Competition Law Notes

UNIT I: Introduction
Pillars
• Prohibition of anti-competitive agreements

• Prohibition of abuse of dominant position

• regulation of combinations

• state aid control system

Competition- The process of rivalry between firms thriving to gain more market share/sales in
the market
Type of Competition- 1. Price: lowering price

2. Non-price: advertising, after sales service, sales promotion tools, etc.

Benefits of Competition: 1. Efficiency
2. Innovation
3. Check on concentration
4. Economic growth

5. Consumer welfare
Competition law v. Consumer Protection Law
have options increased vs have actual purchasers been misled
Common goal of provision of consumers with access to an array of competitively priced goods
and services in the market place

Theories of Competition Law

1. Free Market (Milton Friedman)

- invisible hand concept

- market force in itself ensures competition
2. Perfect Competition
- According to neo-classical theory, social welfare is maximised in conditions of perfect
competition, i.e., large no of buyers and sellers; homogenous goods, free entry and exit; single
price; absence of monopoly; seller is a price taker; perfect knowledge; no artificial restrictions

- Allocative efficiency(resources are where needed), productive efficiency(min resources for

max goods), dynamic efficiency(innovativeness)

- In reality no perfect competition exists. Thus, CL aims at-

i. Where competition already exists, it would deliver the goods by realising above their
efficiencies

ii. Where it doesn’t exist, it is encouraged

History and Evolution of CL

Anti-Trust Legislations in the US
1. Sherman Act, 1890- Precision and Over-inclusiveness

- Growth of trusts
- it makes illegal to restrain trade or form a monopoly
- Dept. of Justice can approach the Federal Court to stop the illegality
- S.1: contract, combination or conspiracy resulting in restrain of trade is illegal
- S.2: monopoly= felony
#Standard Oil Corp. v USA (1912)
Railway increased trade—led to formation of cartels and trusts—Roosevelt sued 45 trusts
Govt. claimed that SO benefitted from immoral acts like rebate taking, local price cutting,
predatory pricing, conspiracy, etc.
Chief Justice Edward White rule SO was participating in restrain of trade and commerce in
petroleum.
So was broken into 33 different companies. Rockefeller received 25% of stock in each company
raising his wealth to $900M

- Extra territorial effect; In Hartford Fire Insurance Co. v. California (1993),the US SC

observed, “it is well-established by now that the Sherman Act applies to foreign conduct that
was meant to produce and aid in fact some substantial effect in US.” a.k.a. effects doctrine

- privets both civil and criminal remedies

- Loopholes in the Act: Doesn’t deal with combinations; no definition of restrain of trade and
attempts to gain monopoly thus uncertainty

2. Clayton Act, 1914

- main agenda was to stop monopolies before conception

- Congress didn’t want to leave to judges to decide whether restraint actions were reasonable
or not

- increased powers of Attorney- General

- The Clayton Act extended the prohibitions of the Sherman Act to price discrimination, tying
and exclusive dealing, M&A

- The Act exempts labour unions and agri. org.

- Only provides for civil remedies and came as an amendment

3. Federal Trade Commission Act, 1914

- general ban on unfair acts

- established FTC to take actions against conduct violating Sherman or Clayton Act as well as
anti competitive practices that do not fall within their scope

4. Robinson-Patman Act, 1936

- Amendment to Clayton Act; a.k.a. Anti Price Discrimination Act

- Made price discrimination illegal

5. Celler- Kefauver (Anti- Merger) Act, 1950

- US Federal Statute
- object to restrict anti-comp. mergers
- included stock and asset acquisitions

6. Hart-Scott-Rodino Antitrust Improvements Act, 1976

- large combinations required notification to govt in advance

- Premerger Notification program w/FTC and DoJ

History of EU-CL

- In 1890s, discussed in Austria was dropped due to political turmoil in 1897

- Post WWII, EU turned to CL as means of economic revival
1. First Phase

- Community Competition Control in Treaty of Paris (1951)

- European Economic Community by Treaty of Rome, 1957 for harmonious development of
economic activities. The common market was intended to create interdependence between
the states. Hence, more competitive opportunities had to be created throughout this
‘integrated market’ and competition rules were included to assist in the creation of a unified
competitive environment.

2. Second Phase

- Directorate General of EU est. in mid 1980s because of problems like lengthy settlement
time, lack of transparency, weak analysis of facts and too much room for politicisation.

- Modern Regulation, 2004- more powers to investigators and courts, decentralisation of

policies

- European Competition Network est.

- Four main pillars of EU-CL: i. Antitrust
ii. Mergers

iii. State aid

iv. Enforcement

Doctrine of Restraint of Trade

- vital to protect interest of e’yer
- under early common law, all such restraints were illegal (Dyers Case)
- Under modern doctrine, partial restraint is valid and considered reasonable.
- #Nordenfelt v. Maxim Nordenfelt Guns & Ammunition Company (1894)
Big company, wanted to sell, clause that won’t work for competitor for 25 years— seller was
sure that restrictive clause was illegal— immediately started working for a rival— sued
House of Lords- Triple amount paid, reasonable restriction to ensure goodwill and longetivity—
exception to the doctrine

- Franchisee Model forms an example to exception to the doctrine. (Prontaprint PLC v.

London Litho Ltd, 1987)

History and Evolution of Indian Competition Laws

- Kautilya’s Arthashastra
- Article 38 and 39
- Nehruvian Socialism Model
1. Industrial (Department and Regulation) Act [IDRA], 1951

- regulate functioning of pvt. sector

- licensing
- patronising public sector
- no competition in market; resulted in monopolies and license raj

2. Monopolies and Restrictive Trade Practices Act, 1969

- on report of Monopolies Inquiry Commission (1965)

- est MRTP Commission, charged with investigating the conduct of entities suspected of
engaging in monopolistic, restrictive or unfair trade practices.
3. High Powered Expert (Sachar) Committee, 1977

- UTP such as false advertising added

- MRTP Act amended in 1984
- 1991 amendment removed license requirement
Reasons for failure of MRTP Act-

i. license requirement and strict regulation punished efficiency]

ii. only power of cease and desist order which were ignored
iii. vague definitions
iv. no interest in pursuing cartels
4. Raghavan Committee

- NEP in 1991
- India became party to WTO, GATS and TRIPS
- Recommendations of Committee-
i. To repeal the MRTP Act
ii. To eliminate reservation of products (eg. Small Scale, handloom etc)
iii. To divest shares and assets

iv. To bring all industries (pvt. and public) under the new legislation

Battle for Corporate Competition Law

Harvard School: Per se Approach/ Structural Approach

- Edward Chamberlain, Edward Mason and Joe Bain

- the number of firms in the market and their proportionate share determines
anticompetitiveness

- “intention of legislator” was to protect individual competitors from the market power
wielded by large firms

- “presumption of illegality” any practice that is to obtain, enhance or exercise market power
- Harvard scholars opposed market concentration, even when it might lower costs and prices

# US v. Aluminium Company of America (ALCOA)

Penalised for aggressive competition using Harvard approach. Former Federal Chairman,
Greenspan criticised the case as he claimed that ALCOA was punished for being too successful,
too efficient and too competitive though the approach had benefitted consumers at large.
# US v. Philadelphia National Bank (1963)
Merger was rejected as any merger that covered 30% of the relevant market were presumed to
be unlawful

- Big is bad, small is good trend started

- These policies prevented firms from achieving efficiencies of scale.
Advantages
i. Court could presume illegality without much analysis rendering faster decisions
ii. Even if not perfect, it was uniform and certain. Firms knew what conducts would be
penalised
iii. Small competitors and new players had easy entry and growth in the market

Disadvantages
i. Too quick and full of prejudice

ii. Halt to economies of scale thereby lesser benefit to consumers

iii. prohibited innovative forms of competition

Chicago School: Rule of Reason

- Robert Bark, Frank Easterbrook and Richard Posner

- Found no evidence that Congress’ intention was to protect individual competitor against
large firms

- Antitrust laws were designed to increase efficiency of American economy

- Economic efficiency= maximisation of wealth w/ consumer welfare, i.e., lower costs, reduced
prices and increase in output of products

- Only goal is to maximise consumer welfare

- Markets were likely to correct itself w/o any intervention and intervention becomes
necessary only when consumer welfare is affected— called for a dramatic reduction of
antitrust enforcement.

