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Volume 1 | Issue 2 | July 2019 1
Volume 2 Issue 1 April 2020
Volume 2 | Issue 1 | April 2020
WHAT’S IN THIS ISSUE?
Summary of the Competition (Amendment) Bill, 2020
01
Total Holdings SAS receives CCI clearance for the acquisition of 37.40% stake and joint control of Adani Gas Limited
03
CCI allows Adani Properties Private Limited to acquire 23.5% shareholding in Mumbai International Airport Limited
03
CCI grants conditional approval to Hyundai Motor Company and Kia Motors Corporation for acquisition of minority stake in ANI Technologies Private Limited and Ola Electric Mobility Private Limited
04
CCI allows acquisition of 44.44% shareholding in GMR Airports Limited by TRIL Urban Transport Private Limited, Valkyrie Investment Pte Limited and Solis Capital (Singapore) Pte Limited subject to adherence with voluntary commitments
06
CCI imposes penalty for gun-jumping on Canada Pension Plan Investment Board
07
High Court of Karnataka stays investigation against alleged anticompetitive conduct of Amazon and Flipkart
09
NCLAT remands matter to the CCI after finding grounds for a prima facie case to be made out against Flipkart India Private Limited
10
NCLAT reduces penalty imposed by the CCI on Adani Gas Limited for abuse of dominance in the market for natural gas
11
CCI penalises Grasim Industries Limited for abusing its dominant position in the supply of viscose staple fibre
13
CCI orders investigation of Asian Paints Limited’s alleged anticompetitive practices against JSW Paints Limited
14
CCI forms second case of prima facie anticompetitive conduct by MakeMyTrip India Private Limited and Oravel Stays Private Limited
15
CCI finds no merit in allegations of abuse of dominance by e-payment gateway, PayU Payments Private Limited
16
CCI finds no bid-rigging in relation to requests for quotations by automobile manufacturers
17
CCI rejects allegation of abuse of dominance against the Ministry of Railways and the IRCTC
18
CCI finds no dominance by ABB Limited in the market for transistor-based power quality solutions
19
Volume 2 | Issue 1 | April 2020 1
REGULATORY/LEGISLATIVE UPDATES
Summary of the Competition (Amendment) Bill, 2020 On 12 February 2020, the Ministry of Corporate Affairs (MCA) published the much-awaited Competition (Amendment) Bill, 2020 (Bill), proposing far reaching amendments to the Indian competition law regime. The Bill follows the Competition Law Review Committee’s (CLRC’s) recommendations, a high-level committee constituted to suggest amendments to cater to the changes demanded by the ever-dynamic Indian markets.
Set out below are certain salient features that may be of interest:
Introduction of a Governing Board – Introduction of a “governing board” that will be empowered to pass regulations and exercise supervision over the Competition Commission of India’s (CCI’s) functioning. This oversight is anticipated to increase judicial discipline and reduce the number of procedural challenges against the CCI’s findings;
Appointment of Director General (DG) – The CCI, as opposed to the Central Government, will exercise the power to appoint the DG;
Recognition of Buyers Cartels and Hub and Spoke Cartels– The Bill explicitly recognises buyer cartels and hub and spoke cartels. The inclusion of hub and spoke cartels is relevant in the context of the rising number of marketplace platforms with the capability of facilitating collusion between its vendors/partners;
Deposit of Penalty for Appeal – The Bill stipulates that before filing an appeal, the appellant must deposit 25% amount of the penalty levied on it or such other lower amount “as may be prescribed”;
Settlements and Commitments – The Bill introduces two dispute resolution
mechanisms, namely settlements and commitments. Settlements allow a party to apply for closure of the CCI’s proceedings - after submission of the DG’s investigation report but prior to the CCI’s final finding. Commitments may be applied for after initiation of the DG’s investigation but before submission of the DG’s investigation report with the CCI. Both, settlements and commitments, are non-appealable but may be revoked by the CCI under certain circumstances. The CCI may also use the evidence submitted to initiate an inquiry separately. It is hoped that the mechanisms provide procedural economy and efficiency, and encourage the imposition of innovative deterrents by the CCI;
Reduction in Merger Review Waiting Period - Merger timelines have been reduced from 210 days to 150 calendar days (extendable by 30 calendar days by the CCI, under certain circumstances). Reduction in the period is expected to facilitate timely closure of transactions;
Dilution of Standstill Obligations for Public Bids/Hostile Takeovers – Parties will be exempt from the standstill obligation under the Competition Act, 2002 (Act) if their transaction involves the implementation of an open offer or a market purchase, subject to (i) the CCI
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being notified of the acquisition, (ii) the shares or convertible securities being maintained in a specific manner, and (iii) among other things, the acquirer not exercising any beneficial rights in the shares until the CCI’s approval; and
Definition of Control – The Bill amends the definition of control to mean the exercise of “material influence” over the management or affairs or strategic commercial decisions of one or more enterprise / group by another. However, no guidelines have been provided for what constitutes “material influence” so as to amount to “control” in terms of the Act.
Comment:
The amendments proposed by the Bill are a mixed bag of structural, procedural, and substantive changes. In particular, the structural changes i.e., the introduction of a governing board and subsuming of the DG’s office into the CCI, pose the risk of compromising the independent functioning of the CCI and DG, respectively. However, it is anticipated that any such risk will be mitigated through the practical implementation of Chinese walls between the governing board and the CCI, and the CCI and the DG.
Click here to access the Bill.
Volume 2 | Issue 1 | April 2020 3
COMBINATION/MERGER CONTROL ORDERS
Total Holdings SAS receives CCI clearance for the acquisition of 37.40% stake and joint control of Adani Gas Limited1
The CCI approved the acquisition of joint control through a 37.40% shareholding of Adani Gas Limited (AGL) by Total Holdings SAS, a French subsidiary of Total S.A.
In India, the parties exhibited horizontal overlaps in the wholesale supply of natural gas. However, low market shares ruled out concerns relating to appreciable adverse effects on competition (AAEC) in India.
