Ex-Parte Prima Facie order by the Competition Commission of India – A Critique

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COMPETITION LAW REPORTS v AUGUST, 2013

Section B

Articles

Ex-Parte Prima Facie order by the CompetitionCommission of India – A Critique

G.R. Bhatia*

Prima facie view or opinion as to existence or absence of a case by the CompetitionCommission of India is an extremely crucial decision. Affirmative decision as toexistence of an anti competitive/abusive practice triggers a full fledged Inquiry.Likewise, a prima facie view that there is no case of infringement of provisions ofCompetition Act results in dropping of further proceedings. It is significant forparties involved.

As prima facie decision as to existence or absence of infringement is quite criticalin competition law enforcement, it would be advisable for CCI to hear the partiesand pass a reasoned order.

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If all men were angels, no Governmentwould be necessary. If angels were togovern men, neither external nor internalcontrols on government would benecessary.1

Likewise, had all economic actorsfollowed fair and ethical businesspractices in markets, neither competitionlaw much less the competition law

* Partner & Head of Competition Law Practice Group, Luthra & Luthra Law Offices, NewDelhi. He is former Additional Director General, Competition Commission of India (CCI)/Monopolies and Restrictive Trade Practices Commission (MRTPC), New Delhi. Member,Corporate Affairs Committee, PHD Chamber of Commerce and Industry. The viewsexpressed are personal and the author can be reached at [email protected]

1 James Madison, 4th President of US and also hailed as Father of Constitution beinginstrumental in the drafting of US Constitution.

Competition Law ReportsB-108 [Vol. 2


to a Parliament Question, the Hon’bleMinister of Corporate Affairs,Government of India reportedly informedthe House that as on 31st March, 2013,the Commission had received 347 casesof violations of anti competitive practicesof which the CCI had closed 262 casesand in 28 cases it had passed a “Cease &Desist” Order, while in 19 cases, it hadimposed Rs. 8013 crores aspenalties.2.Thus, the CCI is focussing onaggressive enforcement of Act andsending strong signals to economicactors to follow the mandate of law.Before passing, however, any adversesanction including a direction to “ceaseand desist” from the anti-competitiveconduct besides imposition of penalty onthe delinquent, there is a mandate on theCCI to

(a) institute an “Inquiry” in relationto alleged infringement of Sections 3and 4; and

(b) after “Inquiry”, arrive at a findingthat the parties have in factcontravened the provisions of the Act.

Thus, simply stated, “institution of anInquiry” and “after inquiry findings ofcontravention”, are mandatoryconditions precedent to passing of anadverse order.

The CCI may institute an Inquiry on itsown motion also known as “suo motu”cognizance of a matter and it may alsoinstitute an Inquiry on:

(a) receipt of any information from anyperson, consumer or their associationor trade association; or

(b) a reference made to it by the CentralGovernment or a statutory authority.

The details of sources on the basis ofwhich enquiries emanated uptoMarch, 2013 are as under:

2 Business Line of 22nd April, 2013.

umpire was needed. Global reality is thatmarkets are by and large infected withthe anti competitive virus and therefore,competition laws are everywhere in over120 countries across all the continents.

In line with the global trend, India alsowelcomed the developed competitionregime by bidding good bye to theerstwhile “Monopolies & RestrictiveTrade Practices Act, 1969” and put in itsplace the Competition Act, 2002. The Actmandates the Competition Commissionof India (Commission or CCI) inter-alia toeliminate anti competitive businesspractices/conducts in India. The tridentenforcement/regulatory dimensions ofthe Competition regime are (a)prohibition of anti competitiveagreement, (b) prohibition of abuse ofdominance and (c) regulation ofcombination (covering acquisition byone or another, merger/amalgamationbetween or amongst enterprises).Sections 3 & 4 of Act contain provisionsin relation to anti competitive agreementsand abuse of dominance respectively.While the first two dimensions of laware enforced ex post, however, merger andacquisitions falling within the purviewof the Act are regulated ex ante.

The twin enforcement provisions namelyprohibition of anti competitiveagreements and abuse of dominance arein force from 20th May, 2009. In response

The twin enforcementprovisions namely prohibitionof anti competitive agreementsand abuse of dominance are in

force from 20th May, 2009

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Interestingly, most of the Inquiries havebeen initiated in the wake of informationfrom aggrieved persons or association ofconsumers or trade association. Whilethere has been an upward trend in thenumber of informations that have beenfiled until March, 2012, however, fromthe newsletter published by the CCI, itappears that of late the number ofinformation filed before CCI havedecreased3. Information based Inquirieshas been the major source of Initiation ofInquiries before the Commission.

An Enquiry has three compartmentsnamely (i) formation of a prima facieopinion by the CCI that there exists a caseof infringement of the Act; (ii) the carryingout of investigation by the DirectorGeneral and filing of investigation reportrecommending either to proceed with theenquiry or suggesting quashing of theenquiry as no infringement of Section 3or 4 has been made out; and (iii) invitingcomments/objections of parties by theCCI and later hearing parties beforetaking a final decision in the Inquiry.

A prima facie opinion or view as toexistence or absence of a case by the CCI(either on its own motion or on aninformation/reference as to existence orabsence of a case under section 3 and/or4 of the Act) is an extremely crucialdecision by the CCI. It is equallysignificant for the parties involved. Theformation of a prima facie opinion as toexistence of a case of infringement

The table provided above clearlyindicates that until the end ofMarch, 2013, the CCI had initiated only11 enquiries suo motu . This couldpossibly be due to the fact that the CCI inthe beginning intended to focus on thecases where there is a formal grievanceby someone. Of late, few more enquirieshave been initiated suo motu.