- Firms should be punished for being efficient and gaining market share—enforcement
agencies to prove that the conduct at issue harmed consumer by increasing prices or
decreasing output.
Advantages
i. Benefitted consumers
ii. Requirement of empirical analysis
iii. Encouraged innovativeness
Disadvantages
i. Uncertainty on what was anti-competitive
ii. More burden on courts
iii. fact finders rendered many conflicting decisions as applicable standards were not defined

iv. Less deterrence effect and agencies became lenient

# Broad Music Inc. v. CBS (1979)
40k music composers/ authors—non exclusive agreement w/music socities—contention of anti-
competitive agreement—price fixing and
Court went through contract clause by clause-

i. not restraint of trade as non-exclusive

ii. although price fixed, but reasonable and necessary for protecting rights of composers and
authors as they have lesser bargaining capacity than broadcasters
“First case of Chicago approach”

#In re Boeing Co.

Merger between Boeing & McDonnel Douglas in 1991— Boeing had 64% RM share and MDD
had 6% share. European company Airbus had 30% share
Contention- if merger allowed only 2 players will be left and Boeing will be a monopoly

FTC & DoJ using Chicago approach determined that MDD was in loss and merger acted as a
business revival plan thus no anti-competitive behaviour
Criticised in Europe as national champ case; blocked in Europe but finally settled after Boeing
sold certain exclusive contracts to Airbus

From Per se to Rule of Reason

Vertical Restraint Cases

#US v. Arnold Schwinn (1967)

Schwinn was bicycle manufacturer w/ 26% market share which was reducing gradually. Came
up with agreement w/ territorial restrictions and sale to only authorised franchisees.
Agreement challenged as RTP and violative of S1 of Sherman Act
Court used per se approach and found it to be RTP to wholesalers. Had agents been involved a
rule of reason approach may have been used as requested by the defendant.

#Continental TV Inc. v. GTE Sylvania Inc. (1977)

Sylvania was manufacturer of TV and put territorial restrictions on franchisee; Continental
which was a franchisee—contended it to be non-price vertical agreement—Dist. Court held in
favour of plaintiff
Appeal in Circuit Court—used rule of reason—viewed agreement as model of business—
reduces inter brand competition but enhances intra brand competition and thus has economic
utility

Merger and JV Cases

# Brown Shoe Co. v. USA (1956)
Brown shoe w/4% market share merged w/Kinney’s having 1% share and post merger
amounted to 7.2% market share
Termed monopoly using Harvard approach

#US v. General Dynamics

General dynamics merged w/United Electric Co. and got 34% market share
Chicago approach used and found that UE Co. was weak and had no influence in market thus
there was no substantial reduction in competition through the merger

#California Dental Assoc. v. FTC (1999) [Quick look analysis]

CDA had guidelines- i. no ads wrt price discounts
ii. no ads about quality of service
FTC objected it to be anti-competitive as information asymmetry between dentists and
consumers
IX Circuit Court used ‘quick-look’ and sustained FTC’s argument though on appeal the decision
was reversed. But the Court concluded that in certain cases where deep understanding of
economics isn’t required, judgment can be rendered through quick look analysis.

UNIT II: COMPETITION LAW IN INDIA

#Brahm Dutt v. UoI (2005)
MRTP Act was repealed and Competition Act, 2002 was be enforced. For bringing into force S.7
and 8 of the Act, the govt. had to make prescription for the appointment of chairman and the
members of CCI. CCI was to deal with adjudicatory, regulatory and advisory functions.
According to CCI (Selection of chairperson and other members of the Commission) Rules, 2003,
Rule 3, a committee was to fill vacancies in the commission. Further, the commission was
required to perform adjudicatory functions even though the appointment of the chairpersons
neither from any judicial authority nor the CJI or his nominee.
In 2003, a WP was filed before the Apex Court essentially praying for the relief of striking
down Rule 3. Further, to issue a writ of mandamus directing UoI to appoint a person who is or
has been a CJ of any HC/ Senior Judge HC.
Essential Challenge: i. CCI was an adjudicatory body

ii. in view of doctrine of separation of powers, should be appoint bye judiciary

iii. chairperson should necessarily be a person of higher judiciary
Arguments by UoI: CCI was a regulatory body and thus expertise in field enough. Moreover,
judicial review of any decision can be taken up by HC and SC. Further, was common practice in
may countries.
The Union also submitted an affidavit with proposed changes to the Act and Rules, i.e.,
Chairman to be appointed by a committee headed by CJI
Decision: Union may consider creation of two bodies- Advisory and regulatory & other as
Adjudicatory.
Further while closing the WP in 2005, the Court declined to pronounce any order in the light
of the proposed amendments.
Amendments
1. 2006 amendment- power of awarding compensation given to Competition Appellate
Tribunal. In reality no conformity was observed with the observation in Brahm Dutt’s case.
2. 2007 Bill- Still CCI kept performing adjudicatory functions

- In subsequent decisions of CCI v. SAIL and Eastern India Motion Pictures Assoc. v. MS
Manju Tharad, the Apex Court has made the same observation of CCI being an adjudicatory
body.

Competition Act- Main Objective

1. To promote free competition in India

2. Protect interests of consumers

3. No limitation of size but of competition power
4. Efficient allocation of resources, technical progress
5. Prohibits- i. Anti competitive agreements such as price fixing, market sharing, bid rigging,
limiting or controlling production
ii. Abuse of dominant position such as unfair pricing, tying & bundling, refusal
to deal and predatory pricing

Definitions
1. Market

- Wherever a transaction or trade occurs between a buyer and a seller, there is a market.
2. Market Power
- Arises in relation to a market, enables firm individually or collectively restrict output,
increase price above the competition level
3. Relevant Market

- To determine whether a firm or a collection of them exercise market power, market has to be
defined and identified w.r.t. a product or geographical area known as relevant market

- To assess dominance and possibility of unilateral conduct

- Limiting the boundaries of Commission jurisdiction in assessing anti-competitive outcomes
- ‘Relevant product market’ and ‘ Relevant Geographical Market’
- EU-CL: The purpose of defining RM is to identify which products are such close substitutes
for another that they operate as a competitive constraint.

- US SC in Standard Oil v. US: “the area of effective competition within which the defendant
operates is RM”

- The RM is the area of effective competition, where supply & demand interact.
- The CA’02 defines RM in S.2(r)- “RM means the market which may be determined by the
Commission with reference to the RPM or the RGM or w.r.t. both the markets.

4. Relevant Product Market (RPM)

S2(t)- RPM means a marker comprising all those products which are regarded as
interchangeable or substitutable by the consumer, by reason of characteristics of the products,
the prices and intended use. Eg. Pepsi and Coca-Cola

- Determining Factors: S.19(7)- i. Physical characteristics

ii. End use
iii. Price
iv. Consumer preference
v. Exclusion of in-house production
vi. Existence of specialised producers

# US v. EI du Pont de Nemours & Co. (1956) [The Cellophane Case]

During 1923-47, Dupont controlled 75% of cellophane market and 20% of all flexible packaging
products
Whether a monopoly?
Issue was to determine RPM
Court- Cellophane was not a market by itself but part of flexible wrapping paper, since only
20%—not monopoly. Great profits were due to increase in commodity packaging and Dupont’s
efficiency.
Fallacy- Cellophane’s own price elasticity wasn’t recognised (price was very high compared to
cost)

- Tests for RPM:

1. Reasonable interchangeability of use or demand substitute
2. Cross elasticity of demand (Small but significant non transitory increase in price SSNIP
test)/ Hypothetical Monopolist- Whether a small but non transitory price increase in
product A will cause buyers to shift to B? (5-10%)

- First officially recognised in 1982 by US horizontal merger guidelines issued by DoJ and FTC.