In its vertical overlap analysis, the CCI noted that both parties are present in the upstream
market (i.e., the wholesale supply of natural gas in India), and only AGL has presence in the downstream market (i.e., the retail supply of natural gas in India). However, given the insignificant presence of both the parties, as well as the presence of competitors like Gas Authority of India and Indian Oil Corporation in the relevant market, the CCI observed that the combination is not likely to raise any concerns from a competition law perspective.
Click here to access the order.
CCI allows Adani Properties Private Limited to acquire 23.5% shareholding in Mumbai International Airport Limited2
The CCI cleared Adani Properties Private Limited’s (APPL’s) acquisition of a 23.5% stake in Mumbai International Airport Limited (MIAL).
APPL is engaged in a range of business activities including real estate, ports and
1 Total Holdings SAS and Adani Gas Limited (Combination Registration No. C-2019/10/694) dated 28 November 2019. 2 Adani Properties Private Limited and Mumbai International Airport Private Limited (Combination Registration No. C-2019/10/696) dated
14 November 2019.
logistics, mining, etc. APPL’s shareholding is held by the SB Adani Family Trust (84.41%) and Mr Karan G Advani (15.59%) (collectively, Adani Group). MIAL is engaged in operating and conducting services pertaining to the managing of Mumbai’s Chhatrapati Shivaji International Airport.
The CCI noted that Adani Enterprises Limited and Mundra International Airport Private Limited (both part of the Adani Group of companies) are present in the market for the development, operation, and maintenance of airports and / or the market for the provision of access to airport facilities / premises.
However, it observed that since the provision of services at one airport is not substitutable with those provided at another airport, competition dynamics for each airport are
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only homogenous within its own premises (which are distinct from other airports).
Following this approach, the CCI held each airport to be a distinct relevant geographic market and consequently, noted that no Adani Group entity had operations within the
vicinity of Mumbai/MIAL. Accordingly, with no vertical relationship exhibited between the parties and no AAEC concerns, the CCI approved the combination.
Click here to access the order.
CCI grants conditional approval to Hyundai Motor Company and Kia Motors Corporation for acquisition of minority stake in ANI Technologies Private
Limited and Ola Electric Mobility Private Limited3
The CCI approved the acquisition of a minority stake in ANI Technologies Private Limited (Ola) and Ola Electric Mobility (Ola Electric) by Hyundai Motor Company (HMC) and Kia Motors Corporation (KMC), subject to compliance with voluntarily submitted behavioural modifications to the combination.
The combination involved the (i) acquisition of 3.61% and 0.90% shareholding in Ola by HMC and KMC, respectively, (ii) acquisition of 4.54% and 1.13% shareholding in Ola Electric
3 Hyundai Motor Company, Kia Motors Corporation, ANI Technologies Private Limited and Ola Electric Mobility Private Limited
(Combination Registration No. C-2019/09/682) dated 30 October 2019.
by HMC and KMC, respectively, and (iii) strategic cooperation between (a) HMC and Ola and (b) HMC and Ola Electric, in relation to Ola and Ola Electric’s mobility businesses (Strategic Cooperation Agreements).
HMC and KMC are subsidiaries of the Hyundai Motor Company, which along with its subsidiaries forms the Hyundai Motor Group (HMG). HMG is engaged in the manufacturing and distribution of automobiles, automobile parts and accessories, and research and development of automotive engineering
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across the globe. In India, HMC operates through its subsidiaries Hyundai Motors India Limited (HMIL), Hyundai Motor India Engineering Limited, and its affiliate Prime Mover Mobility Technologies Private Limited (Revv), while KMC operates through its subsidiary Kia Motors India Private Limited.
Ola is a ride-sharing company that integrates city transportation for customers and driver partners onto an online platform. Through its subsidiaries and affiliates, Ola also undertakes a number of ancillary activities, including digital payment systems, online food delivery, leasing commercial passenger vehicles through Ola Fleet Technologies Private Limited (Ola Fleet), as well as renting scooters for last mile travel. Ola Electric is an affiliate of Ola, at a nascent stage of operations for the provision of charging infrastructure for two and three-wheeler electric vehicles (EVs).
While parties did not exhibit any direct horizontal overlaps, the CCI noted certain indirectly overlapping and complementary activities with respect to four-wheeler self-drive services, the EV supply chain, and the radio taxi supply chain.
The CCI did not see any competition concerns with respect to four-wheeler self-drive services since (i) the market is populated by various players (e.g., Zoomcar, JustRide, Drivezy, Carzonrent, etc.) and (ii) Ola Fleet has not commenced its operations as yet.
Further, the CCI observed complementarity in the fact that while Ola Electric is entering the market for EV charging services, HMC and KMC are looking to manufacture and supply EVs. However, the CCI did not envisage any anticompetitive issues in this regard given that the EV market is at a nascent stage,
With respect to the radio taxi supply chain, the CCI identified concerns in relation to the vertical linkage among the parties. Ola, a vertically integrated leader in the radio taxi market, procures vehicles from various manufacturers (including HMIL, the second
largest player in the Indian auto sector), and then leases them to taxi drivers to conduct their business.
The CCI found that because the gross booking value and incentives of Ola Fleet cabs are relatively higher, Ola Fleet cabs are preferred over other cabs in the Ola marketplace. Further, according to the Strategic Cooperation Agreements and the internal board presentation of HMG, the parties intended to leverage Ola assets to promote leasing of HMG vehicles to Ola drivers.
In light of this, the CCI noted that the proposed combination was likely to incentivise Ola to give preference to drivers operating HMG vehicles. Accordingly, on account of the strong market position of both parties, drivers registered in Ola’s marketplace who operate cabs of competing makes were likely to be disadvantaged.
The parties argued that albeit well-entrenched, neither Ola nor HMC / KMC was dominant in their respective markets as they each had significant competitors. Despite this, the parties made voluntary commitments to the CCI regarding the non-exclusivity of the strategic collaboration among the parties. The commitments included submissions to the effect that (i) drivers would not be given preference or discriminated against based on the brand of vehicle they operated, and (ii) that Ola’s marketplace would be operated in an objective manner.