Ex-Parte Prima Facie order by the Competition Commission of India – A Critique

3 Fairplay, Volume – IV – January to March 2013, p.8-Newsletter of the CompetitionCommission of India.

Information based Inquirieshas been the major source ofInitiation of Inquiries before

the Commission

In a spate of over 46 months, hardly 7references for initiation of Inquiries werereceived from the Government/PublicAuthorities. This lackadaisical attitudeon the part of Government is unfortunate.This gives an impression, of courseerroneous, that the GovernmentDepartment and its arms are not facingserious anti competitive or abusivepractices from its suppliers in itsprocurement. Incidentally, in the MRTPregime of over 39 years, hardly 12 to 15references were received fromGovernment Departments. Governmentis a big economic actor both as buyer aswell seller in markets of Indian economy.Extensive and intensive advocacy seemsto be the only answer to correct this lackof interest on the part of Statefunctionaries in making use of theplatform of the CCI.

Years Suo motu References received from Informationenquiries Central/State Government/Statutory received under

Authorities section 19(1)

2009-10 0 0 32

2010-11 5 1 77

2011-12 0 4 93

2012-13 6 2 76



number of cases considered, number ofcases in which prima facie opinion isformed under Sub-section (2), number ofInquiries instituted and referred to DGfor investigation, number of cases whereDG gave adverse findings, number ofcases where the DG did not find anycontravention and number of cases whereadverse orders/penalties are imposed ondelinquent enterprises/persons:

triggers an institution of Inquiry. On thecontrary, the CCI taking a prima facieopinion as to absence of case ofinfringement gives a clean chit to allegedcontravening party. In the premises, it isimperative to analyse the trend in regardto prima facie opinion and the learningtherefrom.

The following table (containing datauntil 31 st March, 2013) describes the

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As per the information available in publicdomain by the CCI, it is gathered that outof the 223 cases considered, in 146 casesit formed a prima facie opinion that thereis no case of infringement and no casehas been made out to institute an Inquiryand accordingly it closed the cases interms of Section 26 (2) of the Act. Thus, itis clear about 66 per cent cases have beenrejected. Disheartened with the rejection,only a few of the aggrieved informantsknock at the door of CompetitionAppellate Tribunal in appeal and tilldate, there is hardly an example to citewhere the Appellate Tribunal hasdirected the CCI to reconsider itsdismissal of the case. While agreeing thatmost of the Information that have beenfiled have failed to make out a case underthe Act but there have been several caseswhere the CCI in its dismissal ordershave observed that the Informant hasfailed to supply data to establish the case.It would be relevant to state thatInformant does not have statutory rightto requisition an information/document.It is CCI or the DG which are empowered

to summon and enforce the attendanceof any person and to require the discoveryand production of documents. In fewcases, information is rejected withoutgiving an opportunity of being heard tothe Informant or there are instanceswhere reasons for rejection areconspicuously absent.

All these seem to have dissuaded filing ofinformation and the impact isdemonstrable as the number ofinformation filed has already dwindled.An informant is not expected tounderstand the nuances of market andintricate competition concepts. TheInformant is already under the obligationto furnish/file the information in a formprescribed and that the information hasto be accompanied by a requisite fee aslaid down in the CompetitionCommission of India (General)Regulations, 2009. The need is to nurtureand encourage the Informant who is acritical source of information foreliminating anti competitive practices.This manner of functioning of theCommission would lead to the decay of

Total Number of Number of Number of Number of Number ofnumber of cases in cases in cases in cases in cases incases which an which an which the which the DG whichconsidered opinion opinion DG gave did not find orders

is formed is formed an any wereunder under adverse contravention passedSection 26(2) Section 26(1) finding under

and the Section 27matter isreferredto the DG

223 147 76 57 19 19

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the Informant race in the event theCommission continues to only rely on theinformation supplied and discourages theInformant and makes itselfunapproachable. Further, the essence ofthe Act of only having the system ofproviding information as opposed to acomplaint would be diluted completely ifthe Informant has to have in placeconcrete evidence at the prima facie stageand is treated as a complainant insteadof an assisting body to eliminate anti-competitive conduct and practices.

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Further, out of 76 Inquiries, post receiptof detailed investigation report, the CCIdirected the parties to “cease and desist”from the anti-competitive practices onlyin 28 cases and out of these, it is only in19 cases it had imposed a monetarypenalty on delinquent enterprises/persons. The statistics reveal that onlyin 40 per cent of Inquiries, the CCI haspassed remedial directions and in 25 percent cases, it imposed penalties. Thisclearly sends a message that in 60 percent enquiries, the alleged chargedparties/noticees have either during thecourse of investigation by the DG andlater, i.e., before the CCI established thatthere is a jurisdictional lack or that theevidence is absent or insufficient toconclude that there is a violation of law.It is vital that these parties (bothinformants and defendants) are given anopportunity of being heard at the stageof formation of a prima facie opinion.While there is no mandate upon the CCIin terms of the law as it stands today andthe jurisprudence that has developed, itwill be inadvisable to proceed with amatter and institute an Inquiry withouthearing the defendant or dismiss a matterwithout giving an opportunity of beingheard to the Informant. Keeping in viewthe principles of natural justice andfairplay and the fact that Section 26 (1)orders are neither appealable nor subjectto review4, it is advisable that the partiesare heard prior to the formation of a primafacie view by the CCI to institute anInquiry and referring the case forinvestigation to the Director Generalunder Section 26 (1) of the Act.