#Hoffmann La Roche v. Commission (1979) [Vitamin Case]

HLR gave discounts if vitamins C and E brought from them— accusation of abuse of dominant
position and tying by the European Commission
Interchangeable from technical PoV (antioxidant and fermentative) but not bio-nutritive PoV(
C- Skin growth and development of tissues; E- Immunity and anti-aging)

Court: Separate RPM, thus abuse of dominant position

#Hoffmann La Roche & Novartis v. AMOI (2018)

Avastin by HLR to treat tumors at E 81/injection
Lucentis by Novartis at E 902/injection for eye-ailment; both manufactured by subsidiary of
HLR
Avastin was used for eye ailment through off-label prescription; as it led to huge losses to
Novartis; both came to a MoU that fake public announcement that use of Avastin for eye
ailment leads to severe consequences
Court rules that both have same RPM as off label prescription wasn’t illegal and benefitted
consumers. The arrangement b/w HLR and Novartis is illegal.
#United Brands & Co. v. Commission (1978)
UBC had 45% share in bananas market- set retail prices- EU alleged as abuse of dominant
position
UBC claimed that RPM is whole fresh fruit market and thus amounting to only 12% share

Court- Bananas not seasonal, taste, seedless. soft and easy handling amounts to monopoly and
anti-competitive agreement
#Shamsher Kataria v. Honda Siela & Ors. (2014)
Kataria filed information u/S.19(1) (a) of the Act against Honda, Volkswagen and Fiat; alleging
anti-competitive practices in respect of sale of spare parts of these companies. Further, they
were charging higher prices (5000%) for spare parts and maintenance services than they
counterparts abroad.
Report of DG: Brought in 14 other OG Equipments Manufacturers in the scope of investigation.
Concluded that OEMs were in violation of S.3 & 4 of the Act. Divided into primary and
secondary market as primary of car sales and secondary of spare parts and after sales service.
Dominant in secondary market.

Replies of Opposite Parties: Challenged CCI’s power to add 14 fresh OEMs. Further bifurcation
of market was challenged, considering that car is bought taking into consideration all future
costs, thus not dominant in unified system. Also consumers weren’t locked-in and many shifted
to independent repairers.

Order of the Commission: Each OEM is a 100% dominant in aftermarket for its genuine spare
parts and correspondingly in the aftermarket for the repair services. Two criteria to determine
after sales market products- i. importance of such products and compatibility with primary
products
ii. price and lifetime w.r.t. characteristics of primary products
Thus, CCI imposed a fine of Rs 2544 Cr. for violation of S.3(4) and S.4 of CA’02
Implications: First ruling on vertical restraint and excessive pricing under S.4. Far reaching
implications for any industry where a manufacturer may impose restrictions on the manner in
which spares and services are provided.
Critique: - Consumption of spares isn’t an independent economic act

- training is required to use right spares

- no lock in as 300k unorganised dealers
- Commission’s blanket imposition of 2% penalty of total turnover is wrong; only TO of
secondary market should’ve considered

- COMPAT in Excel Corp Care Ltd. v. CCI- Only relevant TO to be considered in such cases

5. Relevant Geographic Market

- S.2(s): Market comprising the area in which the conditions of competition for supply of goods
and services, demand for goods and services are directly homogenous and can be
distinguished from the conditions prevailing in the neighbouring areas.

- Interchangeability with the same product from elsewhere defines RGM

- Determining factors: i. Nature of alternative
ii. Price advantages (transport cost, tariffs, convenience in obtaining goods)
iii. Presence/Absence of barriers to entry
iv. local, national or international

6. Agreements

- S.2(b): Includes any arrangement/understanding to act in concert, intended to be legally

enforced

7. Enterprise

- S.2(h): person/dept. involved in production, storage, supply, distribution, acquisition or

control of goods, services or any kind of investment, either directly or through unit, division
or subsidiary.

- Exception: Govt. activity related to sovereign functions

Anti-Competitive Agreements (S.3)

- Kind of a RTP
- Agreements which have the potential of restricting, suppressing, reducing or lessening
competition
- S.3 prohibits agreements which cause or are likely to cause Appreciable Adverse Effect on
Competition (AAEC).
- S.3(1): No enterprise/person/assoc. can enter into an agreement which cause or is likely to
cause AAEC
- S.3(2): What is prohibited is the agreement to control and dominate trade & commerce in a
commodity coupled with power and intent to exclude a competitor to a substantial extent.
- It is not the form or a particular means used but the result that is achieved is the target of
law.
- Two types of Anti-Comp. agreements: Horizontal and Vertical; Horizontal is b/w 2
enterprises at same level of production/supply chain; whereas vertical are amongst 2 levels of
supply chain
- Per se rule for Horizontal agreement and rule of reason for vertical agreement
- “Causes or likely to cause AAEC” = i. effect should be appreciable
ii. within India
iii. actually effect or is expected to effect
iv. should be a result of an agreement
v. effect may be unintentional, still AAEC
- AAEC, law lexicon- capable of being estimated, weighed, judges or recognised by the mind
or senses but not synonym of significant
- Factors to be considered for AAEC: 1. Anti competitive factors {S.19(3)}- i. Creation of
barriers to new entrants
ii. driving out existing competitors
2. Pro competitive factors- i. accrual benefit to consumers
ii. improvements in production/distribution of service
iii. promotion of technical, scientific and economic development

#Ajay Devgn Films v. Yash Raj Films (2012)

Yash Raj entered into agreement with Small screen theatres to buy both JTHJ and ETT thus
hindering AD Films SoS- alleged abuse of dominant position
Court: Decision by single screen was in commercial interest and had freedom to choose. Only
35% of the revenue came from single screen, the complainant can still screen in multiplex; no
AAEC

#MP Mehrotra v. Kingfisher Airlines Ltd. (2012) [Jet Airways-Kingfisher Case] [Accrual benefit
to consumers]
JA had 31% market share and KF had 28%— entered into agreement of uniform fuel surcharge,
interline traffic agreement, joint fuel management, common ground handling, etc.
Further offers of cheap ticket for JA & King Club
Issue- Fuel surcharge depends on miles travelled and cannot be kept uniform
Abuse of dominant position and anti-competitive agreement
Court: Combined market share was same even after 2 years of agreement— accrual benefit to
consumers, thus no violation of S.3 or 4. Only directed to base fuel surcharge on market trends

Effects Doctrine
- Under S.32, CCI is empowered to take cognisance of an Act taking place outside India but
having an AAEC in India
#US v. ALCOA
#Timberlane Lumber Co. v. Bank of America National Trust
3 part test- i. There must be some effect on American commerce
ii. Cognizable injury to US
iii. Principle of comity
#wood pulp case (Finland, Canada and US)
#Gencor case (South Africa and EU)
#Haridas Exports v. All India Float Glass Manufacturer’s Association
AIFGMA filed complaint of predatory pricing against 3 Indonesian companies.
MRTP Commission: held that foreign firms were indulged in predatory pricing thus restricting
competition in India
SC: MRTP Act has no ET operation. Clear from Expln.2 of S.35.
Cannot extend to foreign cartel unless member of cartel carries on business in India. If any RTP
as a consequence of outside agreement is carried in India, MRTP Commission shall have
jurisdiction under Section 37(1) of the Act if it comes to the conclusion that the same is
prejudicial to public interest.
In present appeal, no AAEC as importing material at lower price is common practice—thus
order of MRTP was set aside.