As a result of the parties’ commitments, the CCI cleared the combination.
Click here to access the order.
Comment:
This decision is testimony to the general digital ecosystem concerns raised by antitrust regulators world-over on platform neutrality, where the company running the platform seeks to promote its own brand to the detriment of others. The remedy offered
Volume 2 | Issue 1 | April 2020 6
by the parties seeks to address such concern in this case.
CCI allows acquisition of 44.44% shareholding in GMR Airports Limited by TRIL Urban Transport Private Limited, Valkyrie Investment Pte Limited and Solis
Capital (Singapore) Pte Limited subject to adherence with voluntary commitments4
The CCI granted conditional approval for acquisition of 19.75%, 14.81%, and 9.88% (collectively, 44.44%) equity stake in GMR Airports Limited (GAL) by TRIL Urban Transport Private Limited (TUTPL), Valkyrie Investment Pte Limited (Valkyrie) and Solis Capital (Singapore) Pte Limited (Solis), respectively.
TUTPL is a wholly owned subsidiary of Tata Sons Private Limited (Tata Sons), engaged in the development of urban transport and infrastructure facilities. Pertinently, Tata Sons, through its group entities (Tata Sons Group), holds a majority stake in two airlines, namely AirAsia India (joint venture with AirAsia Berhad) and Vistara Airlines (joint venture with Singapore International Airlines).
Valkyrie is a Singapore-incorporated special purpose vehicle owned by GIC Pte Limited through its group of investment holding companies (GIC Group). Solis is also an investment vehicle, which is a part of the group of companies held by SSG Capital Management (Singapore) Pte Limited (SSG Group). The SSG Group is engaged in alternative asset management and focuses on investments in the Asia Pacific region.
GAL is a subsidiary of GMR Infrastructure Limited (GIL). GIL is the ultimate parent entity of a number of companies with activities across a range of sectors (GMR Group). GAL, through its subsidiaries, is engaged in developing, managing, and operating airports in India and around the
4 TRIL Urban Transport Private Limited, Valkyrie Investment Pte Limited, Solis Capital (Singapore) Pte Limited and GMR Airports Limited
(Combination Registration No. C-2019/07/676) dated 1 October 2019.
world. There were no horizontal overlaps between the parties.
A vertical relationship between the Tata Sons Group and the GMR Group was found to exist, as the GMR Group (through GAL) is present upstream, in the provision of development, operation, and maintenance of airports, which is vertically linked with the downstream services provided by the Tata Sons Group. These services include provision of scheduled and non-scheduled air transport services, food and beverage services, retail services, in-flight catering services, ground handling services, cargo services, and maintenance and repair operations.
Accordingly, the CCI delineated the relevant markets as (i) the market for provision of access to airport facilities / premises at each of GAL’s airports (upstream), and (ii) the market for provision of air transport activities and other specific services at each of GAL’s airports (downstream).
Further, the CCI observed that pursuant to the proposed combination, Tata Sons Group
Volume 2 | Issue 1 | April 2020 7
would also acquire rights over certain reserved matters, and a board seat in GAL’s entities which are currently operating or would be running, its airports.
In its assessment, the CCI noted that once a contract is awarded by the Government of India, the awardee inevitably becomes a monopolist. The monopoly results from the grant of an exclusive right to develop, control, operate, and maintain the airport allowing the awardee to operate independent of market forces for a few decades. This implies control over the terms of providing access to airport facilities / premises to various third-party service providers. Therefore, the CCI held that the GMR Group had market power in the upstream market.
Further, on account of the proposed combination, and its presence in the airline business and other associated businesses, the Tata Sons Group would have presence in both, the upstream and the downstream markets, as defined above.
Accordingly, the CCI’s concerns involved a potential conflict of interest arising out of the proposed combination where the parties may be incentivised to foreclose the market for downstream players (i.e., competing airlines and other service providers). The CCI also noted the requirement for safeguards to ensure no airline gets preferential treatment
in the allotment of slots and access to other services.
To allay these concerns, the parties made voluntary commitments to the effect that (i) the Tata Sons Group would not appoint a board director or key managerial person for any airport concession entity, (ii) there would be no directors on GAL’s board who also hold directorships in any conflicted entity, (iii) the Tata Sons Group’s nominee director on GAL’s board would recuse themself from matters in relation to slot allocation, (iv) GAL would ensure no commercially sensitive information in relation to slot allocation is disclosed to the Tata Sons Group’s nominee director, and (v) adequate monitoring systems would be put in place such that airport concession entities ensure “competition neutrality, a level playing field and fairness”.
Based on these commitments, the CCI granted its approval.
Click here to access the order.
Comment:
This order demonstrates common conflict of interest issues that can arise due to vertical overlaps. To address such issues, information control and ring-fencing measures are typically employed. In this case, these were used as remedial tools to achieve competitive neutrality, and to ensure fair and equal treatment of all airlines.
CCI imposes penalty for gun-jumping on Canada Pension Plan Investment Board5
The CCI imposed a penalty of INR 5,000,000 (approximately USD 66,555)6 on the Canada Pension Plan Investment Board (CPPIB) for failing to notify an inter-connected transaction with a transaction that had been previously notified.
5 Proceedings against Canada Pension Plan Investment Board and ReNew Power Limited under Chapter VI of the Competition Act, 2002
dated 21 November 2019. 6 Exchange rate applied 1 USD = INR 75.12 as on 26 March 2020. The exchange rate has been applied uniformly throughout the newsletter.
Volume 2 | Issue 1 | April 2020 8
The acquisition of 16.33% stake in ReNew Power Limited (ReNew) by CPPIB (Transaction I) was duly notified to the CCI on 27 November 2017 and received the CCI’s approval on 9 January 2018. Transaction I had two legs, namely, an acquisition of 6.33% of ReNew’s existing equity shares from Asian Development Bank (Secondary Acquisition), and the acquisition of 10% equity stake by way of compulsorily convertible preference shares of ReNew (Primary Acquisition). The Secondary Acquisition was closed on 31 January 2018 and the Primary Acquisition was closed on 23 March 2018.