Section 26 (1) orders areneither appealable nor subject

to review

Out of the 223 cases considered by theCCI, in 76 cases, it formed a prima facieopinion that there exists a suitable casefor referring the matter to the DG forinvestigation and instituted an Inquiryfor the furnishing of a detailed report.Generally, the CCI in the order ofinvestigation makes it clear that

“nothing stated in this order shalltentamount to a final expression of opinionon merit of the case and the DG shallconduct investigation without beingswayed in any manner whatsoever by theobservation made herein”.

It is noticed that out of 76 investigationsreferred, in 57 reports, the DG has givenits adverse findings and in 19 cases ithas found no violation of law. Thisclearly reflects that the DG in giving itsreport is not swayed by the prima facieopinion of the CCI which triggered theinitiation of Inquiry.

4 Competition Commission of India v. Steel Authority of India Limited MANU/SC/0690/2010:(2010) 10 SCC 744.



State of Merger Control in India*

K K Sharma**

“ India recently completed a little over two years of regulation of combinations.In contrast to the exaggerated fears associated with the likely bringing into forceof the provisions relating to regulation of combinations before the provisionswere actually notified w.e.f. June 1, 2011, the two years have passed ratherpeacefully. The author , Mr. K K Sharma, former Head of Merger Control andDirector General, CCI, who laid the foundations of regulation of combinationsin India by way of devising the Merger Review Format as well as making itsuccessfully functional , reviews the performance of Competition Commission ofIndia in regulation of combinations and discusses the associated issues. He alsothrows light on merger filing Form 1 which is almost the simplest in the worldfor a jurisdiction having almost the highest thresholds in the world. He places onrecord the deft handling of the regulation of combinations by CCI.”

1st June, 2011 was the day India enteredinto the club of the countries having fullyfunctional competition law1. Afterconsiderable speculation, doubts,oppositions and persuasions, carryingall the stakeholders together, Indiafinally set in place a mechanism forreviewing the acquisitions, mergers andamalgamations (called “combinations”under Indian law) from the perspectiveof competition law. Even after havingbeen enacted in January 2003, on account

of certain legal challenges, theenforcement provisions of theCompetition Act, 2002 (Act) could not bebrought into force in India till as late asMay 20, 2009. Even after thecommencement of enforcement ofprovisions relating to the prohibition ofanticompetitive agreements and abuse ofdominant position, the opposition to thecomplete implementation of competitionlaw in India did not die down. Theopposition was more from domestic

* This article was first published in Competition Policy International, Inc. For more detailsplease visit Competition Policy International .com

** KK Sharma Law Offices & ex-Director General, CCI. For further details, visitwww.kkslawoffices.com and the author can be reached on [email protected] [email protected]

1 Notification dated March 4, 2011; http://www.cci.gov.in/images/media/notifications/SO479%28E%29,480%28E%29,481%28E%29,482%28E%292406 11.pdf

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State of Merger Control in India

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constituents as they saw in it anotherlayer of Government regulation which,to the extent possible, was better kept inabeyance.

The reasons for opposing merger reviewregime were varied. Starting from thespeculation that the CCI would be sittingover merger clearances for a long timeand thus delaying business transactions,to the claims that the CCI did not have acapacity to review complex mergersbeing a new competition agency, alltypes of conjectures and surmises werebeing thrown around with the soleobjective that a fully functionalcompetition agency does not come toexistence in India. In any case, historyshows that in any jurisdiction - be it theUS, Canada or EU - competition lawenforcement has not been welcomed withopen arms by businesses to begin with.These oppositions had their impact.Despite the competition law becomingfunctional as early as May 2009, it took alittle more than two years for mergercontrol to come into existence. It was ofno little help that the draft merger controlregulations were already prepared, in-house by the CCI, and were ready to betested on the ground. However, the factthat the Act had certain areas in need ofimprovement, harmonization and, insome cases, plain typographical errorremoval, efforts to stall the introductionof merger review into the countrysucceeded. There was even talk of firstamending the Act before the provisionscould be brought into force.

In early 2011, good sense prevailed andthe proposal of bringing in amendmentsbefore the merger control provisionscould be brought into force was shelved.Instead, the logical argument thatamendments only be considered if faultswere found with the Act as it existed. Itwas the result of this changed thinking

within the Government of India that abeginning towards a fully-functionalcompetition law regime in India couldbe made.

2 http://www.ibanet.org/Article/Detail.aspx?ArticleUid=73c4fdd7-9776-41cd-8fbb-3a7dd96c8c7c

The CCI finally unveiled itsfinal draft merger regulations

to the world on May 11,2011 after consulting a wide

body of stakeholdersincluding business houses,

law firms, professionalassociations, business and

industry chambers,consumer organizations and

government departments

The CCI finally unveiled its final draftmerger regulations to the world on May11, 2011 after consulting a wide body ofstakeholders including business houses,law firms, professional associations,business and industry chambers,consumer organizations andgovernment departments. Despite grimwarnings to the contrary, 1st June, 2011came and went without any earth-shattering obstructions to the normalpeaceful existence to the businessenterprises; It was business as usual. Onthe contrary, the international antitrustcommunity welcomed2 the performanceof an Indian merger control regime.

Very soon, the CCI realized that someareas of the regime neededimprovements. For example, the reviewmachinery of CCI was avoidably cloggedby a large number of intra-group mergerfilings, many of which did not changethe control dynamics of enterprises. To



ease the burden on businesses in thesecases, the CCI relaxed the merger reviewformat by amending the mergerregulations so as to ensure that thosemerger filings that did not result in achange of control did not have to seekapproval of the CCI. Similarly, theregulator noticed that harmony betweenthe security regulator (SEBI)requirements and merger review by CCIcould be further enhanced. This wasdone by suitably amending mergerregulations. The highlights of the firstamendments to the combinationregulations, of February, 2012, by the CCIare as follows:

• No requirement to file for mergerreview if the cumulative sharepurchase is below 25 percent(compared to the earlier 15 percent).