Horizontal Agreements: S.3(3)

- Any agreement b/t enterprises engaged in identical trade of goods or provisions of services,
which- i. determines sales or purchase price
ii. limits/controls supply, sale, development, investment or provision of service
iii. shares the market or source of production
iv. bid-rigging or collusive bidding
- Presumed to have AAEC- Per se approach
- Exception JV agreement

Bid rigging or collusive bidding

- any agreement between enterprises engaged in identical production or trade of goods which
has the effect of eliminating or reducing competition for bids or adversely affecting or
manipulating the process for bidding
- Bid rigging contravenes the very purpose of inviting tenders and is inherently anti-
competitive
- bid amount at a pre determined level
- Org. for economic cooperation and development (OECD) glossary pinpoints 2 common types
of bid rigging: i. Dealers agree inter alia not to bid in conjunction with one another
ii. Group of firms agree to file bids in such a way that one of them wins the bid
- Some other ways: i. agreements to submit identical bids
ii. agreement as to who shall submit the lowest bid (complimentary bidding)
iii. agreement not to bid against each other (bid suppression)
iv. agreements on common norms to calculate price or terms of bids
v. agreement to squeeze out outside bidders
vi. agreement designating bid winners on rotational basis (bid rotation)
- In such agreements, a compensation system to the unsuccessful bidders by dividing a certain
% of profits of successful bidders (subcontracting)
- Identification procedure: i. similar errors and irregularities in bidding
ii. same corrections indicating last minute changes
iii. seeking of bid package with a competitor (asking for work together)
iv. bidder submits his and competitor’s bid
v. bid made after discussions and understanding

#Delhi Jal Board v. Grasim Industries Ltd. (2017)

4 parties manufactured water purification chemicals, engaged in bid rigging on rotational basis.
Informant alleged collusive agreement, only difference of Rs 200-400 in each bid from 2007-12.
Findings- against S.3(3)(d)

#Jupiter Gaming Solutions (P) Ltd. v. Govt. of Goa (2012)

Bid rigging is difficult to detect—thus can only be found by assessing suspicious conduct

# M/S Excel Crop Care Ltd. v. CCI (2013)

Whether act of boycotting tenders by all applicants amounted to bid-rigging?
Yes, as cannot be coincidence and wanted Food Corporation of India to give orders at their
prices

- Inquiry into bid-rigging- powers vested under S.19 of the Act, the Commission may inquire
into any alleged contravention under Section 3(3)— power of search and seizure
- Powers of Commission u/S.27 of the Act: i. direct the parties to discontinue and not to enter
into such agreements.
ii. payment of costs and adhere to directions by the CCI
- Penalty: upto 10% of average TO of the last 3 preceding years; if cartel, penalty upto 3 times
the profit for each year of continuous agreement/ 10% of average turnover of such years
(whichever is higher)
- Appeals to NCLAT (S.53B)—has to be filed within 60 days of receipt of order

Cartels
- defined under S.2(c)- assoc. of producers, sellers who have agreed to limit, control
production, distribution sale or price of or trade in goods or provision of services
- cartelisation leads to higher prices, poor quality and lesser choices of goods
- Conditions conducive to formation of cartels: i. High concentration of players, few
competitors
ii. entry and exit barriers
iii. homogeneity in products
iv. high defence of consumers on product
v. history of collusion
vi. active trade assoc.
- Categories of Cartels: i.Specialisation
ii. Territorial
iii. Quota
iv. Price
v. Syndicates
- Price fixing: Vitamin case
- Sharing markets: Cement cartel case
- Bid rigging: Excel Corp case
- Limiting quota
#ITC Ltd. v. MRTP Commission (1996)
Three essentials to identify cartels-
1. agreement by way of concerted action suggesting conspiracy
2. fixing prices; controlling predictions, distribution and supply
3. attempt to gain monopoly or eliminate competition
4. meeting of minds to avoid perils of competition
#Deutsch Bank Case (2009)
existence of agreement to be established and cannot be circumstantially adduced
#Tyre Cartel Case (2009)
Can be adduced from circumstances and explicit proof not required
#Soda Ash Cartel Case
Civil standard of Preponderance of probability

- Two types of evidence relied on by the CCI: Economic and Conduct based
- Economic: nature of industry, players in market, parallel movement of prices, profit margins
across firms, capacity utilisation, etc.
- Conduct based: meeting b/w competitors, similar biddings, membership of trade assoc.,
suspicious information exchange
- Conflict: several decisions of CCI do not comply with due process requirements
#Cement Cartel Case (2013), Airline Fuel Surcharge Case (2016) and the Air Cargo Case (2015)
directed CCI to reconsider its respective decisions afresh due to procedural irregularities at the
time cases were heard
#Shoe Cartel Case
COMPAT- merely quoting similar rates didn’t amount to cartelisation
#M/S Faiveley Transport (India) Pvt. Ltd. (2016)
In an oligopolistic market it wasn’t usual that players quoted similar prices as they were aware
of each other’s position.
#Glaxo Smith Kline Case (2015)
factor relied on by the CCI- that register signed by black ink pen and simultaneously visited the
Govt. office. COMPAT set aside the decision—cannot be inferred as collusion—termed as
fragmentary and sparse evidence

Leniency Programme
- kind of whistle blower protection
- to those who submit information, who would otherwise have to face stringent action by the
Commission had the existence of cartel was detected by the Commission on its own
- S.46: full and true disclosure to satisfaction of Commission; disclosure to be full, true and
vital, impose a lesser penalty as it may deem fit
- A first, second and third applicants can avail the benefit of a reduction in penalty of upto
100%, 50% or 30% respectively—Confidentiality is the bedrock of an effective leniency
regime.
- CCI (lesser penalty) Regulations, 2009: statutory provision for lesser penalty
- Exceptions: i. If the DG report has been received before making of such disclosure
ii. the person making the disclosure doesn’t continue to cooperate till the completion of the
proceedings
iii. if the commission finds that- a. party had not complied with the conditions on which the
lesser penalty was imposed; b. had given fake/false information; c. the disclosure made isn’t vital
- The reduction in monetary penalty will depend upon the following situations: i. stage at
which applicant discloses information
ii. evidence in possession of commission already
iii. quality of information provided by the applicant
iv. entire facts and circumstances of the case
- Confidentiality of info. received by the parties; exceptions- i. when required by law
ii. applicant has agreed to such disclosure
iii. public disclosure by the applicant

CCI Decisions on Cartels

#Brushless DC Fans
Cartel between manufacturers and suppliers of brushless fans in relation to tenders of Indian
Railways and Bharat Earth Movers Ltd. for supply of brushless fans—informed by CBI.
One of the parties became informer but only granted 75% immunity as CCI had information
from CBI

#Carbon Dry-Cell Batteries (2017)

A leniency application filed by Panasonic about Dry Cell batteries cartel with Eveready, Nippo
& Panasonic. Further, Assoc. of Indian Dry Cell Manufacturer was included in the
investigation. CCI granted Panasonic full immunity
Further, Nippo brought forward cartel in flashlight market and was themselves granted
complete immunity.

#Pune Municipal Corporation (2016)

‘Leniency on penalty and not on guilt’

#Cartelisation in sports broadcasting tenders

Leniency application by Globecast India and Globecast Asia disclosing a cartel with Essel Shyam
Communicatuin to rig tenders for procurement of broadcast services of various sporting events
in India. Granted 100% immunity

#Fuel Surcharge Cartel (2008)

Cartel between SpiceJet, Indigo, Air India and GoAir for fuel surcharge. Didn’t decrease rates
with global trend.
DG- not enough evidence to prove collusion, CCI still proceeded with investigation—held
them guilty on circumstantial evidence and without chance of any trial.
COMPAT- no audi alteram partem thus order quashed— called for fresh inquiry

Spontaneous Parallelism and Conscious Parallelism

Conscious- where an actual agreement exists
Spontaneous- rational response of each member to perceived interdependencies.