The CCI’s penalty order focused on the non-notification of ReNew’s acquisition of Ostro Energy Private Limited (Ostro) (Transaction II) which was supported by Transaction I and closed on 28 March 2018.
The CCI came to know of Transaction II by way of press releases issued by ReNew and CPPIB on 2 April 2018 and 3 April 2018, respectively. However, no disclosure regarding Transaction II had been made in the notice filed with respect to Transaction I.
The CCI also reviewed email correspondences between CPPIB and ReNew which revealed that CPPIB was concerned about due diligence being conducted in relation to Transaction II. In fact, CPPIB wanted access to the due diligence even before discussing term sheets in relation to the Primary Acquisition in Transaction I.
Additionally, other documents considered by CPPIB’s Investment Department Decision Committee (Investment Committee), demonstrated that CPPIB was aware of Transaction II at the time of evaluating the investment opportunity. More so, the Primary Acquisition in Transaction I was conceived, negotiated, contemplated, and pursued to finance a certain strategic acquisition by ReNew (i.e, the acquisition of Ostro by way of Transaction II).
The CCI noted that while none of the several other potential acquisitions by ReNew were mentioned in these documents, the Ostro acquisition was discussed at length. The documents included statements to the effect that:
ReNew was in late stage discussions to acquire Ostro at the time of Transaction I;
estimates of the expected returns from the investment proposed in ReNew were based on business operations of both, ReNew and Ostro;
ReNew asked CPPIB to support the acquisition of Ostro;
Ostro was one of the top ten independent power producers, which was specifically highlighted to signify its proposed acquisition by ReNew; and
the projects of Ostro overlap with Indian states where ReNew has operations and Ostro’s assets have higher credit quality than ReNew’s assets.
The CCI also found it relevant that after the closing of Transaction II, CPPIB publicly declared that its additional investment in ReNew (i.e., the Primary Acquisition) was done to support ReNew’s acquisition of Ostro.
Accordingly, the CCI held that Transaction I and Transaction II were inter-connected and CPPIB and ReNew, being the acquirers in Transaction II, were held to be in contravention of the obligation to notify the CCI. Further, the CCI held that the facts and developments regarding Transaction II were material to Transaction I, which were omitted at the time of notification of Transaction I. Accordingly, the CCI imposed a penalty of INR 5,000,000 (approximately USD 66,555) on CPPIB.
Click here to access the order.
Volume 2 | Issue 1 | April 2020 9
ENFORCEMENT ORDERS
ORDERS OF THE HIGH COURT
High Court of Karnataka stays investigation against alleged anticompetitive conduct of Amazon and Flipkart7
The High Court of Karnataka (High Court) stayed the CCI’s order directing investigation into allegations that Amazon Seller Services Private Limited (Amazon) and Flipkart Internet Private Limited (Flipkart) had entered anticompetitive vertical agreements with their sellers.
The CCI had initiated investigation pursuant to complaints that Amazon and Flipkart had entered anticompetitive vertical arrangements.8 These arrangements related to the exclusive launch of mobile phones, deep-discounting, the preferential listing of Amazon’s and Flipkart’s private labels on their respective platforms, and the preferential listing of certain “preferred sellers” to the detriment of “non-preferred sellers”.
Broadly, the CCI found that there was prima facie evidence to suggest that mobile manufacturing companies undertook the exclusive launch of their models on either Flipkart’s or Amazon’s platforms. These exclusive launches were often made through preferred sellers on the platforms. Interestingly, the preferred sellers were identified to be sellers in which Flipkart and Amazon, held and / or exercised some degree of direct or indirect ownership. There was also evidence to suggest that the exclusive launches were being made by preferred sellers at significantly discounted prices.
7 Amazon Seller Services Private Limited v. Competition Commission of India, Delhi Vypaar Mahasangh and Flipkart Internet Private
Limited (Writ Petition (Civil) 3363 of 2020) dated 14 February 2020.
The CCI observed that the possibility of these discounts being funded by the
platforms, who held stake in the preferred sellers, merited investigation. The CCI also noted that the preferential listing of such preferred sellers on the platform and the discounts offered influenced competition on the platforms.
Lastly, the CCI observed that there was a low likelihood that competition between the platforms would mitigate any AAEC as both platforms, prima facie engaged in the same practices. Therefore, the CCI directed the DG to undertake a full investigation into the vertical agreements.
Subsequently, Amazon challenged the CCI’s order before the High Court. Interestingly, the challenge was based on the absence of the CCI’s satisfaction that a prima facie contravention existed. The High Court observed that in Star India Private Limited v.
Volume 2 | Issue 1 | April 2020 10
Competition Commission of India (Writ Petition (Civil) 9175 of 2018), the High Court of Bombay held that the CCI ought to have formed a prima facie opinion that an agreement exists between parties. However, in the present case, the CCI merely observed that an agreement “appears” to exist, without any material on record.
Amazon also urged that the CCI could not exercise jurisdiction over the matter until a separate ongoing investigation against Amazon and Flipkart, in relation to alleged contraventions of Foreign Exchange Management Act, 1999 (FEMA), had been concluded. The High Court observed that the Supreme Court of India in Competition Commission of India v. Bharti Airtel Limited (Civil Appeal No. 11843 of 018) had held that
where an enterprise was being investigated under a specialised regulatory statute (such as FEMA), the CCI would be able to exercise its jurisdiction only after conclusion of findings under the specialised statute. Therefore, the High Court agreed that the CCI should have awaited the result of the FEMA investigation. In view of this, the High Court admitted the case and stayed the investigation ordered by the CCI. Flipkart followed suit and secured a similar stay.
Click here to access the order of the CCI.
Click here to access the order of the High Court.