• No filing requirement for intra-group mergers or amalgamationsinvolving enterprises whollyowned by the group companies.

• Acquisitions of shares or votingrights pursuant to buy backs andacquisition of shares or votingrights pursuant to subscription ofrights issue (without the restrictionof their “entitled proportion”), notleading to acquisition of control,included in the list of transactionsin Schedule I which liststransactions where a merger filingneed not be made.

• The Company Secretary of thecompany, duly authorized by theBoard, was authorized to sign Form1 or Form 2, in addition to thosepersons specified under the generalregulations.

• The distinction for filling up Part Ifor certain types of transactions andPart II for the remainingtransactions was removed, leadingto clarity and uniformity.

On gaining further experience, thecombination regulations wereamended once again by the CCI in

April, 2013. The main changeswere as follows:

• No notice need be filed foracquisition of shares or votingrights of companies if theacquisition is less than five percentof the shares or voting rights of thecompany in a financial year, wherethe acquirer already holds morethan 25 percent but less than 50percent of the shares or voting rightsof the company.

• Where one of the enterprises hadmore than 50 percent shares orvoting rights of the other enterprise,filing of notice with CCI formergers/amalgamations involvingthese two enterprises was notneeded. Similarly, if more than 50percent shares or voting rights ineach of such enterprises are heldby enterprise(s) within the samegroup, no notice was needed.

• Some rationalization in thecategories of exemption foracquisition of certain current assetslike stock-in-trade, raw materialsetc.

On completion, more than two years afterthe journey into a merger control regimebegan, it is the right time to look at theperformance of the CCI in this vital areaof competition law enforcement. Whenthe final merger regulations werenotified by the CCI, there was greatexcitement as well as doubts about therules being laid down by the competitionagency of India. There was a greatcuriosity about the CCI - especially forits capacity to deliver. Until that time,despite the commencement of provisionsrelating to anti-competitive agreementsand abuse of dominance, the markets felthardly any impact because of the mattersbefore CCI. Compared to the performanceof neighboring Pakistan where, right inthe first 18 months of its existence, theCCP had showcased a considerableamount of work it did in exposing cartels

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and issuing government advisories, theperformance of Indian competitionagency was considered quite slow.Similarly, in another neighborlycomparison, although the Act in Indiawas enacted much earlier than China’s,China enacted and brought into force itsAnti Monopoly law much earlier than

India. It also started merger control witha bang and the Coca-Cola case became aselling point for antitrust law in China.Perhaps an open and vibrant democracyhas a price.

India opted for a mandatory filing regime.As of today, the thresholds for triggeringthe filing requirements are as follows:

ASSETS TURNOVER

In India Enterprise INR 1,500 Crores INR 4,500 Crores(approximately USD 330 million) (approximately USD 1 billion)

Group INR 6,000 Crores (approximately INR18,000 CroresUSD 1,320 million) (approximately USD 4 billion)

In India ASSETS TURNOVERor outside

Total India Total India

Enterprise USD 750 INR 750 Crores USD 2.25 INR 2,250 Croresmillion (approximately billion (approximately

USD 165 million) USD 500 million)

Group USD 3 INR 750 Crores USD 9 INR 2,250 Croresbillion (approximately billion (approximately

USD 165 million) USD 500 million)

As would be obvious to any discerningeye, the Indian thresholds for mergerfilings are extremely high - perhaps thehighest in the world. Interestingly, eventhe default merger filing form, Form 1, isalso, perhaps, the simplest in the world.After having faced the severe criticismsfor having a very burdensome filing formand low thresholds, prior to thecommencement of enforcement of mergercontrol in India, these may appear to bequite stark revelations to many.

Starting from 1st June, 2011, till the end ofJune 2013, following number of mergercases has been reviewed by the CCI:

S. N. Year Reviews

1. 2013 (till June, 2013) 28

2. 2012 82

3. 2011 13

Total 123

Thus, starting from 1st June, 2011 - a littlemore than two years since thecommencement of merger review havingcome into force - a total of 123 cases ofacquisitions, mergers andamalgamations have been reviewed bythe CCI. There have been studies3

indicating the average time it takes theCCI to review a merger as just over afortnight - which is a relatively quickmerger review clearance by anystandards, especially for a new agencycommencing operations in the midst ofquestions about its effectiveness.

As would be obvious to anydiscerning eye, the Indian

thresholds for merger filingsare extremely high - perhaps

the highest in the world

3 http://www.slashdocs.com/qispu/combination-review-in-india-a-mid-year-review-by-kk-sharma-part-1.html


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So far, nearly all merger filings have beenthrough the simple form - Form No 1. Onaccount of the pressure of stakeholders,the first draft of merger regulations wasmade in such a way that the opponentsof merger review did not get anopportunity to create unnecessary noise.The first form for merger filing was suchthat, effectively, it was almostdiscretionary to make a merger filing.This was due to the fact that even themost basic information about atransaction was to follow on theassertion of the merger-filing party thatthe transaction was not falling withinsome stated categories given in theschedule and the regulations. It wasquite a big relief to businesses, but howhelpful it was for competition assessmentcan be gauged from the fact that, despitebeing under no obligation to do so, nearlyall the merger filings voluntarilyincluded the details of the transaction,as well as the reason why it was not tocause an appreciable adverse effect oncompetition (AAEC - the substantive testfor evaluation of mergers in India).Despite having a mandatory mergerreview regime, the first filingrequirements practically gave the mergerfiler entire discretion on which form tochoose: Form 1 or Form 2. Form 1 isminimalistic in the information sought;a large proportion of merger filings arethrough Form 1 only.