#All India Tyre Dealers Federation v. Tyre Manufacturers (2013)

MCA filed complaint of cartel amongst Apollo Tyres, MRF, Ceat, JK Tyres and Birla Tyres—
83% of tyre market
Despite in 2012-13 and 13-14, input costs getting lower, tyre prices were kept high by all—
strong indication of coordinated action
CCI: did not accept DG’s report and termed it as spontaneous parallelism.

Plus Factors
- Firm’s participation past collusion
- firm created opportunity of regular communication
- industry performance data, extraordinary profits
- industry characteristics conducive to successful coordination

#Mid-West Paper Products (1979)

US disallowed a claim for umbrella pricing — umbrella pricing is increase in price by non-
cartelist due to increase in price by cartel

#Pioneer Corp. v. Godfrey (2019)

SC of Canada held that umbrella purchasers can make clam against cartel—cause of action
based on cartel and also causes deterrence
In EU Umbrella claims are allowed

Vertical Agreements- S.3(4)

- Any agreement amongst enterprises at different level of production, supply chain including: i. Tie-
in agreement
ii. Exclusive supply agreement
iii. Exclusive distribution agreement
iv. Refusal to deal
v. Resale price maintenance
- shall cause AAEC in India
- Rule of reason is used
Tie-in Agreements
- explanation (a) of S.3(4)
- Any agreement requiring a purchaser of goods to purchase some other goods as a condition of such
purchase
- desirable (tying) good to undesirable (tied) good
- dominance is not a prerequisite
- also under S.4(2) where abuse of dominant position is required
Factors to establish anti-competitive agreement under S.3(4)-
- mentioned u/S.19(3)
- Barriers to entry
- driving away existing competition
- accrual benefit to consumers
- improvement in production or distribution of goods/services
- promotion of technical, scientific and economic development
- if -ve effect outweighs +ve effect, agreement is declared is void
#Microsoft Case
Alleged tying—MS claimed that Windows & Explorer were functionally integrated—if explorer
uninstalled, windows won’t function properly
Princeton computer scientist corrected the problem
Tying proved

#Shri Sonam Sharma v. Apple Inc. (2011)

Apple agreement with Airtel and Vodafone (only purchase these networks with iPhone)—vertical
agreement—challenged as tying in
CC: accepted as tying u/S.3(4) but not a dominant player—thus case dismissed
Criticised as dominance not a prerequisite u/s.3(4) only for S.4(2)

#Ramakant Kini v. Dr. LH Hiranandani Hospital (2014)

DLHH Hospital agreement with Cyrobank Intl. for stem-cell service. Informant approach Lifestyle India
for stem cells but reached DLHH Hospital for delivery. Hospital only accepted Cyrobank as stem cell
provider. Alleged tying in arrangement
CCI ignored S.4(2) but still anti competitive u/S.3(4)

Exclusive Supply Agreement

- Explanation (b) and (c) of S.3(4)
- agreement restricting purchaser to acquire products from any other seller
#Viniyoga Darula Singh v. Hindustan Coca-Cola Beverages (2011)
Theatre had agreement with Coke to sell only there brand—informant claimed it to be exclusive supply
agreement
CCI- Coke not a dominant player—short duration agreement, 4 months—theatre had option to
terminate with1 month notice—no imposition—not anti-competitive or exclusive supply
Criticism- No need to establish dominance; 19(3) lays down clear conditions for 3(4)
#Jindal Steel & Powers Ltd. v. SAIL (2012)
ESA b/w SAIL and Indian railways—Jindal alleged as anti competitive—no scope for pvt. players
CCI: i. steadiness in supply
ii. safety standards of SAIL cannot be matched by pvt. players
iii. required in national interest
Jindal and other pvt. players can still compete in other 25% market
Criticism- Promotion of state run companies

Exclusive Distribution Agreement

- territorial restriction

Refusal to deal
-refusal to deal in competitive brand
#Registrar of restrictive trade agreements v. Bata (1976)
Bata entered into agreement with small manufacturers for purchase of footwear to be sold under its own
brand but restricted purchase of raw materials from parties approved by Bata and moulds sold by Bata.
CCI: RTP
But later contrary jurisprudence evolved aimed at brand and quality
#TELCO v. RRTA (1977)
Tata Motors had exclusive agreement with customers that warranty only when service done by
authorised TATA dealers. TATA even set up mobile service stations for this in rural areas.
Challenged as refusal to deal.
SC: Exclusive dealership promoted competition as it led to specialisation and improvement in after sales
service

Resale Price Maintenance

- S.3(4), explanation(e)
#Fx Enterprise Solution India v. Hyundai Motor India (2014)
Dealership agreement with any other brand than Hyundai required prior permission—exclusive supply
and refusal to deal
Discount Control Mechanism resulted in Resale Price Maintenance
forces customers to buy insurance, CNG Kits, Lubricants and oils from specified vendors otherwise
warranty lapsed—tie in agreements
CCI: no exclusive supply and refusal to deal because only prior consent, no refusal
CNG kits, not anti competitive but lubricants and oils were
Insurance is common practice
Discount price mechanism= Resale price maintenance as no benefit to consumers also
Imposed a penalty of Rs. 87 Cr.
Overruled by NCLAT, no independent appreciation of evidence
#Jasper Infotech, Snapdeal Cse
Snapdeal sold JI products at lower price—notice served by Jasper—snap deal approach CCI alleging RPM
CCI: snapdeal is intermediary and not reseller thus no RPM

#Deepak Verma v. Clues Network Online (2016)

Resale not to be interpreted in strict sense.
#Samir Agrawal v. ANI Technologies (2018)
Allegation on Ola and Uber of being Hub and spokes cartel (where spokes are provided info. by hub to
share with each other and work as a cartel)
CCI: since driver not employees and Ola and Uber work on price algorithms , no cartel

IPR Protection with reasonable conditions - S.3(5)

# US v. Loew’s (1962) [Block Booking]
Bundling of popular movies with unpopular movies; defence- IPR protection against piracy
Court: Disguise of IPR for unreasonable conditions

#Shamsher Kataria v. Honda/Volkswagen etc.

u/ relevant product market

Section 4- Abuse of Dominant Position

EU : Hoffman La Roche, Michelin Cases- it is essential to define the RPM and RGM to establish
dominance in market
- Very large market shares are in themselves save in exceptional circumstances, evidence of existence of
dominance.
- In Hoffman La Roche, 75-85% market share, so high that further examination not required.
- Market share >50%, strong prima facie evidence of dominance and creates presumption in favour for
dominant position if held over a time.
- 40%: Generally denotes not holding dominant position
- 25-40%: dominant position unlikely unless very small competitors
#AKZO Case
50% market share rule is only a presumption, not necessary that the undertaking will have the market
power. Dominance still has to be specifically established.

US: Abuse of dominance is tested seriously with the first consideration of relevant market (Brown Shoe
Co, Du Pont, etc.)