ORDERS OF THE NCLAT
NCLAT remands matter to the CCI after finding grounds for a prima facie case to be made out against Flipkart India Private Limited9
The National Company Law Appellate Tribunal (NCLAT) set aside the CCI’s order that exonerated Flipkart India Private Limited and Flipkart Internet Private Limited (collectively, Flipkart) from abuse of dominance allegations. Finding grounds for a prima facie case to be made out, the NCLAT remanded the case to the CCI on the premise that an investigation by the DG should have been ordered.
By way of an order dated 6 November 2018, the CCI had dismissed a complaint filed by the All India Online Vendors Association (AIOVA), alleging abuse of dominance by Flipkart, on account of facilitating discounts and leveraging its position to enter into another market of manufacturing products through private labels.
9 All India Online Vendors Association v. Competition Commission of India and Others (Competition Appeal (AT) No. 16 of 2019) dated
4 March 2020. 10 Flipkart India Private Limited v. Assistant Commissioner of Income-Tax (ITA No.202/Bang/2018) dated 25 April 2018. 11 An AO is an income tax officer appointed to assess the income tax payments that individuals are liable to pay under the applicable
Indian tax legislation.
The CCI’s grounds for dismissal were based on the fact that there could be no finding of Flipkart’s dominance in the “market for services provided by online marketplaces for selling of goods in India” due to the presence of several other competing platforms like Amazon, Snapdeal, Paytm Mall, etc.
Aggrieved by the CCI’s closure order, AIOVA filed an appeal before the NCLAT. AIOVA claimed that the CCI failed to direct an investigation into the allegations, despite having sufficient material placed before it.
in furtherance of its arguments, AIOVA relied on an order involving Flipkart that was passed by the Income Tax Appellate Tribunal at Bangalore (ITAT).10 AIOVA had especially relied on the findings of the Assessment Officer (AO), 11 even though there were no adverse findings against Flipkart in the
Volume 2 | Issue 1 | April 2020 11
income tax proceedings before the ITAT. Facts put forward by the AO demonstrated how Flipkart was selling goods at less than the cost price, which was not a normal business practice. The AO as well as the ITAT identified this practice as predatory pricing. The AO also noted it to be a strategic move to capture market share by generating consumer goodwill and to earn profits in the long run.
In this regard, the NCLAT noted that while the AO’s observations did not result in any adverse findings against Flipkart regarding
income tax, they are indeed material in demonstrating the manner in which the Flipkart entities operate and how they engage in predatory pricing. Therefore, the NCLAT held that the conclusions from the income tax proceedings were sufficient to make a prima facie case to be investigated under the Act.
Accordingly, the NCLAT remanded the matter to the CCI for fresh consideration.
Click here to access the order.
NCLAT reduces penalty imposed by the CCI on Adani Gas Limited for abuse of dominance in the market for natural gas12
The NCLAT reduced the penalty on Adani Gas Limited (Adani) in relation to the CCI’s findings that Adani had abused its dominant position in the market for supply and distribution of natural gas in Faridabad, Haryana 13 .. The abuse related to the
12 Adani Gas Limited v. Competition Commission of India and Another (TA (AT) (Competition) No. 33 of 2017 dated 5 March 2020. 13 Faridabad is a city in the Indian state of Haryana and is part of the National Capital Region of India.
imposition of unfair conditions in its Gas Supply Agreements (GSAs) with buyers of natural gas. The CCI’s order had directed Adani to pay a penalty of INR 256,727,000 (approximately USD 3,417,558) i.e., 4% of
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Adani’s average relevant turnover and to modify the terms of its GSAs.
Adani appealed to the NCLAT against the CCI’s findings, challenging the CCI’s definition of the relevant market as well as the finding that Adani exercised dominance in that relevant market.
However, the NCLAT confirmed the CCI’s definition of the relevant market i.e., the “market for supply and distribution of natural gas to industrial consumers in Faridabad”. The NCLAT reasoned that industrial consumers were distinct from commercial and domestic consumers because each category had a different end-use for the gas. Further, Adani had itself made a distinction between types of consumers, evidenced by the differing terms and conditions of its business relationship vis-à-vis industrial, domestic, and commercial consumers.
Adani also contended that the market definition should be broadened to include alternative sources of fuel, such as non-gaseous liquified petroleum gas (LPG), and not restricted to natural gas. In this respect, the NCLAT noted that there was no gaseous substitute to natural gas for industrial customers and that members of the Faridabad Industries Association (the initial complainant before the CCI) had relied on alternate means of energy (such as electricity and diesel) only prior to their switch to natural gas. Further, even if it were agreed that LPG was substitutable with natural gas, LPG was unavailable to industrial consumers in the relevant market during the period of contravention. Therefore, the NCLAT found no infirmity with the CCI’s definition of the relevant market.
Regarding the question of dominance, the NCLAT confirmed that Adani exercises a dominant position by virtue of being the sole supplier of natural gas in Faridabad. It also
14 Minimum guaranteed take-offs refer to the minimum amount that a consumer would pay Adani, irrespective of whether the buyer
actually offtakes the natural gas.
noted that, while Adani’s competitors could now use Adani’s pipeline infrastructure to distribute compressed natural gas, the infrastructure was not available to competitors at the time of contravention.
The NCLAT confirmed the CCI’s findings and held that the clauses of the GSAs were unfair conditions amounting to an abuse of a dominant position. Some of the clauses found to be unfair include the following:
Adani would not be liable for excess payments made by a consumer, due to erroneous billing by Adani;
consumers would be held liable for delayed payment of interest, and interest could be unilaterally changed by Adani;
Adani had the discretion to accept or reject a consumer’s request under force majeure;
burden on consumers to meet payment obligations regarding minimum guaranteed take-offs14, even in the event of an emergency shutdown; and
• Adani could terminate a contract if a consumer did not take off 50% or more of the daily contracted quantity of natural gas, within forty-five days.
On the issue of penalty, the NCLAT highlighted the existence of certain mitigating factors and reduced the penalty imposed by the CCI. The factors highlighted were (i) Adani’s voluntary offer to revise its GSAs, prior to the completion of the CCI’s enquiry and during pendency of the appeal and (ii) the emergence of new competitors in the relevant market. In view of these factors, the NCLAT reduced the penalty percentage from 4% to 1% of the average relevant turnover.