For all practical purposes, nearlyeverybody was using Form 1. The basicreason for introducing this was that anyburden on business would have beenused as a handle by the hawks amongstthose opposing merger controls, leadingto a further possible postponement ofenforcement of merger control ondifferent grounds. The cases filedthrough Form 2 could be counted notonly on one’s fingertips, but on a single

finger. These were the only cases inwhich some horizontal overlap amongstproducts and services was admitted bythe parties. Prior to these cases, in no casewas any horizontal overlap betweenproducts and services either admitted orclaimed by the CCI during the mergerreview.

A look at India’s journey andprogression of merger controlenforcement shows a very slowmovement. No doubt, the promptclearances by the CCI, a laudableachievement, have been widelyappreciated.4 However, where do we gofrom here? Do we have similar glowingtestimonials for an in-depth analysis andincisive dissection of the issues? Onepossibility may be that all the casescoming before the CCI really had nocompetitive concerns. But if we look atthe Indian thresholds, nearly the highestin the world, wherein only the big ticketacquisitions, mergers andamalgamations come under the CCIscanner, the possibility of some casescontaining issues that can only be dealtwith through modification cannot beruled out, if looked at carefully. Themodification mechanism (called“remedies” elsewhere) has not yet beentried and tested in full. However, there isa silver lining.

Gradually, the CCI is increasing the rigorof review. Except for giving plainapprovals, there are some notableexceptions where the CCI examined theagreements in detail and directed someagreements to be amended to changesome of the conditions consideredanticompetitive. Two cases stand out:Orchid Chemicals and PharmaceuticalsLtd. (Combination Reg. No. C-2012/09/79), and Mylan Inc. (Combination Reg.No. C-2013/04/116). In the case of

4 http://www.ibanet.org/Article/Detail.aspx?ArticleUid=73c4fdd7-9776-41cd-8fbb-3a7dd96c8c7c

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Orchid Chemicals and Pharmaceuticals, theCCI observed “non compete obligations,if deemed necessary to be incorporated,should be reasonable particularly inrespect of (a) the duration over whichsuch restraint is enforceable; and (b) thebusiness activities, geographical areasand person(s) subject to such restraint,so as to ensure that such obligations donot result in an appreciable adverseeffect on competition.”5

Similarly, in its order dated June 20, 2013,in the case of Mylan Inc. (CombinationRegistration No. C-2013/04/116), theCCI has accepted the modificationsoffered by the parties underRegulation 19(2) of the combinationsregulations. In both these cases, the CCIput into practice the provisions ofRegulation 19(2) of the combinationregulations. Under these regulations, theparties to the combination can comeforward with modifications to thecombinations on their own which maybe accepted by the CCI. This is somethingsimilar to the undertakings in EU.

Another case stands out for comment: thenotice for acquisition given by GSPCDistribution Networks Limited(“GDNL”) to acquire Gujarat GasCompany Ltd. (GGCL) (CombinationRegistration No.: C-2012/11/88). In thiscase, an undertaking was taken fromGGCL to modify the agreements of GGCLwith its customers. Object of this exerciseis not known. This kind of action isfascinating and sometimes questionable.

The question which arises is if one partyis acquiring another enterprise, what isimportant: the possible future conduct,or the past conduct? If an agreementbeing routinely entered into with itsclients comes to the knowledge of the CCIduring a merger filing, should the CCIstart examining it in addition to the

5 http://www.cci.gov.in/May2011/OrderOfCommission/CombinationOrders/C-2012-09-79.pdf

review of merger filing? In mergercontrol, it is the counterfactual (situationwhere the merger has not happened)which is important for evaluating theimpact of a merger on competition in themarket. If counterfactual does not showany adverse impact on the competitiveenvironment for the product underquestion, is it alright to get entangled inside issues? Or ideally speaking, shouldsuch cases be dealt with in a differentmanner? Even if some compellinglyanticompetitive practice comes to noticeduring merger review, should it be mixedwith the job at hand or dealt separately?What the CCI did in this case was toallow the merger, but acceptundertakings to modify the agreements.

However, it is noteworthy that the CCIhas been able to prove all of its criticswrong by ensuring that even within thecountry, amongst various regulatoryapprovals, the approval from the CCI isalmost invariably the first to come. Thishas certainly gone down well withbusinesses and has helped quell negativenoise about the CCI becoming anothergovernment regulator delaying businesstransactions and raising the cost ofbusiness. On the whole it can be said thatthe CCI has generally had a good start onmerger review. The importance ofeconomic analysis has been wellrecognised and CCI is paying enoughattention to this aspect. At least 40 per centof the CCI is made up of economists. Thiscompares well with even the most matureantitrust jurisdictions. One thing cancertainly be said: the CCI is not shyingaway from learning from experience.Until now, two significant amendmentshave taken place in merger regulations,both of which aimed at ensuring a moreworkable and practical merger controlreview in India. Having travelled safelyso far, we wish the CCI bon voyage ahead.