South Africa: >45%

Israel: >50%

Section 4
- Deals with the abuse of dominance by an enterprise. It prohibits the use of market controlling
positions to prevent individual enterprise from driving out competition from market as well as
dictating prices
- When an enterprise:
i. imposes unfair or discriminatory condition in purchase or sale of goods or services or predatory price
ii. limits or restricts production of goods or services in the market or technical and scientific
development
iii. indulges in practices resulting in denial of market access
iv. 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
v. uses its dominant position in one relevant market to enter into another;
Amounts to abuse of dominant position (ADP)

- Dominance: The Act defines dominance in terms of position of strength in market enjoyed by an
enterprise, which enables it to:
i. operate independently of the competitive forces prevailing in the RM
ii. affect the competition on consumers in RM in its favour

- Factors to determine dominant position (S.19(4))

i. market share
ii. size and resources of enterprise
iii. size and importance of competitors
iv. economic power of enterprise
v. vertical integration
vi. dependence of consumers
vii. extent of entry and exit barriers
viii.countervailing buying power
ix. source of dominant position
x. social costs and contribution to economic development
xi. any other factor the Commission deems fit

- Dominance is not considered bad per se, but its abuse is. It occurs when an enterprise uses its
dominant position in RM in an exploitative and exclusionary manner
- Categories of exclusionary abuses:
i. refusal to deal
ii. creating entry barriers
iii. predatory pricing
iv. raising competition costs
v. cross-subsidisation
vi. structural abuses

S.4(2)- Abuse
-Specifies the following practices as abuse:
i. imposing unfair or discriminatory condition in purchase or sale of goods
ii. predatory pricing
iii. limiting or restricting production of goods and technical and scientific development
iv. denying market access
v. making conclusion of contracts
vi. using dominance in one RM to enter into other market

#Belaire Owner’s Assoc. v. DLF Ltd. [Case 19 of 2010] (Unfair and abusive)
BOA contented that DLF was abusing dominant position in their buyer’s agreement. Their buyer’s
agreement had the following stipulations:
• unilateral charges may be made by the builder w/o consent of buyers
• increased to 29 floors instead of proposed 19 without any consultation
• builder can increase carpet area unilaterally and charge for it
• buyer did not have proper exit option (no refund until 3rd party agrees to buy the flat)
• if party delays in payment there was a heavy penalty but if DLF delayed no action was permissible
CCI: Conditions were violative of S.4(2)(a)(i), i.e. unfair and discriminatory. A penalty of ₹630 Crore was
imposed by CCI

#Pragati Maidan Case

RM- Providing venue for national and int’l exhibitions
ITPO-venue provider, Pragati Maidan was the venue
90 days strict time restriction for tickets bought off 3rd party vendors but waiver if bought from ITPO.
Informed to CCI, Was held to be unfair and discriminatory, case of exclusionary abuse
A penalty of 2% of average TO of preceding 3 years was levied (₹6.71 Cr)

Predatory Pricing
- sale of goods or services at a price which is below the cost, as may be determined by regulation of
production of goods or services with a view to reduce competition or eliminate the competitors
(Explanation B of S.4)
- Exclusionary behaviour and can be indulged only by dominant party
- Major elements:
i. establishment of dominant position in RM
ii. pricing below cost
iii. intention to reduce or eliminate competition (a.k.a. predatory intent test)
iv. able to recoup the losses after the exclusion of the competitor or foreclosing the cooperation.
v. Unjustified rebates, discounts or sale incentives are considered within its ambit

#MCX SE v. NSE
MCX alleged that NSE was indulging in predatory pricing. Allegations-
- From August, 2008 onwards, transition cost was waived off in currency derivates
- NSE stopped charging any subscription fee in currency derivative segment
- NSE didn’t collect annual subscription and other charges in currency derivative segment
MCX contended that since they only operated in currency derivatives, it led to huge losses.
Dominance: NSE occupied 33.17% of market share in currency derivates but was also dominant in other
markets getting undeniable advantages from it. They were able to provide stock exchange for free. The
acts of NSE amounted to leveraging its position in other markets to its benefit to capture the currency
derivative market
Abuse: Zero pricing adopted by NSE was a clear method of leveraging done with the intention to impede
future market access to potential competitors and foreclose existing competition,

CCI imposed a fine of ₹55.5 Cr. NSE challenged order before COMPAT.
COMPAT modified RM to entire stock exchange service and post such modification, NSE was beyond
doubt a dominant player. CCI’s penalty was upheld with additional order to stop subsidiary services with
immediate effect.
Appeal to SC in 2018, matter sub-judice

Essential Facilities Doctrine

- When a dominant enterprise in the RM controls infrastructure or facility necessary for accessing the
market and which is neither easily reproducible nor interchangeable, the enterprise may not without
any sound justification refuse to share it with its competitors at a reasonable cost. This is known as
Essential Facilities Doctrine. (S.4(2)(c))
- The section speaks of a remedial order if such practice is not followed in any market
- This arises when a firm is a natural monopoly
- It must be feasible to provide access to such facility
- Laid down in the Ericsson Case

IPR & Abuse of Dominance

S.4 relating to abuse of dominance on account of holding of the IPRs considers all the factors under the
framework of competition harm before arriving at any conclusion

Collective/Joint Dominant Position

A.102 of Treaty on Functioning on European Union (TFEU)- “collective abuse refers to when two or
more undertakings which are connected in some way (economic link) abuse their concentrated market
dominance.”
- the entities must be independent economic entities
- must be united through economic links
- must hold a dominant position by virtue of such link
Indian Position: absence of any such concept in the Act
#Sanjeev Rao v. Andhra Pradesh Hire-Purchase Assoc. (2013)
CCI admitted its failure to penalise the parties implicated in the case due to the absence of such
provision

#MERU Travel Solutions ℗ Ltd. v. M/S ANI Technologies ℗ Ltd. , M/S UBER Technologies Inc.
Commission observed that S.4 does not contemplate in its fold the concept of collective dominance.

Inquiry into abuse of dominance

- U/S.19, the Commission may inquire into any contravention of S.4
- May pass an order after inquiry u/S.27
- Interim order u/S.33 to restrain any party from continuance with the alleged offending act
- Appeal may be preferred to NCLAT

# Dhanraj Pillai & Ors. v. M/S Hockey India (2011)

Background- Informants were a group of former Olympians and professional Indian hockey players
including the likes of Dhanraj pillai, Gurban Singh, Grewal and V Baskaran. – Hockey India apex
governing body for the sport of hockey – has mandate to govern and conduct all related activities – also
the national sports federation for the sport of hockey in India and is affiliated to IOH, AHF, and FIH.
IHF – related party, former governing body, no longer recognized by IOH,AHF,FIH, Nimbus Sport, a
subsidiary of Nimbus communications Ltd, is a sports rights management and marketing company. In
2010, Nimbus sport and the IHF envisioned the birth of a professional hockey league in India, featuring
eight city based teams with Indian & overeseas players. The proposed league was given the name World
Series Hockey, the organisers, Nimbus sports, started negotiating with players to sign them up for the
league.
In 2011, the FIH notified the Regulations on sanctioned and un-sanctioned events and communicated
the same to all affiliated National Assoc through a letter dated 11/03/2011.
The FIH also provided that the refulations would apply prospectively from 31/03/2011 and would apply
to any participation commitments made prior to that date. HI dopted these regulations and consequently
modified its Code of Conduct Agreement with the players to include clauses related to disciplinary
action in case of participation in any unsanctioned events.
The disciplinary action for any player participating in any unsanctioned event was D/Q from selection to
the Indian national team.
Hi soon announced plans for starting their own professional hockey league along the lines of the
proposed WSH League.
Allegations: HI was misusing its regulatory powers to promote its own hockey league to the exclusion of
the WSH and was engaging thus in practices resulting in denial of market access to rivals, which was an
abuse of dominant position under section 4(2)(c) of the Act.
HI was using its dominance in conducting international events in India to enter into the market of
conducting a domestic event in India, a contravention under §4(2)( c) of the Act.
The CoC agreement entered by HI with the players is an exclusive supply agreement and imposes
restrictive conditions on participation in unsanctioned private professional leagues resulting in undue
restrictions on mobility of players. The CoC agreement was an anti-competitive agreement under §3(4)
of the Act.
Contention of HI: Disputed the jurisdiction of the commission – Hi was acting as the custodian of sport,
public good, and its organizational, governance and regulatory roles is not an economic activity.
Contended that it did not provide any product/service as defined in the Act, that the hockey players
cannot be considered as consumers and hence no relevant market could be identified.
Pyramid structure for geoverning international sport – would be unable to sanction the WSH, as an
event such as the WSH involved players from different continents.
Commission’s Analysis:
Jurisdiction – relied on Surinder Singh Baruni v. BCCI [no. 61/10].
Relevant market - Market for organization of private professional hockey leagues in India.
Abuse of Dominant Position: The most significant source of dominance is the regulatory powers of HI.
HI’s regulatory role empowers it, along with FIH to create entry barriers for private professional leagues
in the form of requiring sanctions for their tournament and requiring players to obtain NOCs from HI to
participate in such tournaments.
HI monopsony buyer – alleged abuse of dominance, the commission concluded that the informant’s
greviances stemmed from 2 issues namely:
 i. The FIH’s Resgulations on sanctioned and unsanctioned events;
ii. Conditions contained in the CoC agreement signed between HI and the players.
The Commission scrutinized the FIH regulations and appreciated factors such as maintaining the
integrity of the sport, ensuring the primacy of international competition and preventing free riding on
the investments of national assoc. Crucially, the commission founda that no approval had been sought
by the WSH as per the FIH regulations. At no stage in any events, all it provides is that the player should
not participate in any unsanctioned event and should obtain a NoC for participation in events w/foreign
teams/clubs.