Click here to access the order.
Volume 2 | Issue 1 | April 2020 13
ORDERS UNDER SECTION 27
CCI penalises Grasim Industries Limited for abusing its dominant position in the supply of viscose staple fibre15
The CCI imposed a penalty of approximately INR 3,020,000,000 (approximately USD 40,200,000) on Grasim Industries Limited (Grasim) for abusing its dominance in the relevant market for the supply of viscose staple fibre (VSF) to spinners in the Indian textile industry.
Grasim is the sole producer of VSF in India, and through its subsidiaries and affiliates, is deeply integrated across the VSF value chain. Grasim’s activities range from timber plantations to retail sales of apparel in India.
Through various joint ventures, Grasim also has an international presence by way of fibre manufacturing and spinning facilities in a number of Asian countries.
Based on data provided to the DG, the CCI observed that Grasim’s market share was consistently above 87% during the relevant years. The remaining gap of 7-13% in the relevant market was met by imported VSF. However, due to the imposition of an anti-dumping duty on imported VSF by the Government of India, the option of importing VSF was not competitive for spinners. Accordingly, Grasim was held to be dominant in the relevant market with near monopoly power.
15 XYZ v. Association of Man Made Fibre Industry of India, Grasim Industries Limited, Thai Rayon and Indo Bharat Rayon (Case No. 62 of
2016) dated 16 March 2020.
Based on this, the CCI observed that Grasim had abused its dominant position by pursuing a discriminatory pricing policy and imposing unfair conditions upon its customers i.e., spinners in the textile industry. The CCI noted that Grasim had complete discretion on pricing and discount policy, creating immense scope for discrimination amongst spinners. Grasim’s power was further reinforced by its ability to unilaterally dictate terms. Therefore, Grasim was held to have engaged in discriminatory and exploitative behaviour by:
selling VSF to different customers at different base rates i.e, (i) distinction between Indian and foreign customers and (ii) distinction between Indian customers manufacturing yarn for the Indian market versus exporting spinners;
not declaring the price of VSF in the open but only communicating it confidentially to each local customer;
providing discounts to its customers under various heads creating wide disparity in the discounts given to similarly placed customers;
charging higher prices to buyers purchasing larger annual quantities of VSF, than those sourcing lesser quantities; and
imposing end-use restrictions by seeking details of production and exports from Indian spinners for sale of VSF. Such requisitions were found to be in the nature of ancillary obligations imposed upon the Indian spinners having no connection with the primary sale in accordance with the prevailing commercial usage.
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Accordingly, the CCI noted that Grasim’s activities had the following anticompetitive effects:
creation of information asymmetry, adversely affecting the ability of Indian spinners to supply yarn at a competitive price;
complete distortion of competition in the downstream value chain on account of (i) differing conditions of competition between domestic customers and (ii) an
undue advantage given to foreign customers; and
perpetuation of higher prices and lesser choices in the market.
Consequently, the CCI imposed a penalty calculated at the rate of 5% of the relevant turnover generated by Grasim during three financial years, which amounted to approximately INR 3,020,000,000 (approximately USD 40,200,000).
Click here to access the order.
ORDERS UNDER SECTION 26(1)
CCI orders investigation of Asian Paints Limited’s alleged anticompetitive practices against JSW Paints Limited16
The CCI ordered an investigation against Asian Paints Limited (Asian Paints) based on a complaint made by JSW Paints Private Limited (JSW). JSW alleged that Asian Paints had abused its dominance and entered anticompetitive vertical agreements, in the market for decorative paints.
Asian Paints purportedly pressured dealers, distributors and retailers partnering with JSW for the launch of its new range of “Decorative Paints”, to stop dealing with JSW. As a result, JSW was allegedly denied access to the distribution network for decorative paints, essential for operating in the market. JSW also had apprehensions that Asian Paints would deploy the same tactics in states where JSW’s decorative paints were not launched as yet.
To assess dominance, the CCI delineated the relevant market as the “market for manufacture and sale of decorative paints by the organised sector in India”. The market for decorative paints was distinguished from the market for industrial paints because of the differences in their chemical nature, end-
16 JSW Paints Private Limited v. Asian Paints Limited (Case No. 36 of 2019) dated 14 January 2020.
uses, pricing, distribution networks, and business models.
Subsequently, the CCI determined that Asian Paints was prima facie dominant in the relevant market owing to its high market share (based on parameters such as revenue and installed capacity). Moreover, the difference in market shares between Asian Paints and its next closest competitor i.e., Berger Paints, was found to be significant. Finally, Asian Paints was observed to have the most extensive distribution network (including dealers and depots). Given the above and the lack of countervailing buying power exercised by its customers, Asian Paints was found to be prima facie dominant.
The CCI held that there was sufficient evidence of abusive conduct, such as transcripts of a conversation between JSW’s dealer and a representative of Asian Paints. This, among other things, suggested that Asian Paints had threatened downstream players to stop dealing with JSW’s decorative paints.
Further, the CCI found that the threat of punitive action against persons dealing with
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JSW prima facie amounted to anticompetitive exclusive supply agreements and refusal to deal.
Based on its findings and the potential impact on consumer choice, the CCI directed investigation into (i) whether Asian Paints
had denied JSW access to distribution channels in the relevant market; and (ii) whether Asian Paints had entered anticompetitive vertical agreements.
Click here to access the order.
CCI forms second case of prima facie anticompetitive conduct by MakeMyTrip India Private Limited and Oravel Stays Private Limited 17
In a fresh case involving MakeMyTrip India Private Limited (MMT) and Oravel Stays Private Limited (OYO), the CCI directed an investigation into abuse of dominance by MMT and an exclusivity arrangement entered between MMT and OYO.