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Exclusive Supply Agreements under Competition Lawin US, EU and India

Prachi Gupta*

This article studies the concept and scope of exclusive supply agreements in thejurisdictions of US, EU and India. Vertical restraints can, occur at any stage ofthe supply/distribution process for a product or service. However, the attentionby commentators, and competition authorities, has centred on restraints in retaildistribution. These restraints come in a number of guises and are motivated bythe desire for vertical control within a principal-agent relationship, where theprincipal i.e. manufacturer imposes contractual obligations on its agent/retailerwhen delegating responsibility for selling its goods. Such agreements are generallygoverned under “restraint of trade” provisions in the Indian Contract Act, 1872and specifically prohibited under Section 3(4) of the Competition Act, 2002.Economists are of the view that if inter brand competition exists, restrictions onintra brand competition should not be capable of restricting competition and theefficiency enhancing effects of vertical agreements would outweigh any possiblerisks. Yet experience reveals that vertical agreements can have anticompetitiveeffects which outweigh their pro-competitive effects, and hence they have to bebrought within the purview of antitrust law. The Indian law is similar to USlaw as there is a clear scope for application of the rule of reason to verticalagreements, but there cannot be a uniform application of the rule of reason, sincedifferent vertical agreements would different regulatory measures.

Introduction

There are about a hundred systems ofcompetition law in existence today withsome of the laws like the Sherman Act ofthe US more than a century old, whereassome of them are as recent as the Indian

Competition Act of 2002. As more andmore countries are shifting to openmarket economies, they are adopting ormodernising their competition laws. Inspite of this recent propagation andadoption of competition laws across

* Advocate and Legal Expert at Competition Commission of India. She may be reached [email protected]

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many jurisdictions of the world, thenecessity to protect the free market fromcompetitive restraints is not a recenttrend. The Roman Constitution of Zeno,promulgated in 483 A.D. had provisionsto restrain monopolies. Though theSherman Act, 1890 is considered to bethe starting point of modern competitionlaw, it was nothing but an application ofthe old and recognised principles of thecommon law.1 US vertical restraint lawhas been developed through a longjourney. To oversimplify, courts initiallyviewed vertical restraints with greatsuspicion, and tended to condemn thatwhich they did not understand. Today,vertical restraints are generally viewedwith equanimity, and where courts areuncertain about the effects of a restraintthey tend to uphold it.2

The common law doctrine of “restraintof trade” has played a critical role in thedevelopment of modern competition law.What is unreasonable was to bedetermined by considering whether therestraint was so large as to interfere with

the interests of the general public.3 In theUS, the common law doctrine of restraintof trade and its relationship with theSherman Act was explained by ChiefJustice White in the landmark case ofStandard Oil Company v. US.4 It was inthis case that the rule of reason approachto interpret the Sherman Act finallytriumphed over the literalist approachfollowed earlier. In the EuropeanCommission, the close relationshipbetween the common law doctrine ofrestraint of trade and EuropeanCommission competition law have beenclosely studied.5 Though the analysis tobe carried out under the two approachesis somewhat different - in common law,the courts are more focussed on the effectof the restraint between the partieswhereas competition law focuses moreon the effect on the market; theterminology used in relation to the twoapproaches is markedly similar, and bothuse public interest as a touchstone todetermine reasonableness of therestraint.

1 Mark R. Joelson, An InternationalAntitrust Primer- A Guide to the Operation of UnitedStates, European Union and other Key Competition Laws in the Global Economy 1-3 (2006).

2 Vinod Dhall, COMPETITION LAW TODAY, 1st ed. 2007, p.413

3 In Lord Morris of Borth-y-Gest in Esso Petroleum Ltd. v. Harper’s Garage (Stourport) Ltd.,[1968] AC 269

–“In general the law recognizes that there is freedom to enter into any contract that can belawfully made. The law lends its weight to uphold and enforce contracts freely entered into.The law does not allow a man to derogate from his grant. If someone has sold the goodwillof his business, some restraint to enable the purchaser to have that which he has boughtmay be recognized as reasonable. Some restraints to ensure the protection of confi

-dential information may be similarly regarded…but when all this is fully recognized yetthe law, in some circumstances, reserves a right to say that a contract is in restraint of tradeand that to be enforceable it must pass a test of reasonableness. In the competition betweenvarious possible principles applicable…public policy will give it priority”.

4 221 US 1 (1911)

5 See WWF vs. World Wrestling Federation Entertainment Inc., EWCA Civ 196 [2002],(Carnworth, LJ at 64-66); Apple Computer Inc. (No Challenge Interlocutory), RPC 70 Ch D[1992], (Nicholls, LJ at 109-113).

Exclusive Supply Agreements under Competition Law in US, EU and India

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Restraints in Competition Law:Horizontal and Vertical

United States and European Union havedifferent approaches to antitrustregulation of contractual arrangementsbetween suppliers, distributors, andcustomers reflect significant differencesin competing policy considerations andin balancing goals of competition policyagainst goals of enforcement. In theUnited States 20 or 30 years ago,regulation of a wide range of distributionarrangements was fairly restrictive ofprivate firms conduct. Not only weremaximum and minimum resale pricemaintenance agreements declared illegalper se, but stringent rules applied as wellto division of customers and territoriesamong distributors. These rules reflectedan inclination for the preservation of fairopportunities for distributors to competeand act independently of their suppliers.Distributor’s freedom viewed as freedomto respond to the market was assumed tobe consistent with consumer’s interests.