Regulation of Combinations Under Indian Competition Law

• Supervision of Mergers:

o Why should it be supervised?

▪ Creates unusual economic power resulting in market concentration

▪ Tends to reduce competition in the RM and results in the merged business

having dominance in the RM.

▪ This may lead to an abuse of dominance & suppression of consumer rights.

▪ §5 & §6 of the 2002 Act – The provisions inserted w.e.f 1/06/2011

o Scope of CA ‘02

▪ Creation of enterprise through any structural combinations (merger,

amalgamation, acquisition) producing anti-competitive effect is under the ambit
of the Act.

▪ Does not define anti-competitive combinations but provides quantitative

threshold in terms of assets and Turn over.

o What is a combination?

▪ Acquisition of control, shares, voting rights or assets - §5(a) – done to enable

enterprise to exercise control – If the value of asset or TO of the combined
enterprises exceeds the prescribed thresholds then the combination is deemed to
have an AAEC in India.

▪ Acquistion of control by a person over an enterprise, when such person has

direct or indirect control over another enterprise engaged in competing
businesses – Expln (a) to §5 defines ‘control’ and includes controlling the affairs
or the management by ine or more enterprises.
Controlling the affairs of the management does not mean that controlling the
 company by means of voting rights but control in relation to the company’s
business.
Affairs = those which are relevant or having relation to the Biz. of the enterprise.

• Act does not specify the degree of influence that would require the
requirement to notify a transaction. Some of the Rights that the CCI has
considered amounting to control include:

o Appointment or removal of KMP;

o Changing no. of directors.

o Adopting or amending the annual budget and business plans to

enter a new line of business.

o The right to block special resolutions

o Altering the character documents.

o Appointment of auditors,etc.

▪ M&A b/w or amongst enterprises when the combining parties exceed the
threshold set in the Act. – M&A has the potential of affecting the competition, if
the total assets and TO exceeds the prescribed thresholds.
National Philadelphia Case – Even if M&A his approved by the SHs and Courts
under the Company’s Act, it can still be examined under the Clayton Act

▪ §5 – an acq, M&A which meets the relevant asset or TO thresholds stipulated

under the Act is a combination.

o Acquiring of control

▪ De Jure – Legal

▪ De Facto – Factual

o EU Merger guidelines:

▪ Control = having the “possibility of exercising decisive influence” rather than the
actual exercise of such influence.

o Combination: market dominance of a group in and outside India:

▪ Combination of non-Indian enterprises, business carried and merger completed

and approved outside India, can be subject to CA’02 if it meets the quantitative
jurisdictional test – Then notice given to CCI.
▪ Boeing/McDonnel Douglas Case [1997] – FTC approved combination but blocked
by EU Commission.

▪ Gencos Case [1999] – Combination b/w South African firms – approved in SA

but blocked by EC citing that their entry may adversely affect biz in EU.

o Combination – Prescribed Thresholds – 2016 notification

IN INDIA

Applicability Assets Turnover

 For individual Portion (i.e., acquirer and target) [combined] Rs. 2000 CR Rs. 6000 Cr

For Group (to which target belongs post acquisition) Rs. 8000 Cr Rs. 24000Cr

IN INDIA & OUTSIDE INDIA

Applicability Assets Turnover
Total Min. in IND Total Min. in IND
For individual Portion (i.e., acquirer and target) $1B Rs 1000Cr $3B Rs. 3000Cr
[combined]
For Group (to which target belongs post acquisition) $4B Rs. 1000Cr $12B Rs. 3000Cr

• Thresholds in 2002 Act increased by notification - §54 empowers CCI/C.Govt the power.
▪ Based on the changes in Wholesale Price Index or fluctuations in exchange
rates of rupee or Foreign Currency.
▪ Consider the consolidated, audited financial statements of the previous FY.
• Merger review process: When to Notify?
o Obligation to file the notification w/in 30 days of: -
▪ M&A – final approval of scheme of amalgamation by the BoD of such
Companies.
▪ Acquisitions: execution of a fixed binding agreement of other document
conveying an intent to acquire – communication to the statutory body.
o Aditya Birla / Pantaloons – Sufficient finality required in the trigger document –
MoU missing several important terms of transactions.
o Tesco / Trent – Fine of Rs. 3Cr for delayed filing.
o Thomas Cook/ZFCL – Fined Rs. 1 Cr for implementing part of a notifiable
transaction.
• Factors to be considered
o CCI will evaluate the possibilities of unilateral effects, coordinated effects and
possible conglomerate effects of the combination to see if it causes AAEC in the RM
in India.
▪ § 20(4)
i. Extent of barriers to entry into the market.
ii. Level of combination in the market.
iii. Degree of countervailing power in the market
iv. Likelihood that the combination would result in the parties to the
combination being able to increase price or profit margins
significantly and sustainably.
v. Extent of effective competition likely to sustain in a market.
• Scope of Merger Control
o Mandatory requirement of prior notification and approval:
▪ Supervisory effect: Cannot give effect to any part of the transaction till
clearance is received or 210 days pass from notification – Covers both
domestic & international transactions.
▪ Penalties for failure to file/belated filings: Up to 1% of combined assets or
TO.
Combinations causing or likely to cause AAEC will be void – Notifications may be ordered by the CCI
Which form to file?
1. Form 1- short form and default form
2. Form 2- detailed from requiring much more information. CCI prefers that this from be used
when transactions involve parties that have:
a. A horizontal merger w/ market shares over 15%
b. Vertical relationships w/ market shares under 25%
3. Material change to combination: file again (restart clock)
4. Form 3- intimation after transaction- S6(4)
Review timelines-----
Phase I- prime facie view w/in 30 days
- Meeting with the CCI to explain the case
- Phase II- Show cause notices- publication &30
- Comments- DG report

Combinations- statutory exemptions

S6(4)- acquisitions by public financial institutions, banks, venture capital funds and foreign institutional
investors pursuant to an investment agreement or a loan agreement are excluded from the prior
notification requirement.
A post facto intimation under Form 3 is required to be made w/in 7 days of the acquisition.

De-minimus exemptions/ gun- jumping provisions

Acquisitions and mergers/amalgamations, where the value of assets being acquired, mergered or
amalgamated is not under 350 crores in India or turn over not under 1000 crores are exempted from the
provisions of S5 of the CA’02
2017- deminimus financial thresholds
Exemption in such cases is for a period of 5 years.