The case arose out of a complaint filed by Rubtub Solutions Private Limited (Rubtub), a company engaged in the business of franchising services to budget hotels under the brand name “Treebo”. Rubtub averred that MMT had abused its dominance in the
17 Rubtub Solutions Private Limited v. MakeMyTrip India Private Limited and Another (Case No. 01 of 2020) dated 24 February 2020.
market for “online intermediation services for booking of hotels in India” by entering into an exclusivity agreement with Rubtub. The arrangement imposed restrictions on Rubtub with respect to its property listings on platforms competing with MMT, namely Booking.com and Paytm. Consequently, Rubtub could not list properties on these platforms (i) at a price better than that listed on MTT (price-parity clause) or (ii) for a certain period of time prior to check-in.
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Rubtub also alleged that MMT had subsequently delisted Treebo from MMT’s platform through the unilateral termination of their listing agreement. The delisting was supposedly undertaken in pursuance of an anticompetitive exclusivity arrangement between OYO and MMT, owing to which MMT could not list competitors of OYO (such as Treebo).
When assessing dominance, the CCI first confirmed the findings in its earlier order which found MMT prima facie dominant in the “market for online intermediation services for booking of hotels in India” 18 . Regarding abuse, the CCI held that a plain reading of the restriction on listing prior to check-in appeared unfair, exploitative, and capable of denying market access to MMT’s competitors. Accordingly, the DG was directed to investigate the allegation.
Separately, the CCI noted that investigation into the imposition of a price-parity clause by MMT had been directed in the previous order. The basis for investigating such a clause is
that the price-parity clause could reduce incentives for platforms to compete on commission and also prevent entry of low-cost intermediation platforms. Similarly, investigation into the delisting of
competitors in furtherance of an exclusivity arrangement with OYO had also already been directed. Accordingly, the CCI directed the DG to conduct a joint investigation of the allegations in the present case along with the previous order.
Click here to access the order.
ORDERS UNDER SECTION 26(2)
CCI finds no merit in allegations of abuse of dominance by e-payment gateway, PayU Payments Private Limited19
The CCI determined that PayU Payments Private Limited (PayU) did not abuse its dominance in the relevant market for e-payment gateways, pursuant to its acquisition of Enstage Software Private Limited (Wibmo).
The case concerned averments that PayU’s acquisition of Wibmo had strengthened PayU’s position in the relevant market by allowing it to leverage Wibmo’s dominance in the downstream market for “risk-based authentication and payment security services in the e-payments gateway in India”.
18 A summary of the order may be accessed here.
Specifically, it was alleged that the integration of PayU’s and Wibmo’s capabilities had enabled PayU to (i) deny its competitors access to Wibmo’s services and (ii) create entry barriers by denying new entrants access to a “safe pathway” (provided by Wibmo) during e-payment transactions.
Evidence of PayU’s enhanced capability and strengthened position on account of the integration was exemplified by PayU’s operations on online marketplaces. It was demonstrated that transactions (facilitated through the integrated services of PayU and
19 Satyen Narendra Bajaj v. PayU Payments Private Limited and Another (Case No. 23 of 2019) dated 29 January 2020.
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Wibmo) generated “OneTime Passwords” within 5 seconds. However, transactions facilitated absent such integration resulted in “Onetime Password” generation after 20 seconds. The enhanced user experience due to reduced time purportedly accorded PayU an unmatchable advantage over its competitors.
It was also alleged that PayU (through Wibmo) would have access to user account information and commercially sensitive data such as commission rates charged by payment gateways. This would buttress PayU’s position in the relevant market.
The CCI found that regardless of PayU exercising dominance in the relevant market, there was no prima facie evidence to suggest that PayU had abused its dominant position. This was because, (i) the enhanced user experience through integration did not suggest any abusive conduct and (ii) the allegation that access to Wibmo’s information/database had the potential to result in abuse was premature.
The CCI stressed that the informant’s allegations were premised on the potential for abuse of dominance. However, allegations of potential for abuse of dominance are untenable under the Act and hence, the CCI dismissed the matter.
Comment: In the present case, the CCI did not find that PayU entered anticompetitive agreements or abused its dominant position, pursuant to its acquisition of Wibmo. While no contravention was determined, the case confirms that the CCI can scrutinise both, notifiable and non-notifiable mergers and acquisitions, for competition law violations after closing of the transaction.
Click here to access the order.
ORDERS UNDER SECTION 26(6)
CCI finds no bid-rigging in relation to requests for quotations by automobile manufacturers20
The CCI found no anticompetitive conduct by suppliers of anti-vibration rubber products (AVRP) and automotive hoses (Hoses) (collectively, Suppliers). The case was initiated pursuant to a leniency application and concerns the rigging of requests for quotations (RFQs) by the Suppliers. The RFQs were floated for both, AVRPs and Hoses, by certain automobile original equipment manufacturers (OEMs).
With respect to the AVRP RFQs floated by the first OEM, the CCI noted that for some
20 In Re: Cartelisation in the supply of Anti-Vibration Rubber Products and Automotive Hoses to Automobile Original Equipment
Manufacturers (Suo Motu Case No. 01 of 2016) dated 26 February 2020.
RFQs, the DG’s investigation report failed to provide evidence to establish contravention. Further, the other AVRP RFQs did not pertain to the Indian market as the issuance, pricing, supply, etc. for the AVRPs took place outside India. The AVRP RFQs floated by the second OEM were also not in contravention of Indian competition law as there was no evidence that the automobiles sold in India had been fitted with AVRPs procured through rigged RFQs.
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During assessment of the AVRP RFQS floated by the third OEM, the CCI noted communications between two suppliers and allocation of orders for certain engine mounts. However, once again, no contravention was found as vehicles with those engine mounts had not been sold in India. Similarly, no contravention regarding AVRP RFQs floated by the last OEM was found because the DG could not establish communication between suppliers or AAEC in Indian markets.
Lastly, no contravention was found with respect to the Hoses RFQs primarily because there was no evidence of AAEC in India and
regardless, the conduct predated the enforcement of the Act.
In view of this, the CCI found no case of contravention against the suppliers of AVRP and Hoses and closed the matter.
Comment: The CCI’s findings are aligned with its previous orders according to which several cases involving anticompetitive conduct by global automotive companies have been closed as they have not been found to cause an AAEC in Indian markets.