In competition law, restraints have beenbroadly categorised as horizontal andvertical. Horizontal agreements areagreements between firms which operateat the same level of production and areof utmost concern to competitionenforcement authorities, as theseagreements tend to increase the chancesof anti-competitive behavior.6 Verticalagreements are between firms that are inproduction supply relationship, betweenundertakings operating at different levelsof the production chain. Unlikehorizontal agreements, verticalagreements do not involve a combinationof market power but affect competitionin the market only when the firmimposing a vertical restraint already hasmarket power.7

In case of almost all goods, there is a chainof production before the product reachesthe final consumer, i.e. from the rawmaterial to processing and creating thefinal product, distributing and selling ofthe product etc. Vertical restraints exertmixed effects on the competitive processand have to be judged on the basis of thereasonableness of restraint. Verticalrestraints can occur at any stage of thesupply/distribution process for aproduct or service and are largelymotivated by the desire for verticalcontrol within a principal agentrelationship, where the principal (themanufacturer) imposes contractualobligations on its agent (the retailer)while delegating responsibility forselling its products. In verticalagreements, competition from otherfirms’ products is limited and it isdesirable that there is enoughcompetition between distributors andretailers of the products of the firm whichhas market power. If the firm exercising

United States and EuropeanUnion have different

approaches to antitrustregulation of contractualarrangements between

suppliers, distributors, andcustomers reflect significant

differences in competingpolicy considerations and in

balancing goals ofcompetition policy against

goals of enforcement

6 Mark Furse, Competition Law of the EC and UK133-134 (2004).

7 Tilottama Raychaudhuri, Vertical Restraints In Competition Law: The Need To Strike TheRight Balance Between Regulation And Competition, 4 NUJS L. Rev. 609 (2011)

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vertical restraint does not have sufficientmarket power, or if there is sufficient interbrand competition, then the restrictionon competition between the distributorsand retailers of the same brand may nothave any effect on the market. Generallyvertical agreements may be of thefollowing kinds8:-

a) Exclusive Distribution Agreementsare agreements where a producersells his products to a restrictednumber of traders, who are grantedexclusive right to sell the productswithin a defined territory or to aspecific group of customers.

b) Selective Distribution Agreements areagreements where traders arerequired to meet certain criteriabefore becoming part ofdistribution network.

c) Exclusive Supply Agreements are anextreme form of limited distributionagreement where the trader isprevented from dealing in productsof any other manufacturer otherthen the manufacturer with whomhe is dealing.

d) Tying Agreements are when thesupplier makes the supply of oneproduct conditional upon the buyerbuying a distinct, separate product.

e) In Resale Price MaintenanceAgreements , the manufacturerimposes price restraints on thebuyer i.e. the price at which he maysell the product.

Position in United States

Under the United States’ antitrust law,“exclusive dealing” is used to describevertical arrangements in which a buyeris effectively obligated to purchase most

or all products or services from one seller,usually for a set period of time. Suchexclusive dealing arrangements arewidespread and can take many formslike agreements forbidding a buyer frompurchasing products of a differentmanufacturer, and restrictions incontracts obligating a buyer to purchaseall, or a substantial portion of its totalrequirements of specific goods or servicesfrom one supplier. Exclusive dealingarrangements that intentionally andpotentially foreclose competitors of thesupplier raise competition concerns andcan give rise to liability under variousantitrust and competition theories oflaw.9 The exclusive dealingarrangements are challenged under fourprovisions of the US antitrust laws:

(i) Section 1 of the Sherman Act,

(ii) Section 2 of the Sherman Act,

(iii) Section 3 of the Clayton Act, and

(iv) Section 5 of the Federal TradeCommission Act of 1914.

But, not all exclusive dealingarrangements are anticompetitive andmany are in fact found to have pro-competitive effects and/or be motivatedby goals that are not anticompetitive. Thelaws regarding exclusive dealing havebeen developed through a common lawprocess in US courts, deriving from thegeneral terms of Sections 1 and 2 of theSherman Act and Section 3 of the ClaytonAct, which make certain anti-competitiveconduct illegal.10

Section 1 of the Sherman Act prohibitscontracts ‘in restraint of trade’. It saysthat “every contract, combination in theform of trust or otherwise, or conspiracy,in restraint of trade or commerce among

8 See Richard Whish, Competition Law 626-638 (2009). The Act in §3(4) mentions five kindsof vertical agreements namely tie-in arrangements, exclusive supply agreements, exclusivedistribution agreements, refusal to deal and resale price maintenance.

9 Lauren N. Norris, “Exclusive Dealing: An Antitrust Analysis”, available at http://w w w . a m e r i c a n b a r . o r g / g r o u p s / y o u n g _ l a w y e r s / p u b l i c a t i o n s /the_101_201_practice_series/exclusive_dealing_an_antitrust_analysis.html

10 Vinod Dhall, Competition Law Today, 1st ed. 2007, p.401.


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the several States, or with foreign nations,is declared to be illegal”.11

Section 2 of the Sherman Act prohibits“attempts to monopolize” andmonopolization. The provision makes itillegal to “monopolize, or attempt tomonopolize, or combine or conspire withany other person or persons, tomonopolize any part of the trade orcommerce among the several States, orwith foreign nations”.12

Section 5 of the Federal TradeCommission Act prohibits “unfairmethods of competition”. In the case ofFederal Trade Commission v. Brown Shoeand Co,14 the Defendant shoe companyhad entered into agreements with otherstores that required them to concentrateon defendant’s sales in return forBrown’s provision of low-cost insurance,merchandising records, architecturalplans and other services. Federal TradeCommission found that the stores partiesto the agreement amounted to 1per centof the entire nation’s shoe stores and thatthis foreclosure was significant. TheSupreme Court upheld the Commissionon the ground that the Federal TradeCommission has broad powers to declaretrade practices unfair.15

The US antitrust laws have beendeveloped through a common lawprocess and hence take into account avariety of circumstances in determiningwhether exclusive dealing is anti-competitive or not. In assessing whetheran exclusive dealing arrangement is anti-competitive a number of factors areconsidered: degree or percentage ofmarket foreclosure, whether the degreeof market foreclosure deprives acompeting firm of the ability to obtaineconomies of scale that are sufficient toenable it to act as an effective competitorthat could erode existing monopolypower, the ability of competitors to reachthe market despite the exclusivearrangement through alternativedistribution channels, the level ofdistribution chain at which there is

Under the US antitrustlaws, an exclusive dealingagreement is not illegal in

itself if it does not havemarket foreclosure effects

that are harmful forcompetition

Section 3 of the Clayton Act prohibitsexclusivity arrangements that may‘substantially lessen competition’ or tendto create a monopoly.

