costs. Further, if these publishers want to charge a
premium for their news they have to agree to some unfair terms by google. They went as
informants.
●​ Alleged that the majority of the traffic for their websites came from search engines in
which market, Google was dominant. Alleged that Google had abused this dominance.
Advertisement revenue sharing agreements with Google were also unilateral . They also
alleged that Google did not fairly compensate them for snippets of information used on
their search engine. Google also mandates accelerated mobile pages (AMPs) to optimise
mobile usage. This also leads to a revenue loss for digital news publishers because it
results in a surge of zero click action. Google does not allow paywalled content to
function effectively.
●​ Relevant geographic market: India
●​ Relevant market - online general web search services cannot be substituted with going to
specific websites urls and searching - the relevant market was online general web search
services in india and market for online search advertising services
●​ A news publisher online will interact with different intermediaries - online digital
intermediation services

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●​ CCI held that Google was dominant in the search engine market and this dominance
was being abused in the digital news market
●​ Competition is being eliminated because the publishers are dependant on Google because
it is the most used search engine and consumers access their websites through Google
●​ Based on various reports of other anti-trust authorities, CCI held that Google abused its
dominance in both markets

ACA under section s. 3 and AoD under s. 4 are analysed under s. 19 and investigated
under s. 26

S. 33 - Interim orders

Chapter 6 - Penalties

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