Sun Pharam/Ranbaxy case

Order of divestment
Parties: sun pharmaceuticals Industries ltd and Ranbaxy
Transaction- In 2014, Press release- merger of Ranbaxy into sun pharma pursuant to the scheme of
arrangement. The proposed combination would also result in the association of 4zero6.79% of equity
share capital of zerotech by sun pharma from Ranbaxy. CCI formed a prima facie opinion that the
proposed combination is likely to cause an ACC.
If allowed, company- largest in India, 5th largest in the world. Operations would span across 65
countries, 47 manufacturing facilities across 5 continents.
Reason for merger- US food and & drug admin inspected ranbaxy’s Indian manufacturing units-
discovered lapses I compliances- barred ranbaxy in USA. Cuz of such sanction- multi billion dollar in
pharma sector.
Sun pharma- willing to amalgamate- it would increase market penetration in areas where they lacked-
would become No.1 market competitor in India and no. 5 in the world- would also get diversified
product portfolio (generic medicines).
July 29, 2014- CCI asked why an investigation shouldn’t take place?
On initiation of enquiry- first relevant market was defined at a molecular level.
December 5, 2014- CCI approved w/ certain condition because only in 7 brands, higher concentration in
markets are created- this, order of disinvestment u/S33(3) of CA. both companies agreement
Criticism: how will prices be regulated if dominant player.
Transnational combinations/cross border
S32- extra territorial jurisdiction to CCI- only possible if MOU w/ different jurisdictions/

Boeing/ Md Donnel Douglas case & Genocor case (both mentioned before)

Mergers by business concentration

Criticism of Indian law- not differentiating between horizontal, vertical and conglomerate mergers.
a. Horizontal mergers
- Between former, intra industry competitors
- Attempt to gain efficiencies of scale/scope and benefit from increased market power
- Susceptible to anti trust scruitiny.
b. Vertical mergers
- Between fromer buyer and seller
- Forward (Disney merger w/ capital cities/ ABC) or backward (Texaco and getty oil merger
in 1984) integration.
- Creates an integrated product chain
c. Conglomerate mergers
- Between unrelated firms
- Creates portfolio businesses
- Product extension merger v. pure conglomerate mergers
- For example- GM & EDS

Proposed changes to CCIs merger control regime by the draft competition amendment bill, 2020
1. Central gov’s power to notify new thresholds for merger control –
S6(a) of the bill seeks to add a provision to S5(c) of the act which gives power to the CG (in
consonance w/ CCI) to notify new criteria of determining thresholds which can be defined as a
‘combination u/ the Act in addition to the existing ones u/ S5(a), (b) and (c). Similarly, S6 of the
bill also gives CG the power to notify the transactions that wouldn’t count as ‘combination’
under the act.
2. Change in the definition of control
Currently, the definition of control u/ explanation provided under (a) of section 5 of the act is
the ability of a group or enterprise to control the management or affairs of the company.
S6(6) of the bill seeks to completely replace the existing definition of control by replacing
explanation proviso (a) to define control as “singular or joint ability of an enterprise or a group to
exercise ‘material influence’ over the management or affairs or stratergic commercial decisions.”
3. Change in definition of group
The definition of group u/ explanation proviso (b) of S5 of the act is the ability of two or more
enterprises are in a position to either exercise more than 26% if voting rights, or appoint more
than 50% of members of the BOD in the other enterprise or control the management or affairs of
the other enterprise.
The significant change made by the DAB is to allow the CG to prescribe any other percentage
than 26%.
4. Speedier process of approval
S31(11) provides that the review of assessment of the combination can extend upon 210 calendar
days. U/ this review process, the CCI is required to gives its prima facie opinion on a
combination as a result of its notification.
 The bill seeks to decrease the assessment timeline from 210 days to 150 days w/ an extension of
upto 30 days in case the parties concerned need to provide additional information or address
certain defects.
5. The green channel approval process given a statutory recognition.
The green channel approvl process was introduced by regulation 5A by an amendment in 2019.
The bull seeks to give statutory recognition to the green chnnel approval process in the act.
This bull recognizes the green channel by empowering the CG to allow in consonance w/ CCI,
certain non-contentious transactions, classified in Schedule III of the bill, to use the green
channel or the ‘deemed approval’ process through a notification.
Eligibility criteria for green channel notification: The transaction parties do not have any:
a. Horizontal overlaps (that us, they must not be already producing any similar, identical or
substitutable products/services) or
b. Vertical overlaps (that is, they must not be engaged in activities at different stages or
level of the production chain) or
c. Complementary overlaps (that is, products/services when combined and used together
enhance the value of the combined goods and services).
6. Inclusion of tech and new age markets
The bill proposes to expand the scope of the act to include within its scope of the digital markets.
Inclusion of hub and spoke arrangement
7. Changes in the enforcement functions:
The bill intents to introduce wide range of powers to the DG as well as the CCI. The bull
introduces provisions u which any person who:
a. Fails to produce any docs, information or records
b. Did not appear before the DG or fail to answer any question by the DG
c. Or sign the note of cross examination, shall be punishable w/ imprisonment of term
extending upto 6 months or dine for upto 1 cr rupees.
The bill introduces the max capacity of penalty as 10% of income of the individual in the
preceding years, incase of formation of cartels.
8. Extension of IPR safe harbor to dominance cases
9. Leniency plus
10. Settlement mechanism, not for cartels.
11. Introduction of size of the transaction test- income criteria also included now.

Inquiry and investigation- process flow- section 3 and 4

S19- case initiation:
- Info received under section 19(1((a) from any person, consumer or their association or trade
association.
- Reference received from CG or SG. Section or statutory authority [S19(1)(b)]
- Prima facie view u/ S26(1)

No prima facie
case made out
Prima facie
case made out
(no appeal
lies)
Case closed -
S26(2)
Sent to DG Appeal lies
for
investigation
In case of
Powers and duties of CCI
S18- duties
- The commission has duty to eliminate the practices having adverse effect on competition, to promote
and sustain competition in the market
- To protect the consumer interests and to ensure freedom of trade carried on by other participants in
the market in India.
- For the purpose of discharging its duties or performing its functions, the commission may enter into
any memorandum or arrangement w/ the prior approval of the CG w/ any agency of any foreign
country.

Composition of the commission

- Chairperson + 2 to 10 other members to be appointed by CG
- They are recommended by the selection committee consisting of:
- CJI or his nominee (chairperson)
- Secretaries in the MCA and law and justice
- Two experts of repute having spl knowledge of and professional experience in intl trade,
economics, business, commerce, law, finance, accountancy, management, industry, public affair or
competition matter including competition law and policy in intl trade, economics, business,
commerce, law, finance and industry
- RBI governor

Powers of the commission

S27: orders by commission after inquiry into agreements or abuse of dominant position
S28: division of enterprise enjoying dominant position
S31: orders of commissions on certain combinations
S33: power to issue interim orders
S36: power of commission to regulate its own procedures
S38: rectification of orders
S39: execution of orders of commission imposing monetary penalty

Appeal:
CCI – COMPAT/ NCLAT- SC

Chapter V- duties of DG
S41- DG to investigate contravention
 - The DG shall, when so directed by the commission shall assist the commission in investigating into
any contravention of the provisions of this act or rules, regulations, made thereunder
- The DG shall have all powers as are conferred upon the commission in s 36(2)

Competition law and advocacy

S49- advocacy is the act of influencing or supporting a particular ide or policy. The act mandates CCI to
undertake competition advocacy, public awareness and training on comp issues.
Comp advocacy refers to those activities conducted by comp authority related to the promotion of a
competitive environment for economic activities by means of non-enforcement mechanism, mainly
through its relationship w/ other governmental entities y increasing public awareness of the benefits of
competition.
S49(1)- the commission has an advocacy role to play on a reference made to it by the CG for the opinion
on possible effect of any policy on competition. The commission is mandated to offer its opinion to the
CG or SG w/in 60 days of securing the reference. The opinion shall not be binding on the government.