Click here to access the order.
CCI rejects allegation of abuse of dominance against the Ministry of Railways and the IRCTC21
The CCI dismissed a complaint filed by two informants against the Ministry of Railways (MoR) and Indian Railway Catering and Tourism Corporation Limited (IRCTC, a subsidiary of the Indian Railways) (collectively, Indian Railways), which alleged that they abused their dominant position by rounding off railway passenger fares.
The informants submitted that the Indian Railways round off passenger base fares to the next multiple of INR 5 (approximately USD 0.06). They contended that rounding off could not be justified for online bookings because even a single paisa 22 could be transferred electronically. Therefore, the practice of rounding off allegedly resulted in the Indian Railways making unfair and exorbitant gains and an abuse of their dominant position.
During assessment, the CCI delineated the relevant market as the “market for the sale of tickets by railways in India”. Since the MoR is the sole player in the market of passenger transportation through railways across India,
21 Mr. Meet Shah and Another v. Union of India, Ministry of Railways (Case No. 30 of 2018) dated 3 February 2020. 22 Paisa is an Indian currency denomination which amounts to 1/100th of INR 1. One paisa equals to approximately USD 0.00013.
the Indian Railways were held to be dominant in the relevant market.
With respect to abuse, the CCI observed that the rounding off policy came into vogue as part of the rationalisation of fare to recoup the enormous loss incurred by the Indian Railways. The CCI, among other things, noted that (i) the rounding off has been adopted transparently and applies uniformly to all passengers and modes of booking without discrimination; (ii) the policy had received consideration from the Parliament of India; (iii) the policy is duly backed by social and commercial justifications; and (iv) the policy has logistic benefit since currency in multiples of five is easier to deal with over exact change at offline booking counters.
In view of the justifications provided, the CCI rejected the allegation of abuse of dominant position.
Comment: The case reaffirms the CCI’s earlier decisions whereby public sector undertakings, including Ministries, are not beyond the pale of antitrust scrutiny. Despite a favourable order in this case, state-owned-
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enterprises should note that exoneration from the penal consequences of the Act is a fact-based assessment and varies on a case-to-case basis.
Click here to access the order.
CCI finds no dominance by ABB Limited in the market for transistor-based power quality solutions23
The CCI found no abuse of dominance by ABB India Limited (ABB) in the market for power quality solutions i.e., “manufacture and sale of Insulated Gate Bi-polar Transistor (IGBT) based power quality solutions for less than 1000 V usage”. The informant averred that ABB had developed two Static Synchronous Compensators (STATCOMs) to address power quality problems relating to (i) reactive power, (ii) unbalanced loads, and (iii) harmonics. The informant submitted that its STATCOM was superior to ABB’s STATCOMs and was receiving favourable reviews from customers. It claimed that as a result of the popularity of its STATCOM, ABB instituted civil and criminal litigation against the informant, made phone calls stating that the informant was a sham company and compelled ABB’s customers (for different products) to stop dealing with the informant’s STATCOM. Resultantly, the informant lost out on orders for its STATCOM and another product called Active Harmonic Filters (AHF).
During assessment, the CCI first delineated the relevant market as the “manufacture and sale of IGBT based power quality solutions for less than 1000 V usage”.
Interestingly, the informant took objection to the relevant market being the overall market for “power quality solutions”. Instead, the informant insisted on two distinct single product markets for STATCOMs and AHFs. However, the CCI observed that the market in question was such that a customer’s demand was “solutions based” and not for a specific product. In other words, a customer was unlikely to be able to identify a product to satisfy its requirements and instead demanded solutions to its concerns. These concerns could be resolved either through the use of a specific product, or a combination of products.
Thereafter, the CCI found that ABB was not dominant due to the presence of players such as P2Power, Schneider, and Consul-Neowatt. Further, the relevant market was characterised by low entry barriers and was not capital intensive, either. Accordingly, no case of abusive conduct was made out and the case was disposed of.
Click here to access the order.
23 InPhase Power Technologies Private Limited v. ABB India
Limited (Case No. 12 of 2016) dated 31 January 2020.
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TEAM MEMBERS
Manas Kumar Chaudhuri Partner, New Delhi T: +91 11 4151 5454 E: [email protected]
Arshad (Paku) Khan Executive Director (New Delhi/San Francisco Bay Area (US)) T: +91 11 4151 5454 E: [email protected]
Rahul Singh Partner, Mumbai/Bengaluru T: +91 80 4339 7000 E: [email protected]
Susmit Pushkar Partner, New Delhi T: +91 11 4151 5454 E: [email protected]
Sagardeep Rathi Partner, New Delhi T: +91 11 4151 5454 E: [email protected]
Anisha Chand Partner, Mumbai T: +91 22 6636 5000 E: [email protected]
Pranjal Prateek Principal Associate, New Delhi T: +91 11 4151 5454 E: [email protected]
Radhika Seth Senior Associate, New Delhi T: +91 11 4151 5454 E: [email protected]
Swati Bala Senior Associate, New Delhi T: +91 11 4151 5454 E: [email protected]
Soham Banerjee Senior Associate, Mumbai T: +91 22 6636 5000 E: [email protected]
Volume 2 | Issue 1 | April 2020 21
Aman Singh Baroka Associate, New Delhi T: +91 11 4151 5454 E: [email protected]
Ebaad Nawaz Khan Associate, New Delhi T: +91 11 4151 5454 E: [email protected]
Anmol Awasthi Associate, Mumbai T: +91 22 6636 5000 E: [email protected]
Alisha Mehra Associate, New Delhi T: +91 11 4151 5454 E: [email protected]
Mayuka Sah Associate, New Delhi T: +91 11 4151 5454 E: [email protected]
Vasudhaa Ahuja Associate, Mumbai T: +91 22 6636 5000 E: [email protected]
Arvind Pillai Associate, Mumbai T: +91 22 6636 5000 E: [email protected]
Volume 2 | Issue 1 | April 2020 22