Under the US antitrust laws, an exclusivedealing agreement is not illegal in itselfif it does not have market foreclosureeffects that are harmful for competition.Harm to competition is said to have beencaused (or is likely to be caused as thecase may be) when the exclusive dealingagreement deprives a competitor of theability to obtain economies of scale andthereby grow into an effective competitorthat could erode existing monopolypower.13

11 See Section 1 of Sherman Act, 1890.

12 See Section 2 of Sherman Act, 1890.

13 US Department of Justice and US Federal Trade Commission, “Exclusive Dealing/ SingleBranding”. Available at http://www.internationalcompetitionnetwork.org/uploads/questionnaires/uc%20pp/us%20response%20exclusive%20dealing.pdf, last visited on2 June, 2013.

14 384 US 316 (1966).

15 Keith N. Hylton (ed.), Antirtust Law and Economics, Vol. 4, Encyclopedia of Law andEconomics, 2nd ed., 2010, pp. 190-193.

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Non-Price Vertical Restraints

A manufacturer confines a reseller to aparticular geographic territory whichlimits intra-brand competition but canenhance inter-brand competition. Afterthe landmark opinion, Continental T.V.,Inc. GTE Sylvania Inc., 433 U.S. 36 (1977),general non-price vertical restraints havebeen judged under the rule of reason.

Exclusive Distributorships and Dealings

In an exclusive distributorship, amanufacturer promises a reseller that itwill not supply or stock products of rivalresellers and enter into exclusive dealingarrangement. Though, there areconflicting views of jurists and expertsthat exclusive distributorships are oftenpro-competitive and should be judgedunder the rule of reason and suchagreements are almost invariably upheld.Exclusive dealing, in which a resellerpromises not to stock rival brands, hasalways been treated more leniently thanother types of seller and resellerarrangements, perhaps because thepossible pro-competitive benefits havebeen more apparent.

If a relevant market has been foreclosed,a company may offer “efficiency-enhancing justifications” that show thatthe exclusive dealing arrangement is notanti-competitive. The main justificationsfor an exclusive dealing agreement areto encourage dealers to promote amanufacturer’s products morevigorously and to provide retailers withassured supplies and protection fromprice increases, both of which allow forlonger term planning and efficiency-enhancing investments by retailers; toencourage manufacturers to help dealersby providing services or informationbenefiting consumers; to ensure a steady,reliable outlet of supply for amanufacturer so that it can makeinvestments that increase efficiency orpermit scale economies.

European Union Competition Law on‘Exclusive Supply Agreements’

The EC competition law provisionsrelevant to ‘exclusive supplyagreements’ use the term ‘verticalrestraints’ to describe agreementswherein a buyer is to purchase from onesupplier only. Specifically, EuropeanUnion competition law may use theterms exclusive purchase agreements orsingle branding to refer to theseagreements. Article 101(1) of the Treatyon the Functioning of European Union(TFEU), formerly Article 81(1) of theTreaty establishing the EuropeanCommunity (TEC) prohibits agreementsthat may affect trade between EUcountries and which prevent, restrict ordistort competition. Agreements whichcreate sufficient benefits to outweigh theanti-competitive effects are exempt fromthis prohibition under Article 101(3)TFEU (that is, formerly, Article 81(3)TEC).

As per the EU competition law, verticalagreements are agreements for sale andpurchase of goods or services which areentered into between companiesoperating at different levels of the

exclusivity, the duration of the agreementor whether it may be terminated on shortnotice, the relationship between theparties that deal exclusively includingwhether the purchaser desiresexclusivity, whether the product is thetype for which the consumer is likely tocomparison shop.

In an exclusivedistributorship, a

manufacturer promises areseller that it will not supply

or stock products of rivalresellers and enter into

exclusive dealingarrangement


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production or distribution chain.16 Allvertical agreements are not restrictive ofcompetition, like vertical agreements thatdetermine the price and quantity for aspecific sale and purchase transactiondo not normally restrict competition.However, when a vertical agreement saysthat a buyer is obligated not to purchasecompeting brands, the agreement has thenature of restraining competition.However, vertical restraints may not onlyhave negative effects but also positiveeffects. Vertical restraints may help amanufacturer enter a new market, oravoid a situation whereby one distributorfree-rides on the promotional efforts ofanother distributor, or allow a supplierto depreciate an investment made for aparticular client.

For vertical agreements, to fall under theexemption provided by the BlockExemption Regulation (BER), thefollowing requirements are to besatisfied; the agreement does not haveany restrictions set out in the BER; thesupplier and buyer have a market sharecap of 30 per cent; the BER contains threespecific restrictions which the verticalagreements should not contain if they areto avail of the block exemption.17 The firstrestriction concerns resale pricemaintenance. Suppliers are not allowedto fix the minimum price at whichdistributors can resell their products.The second restriction concernsrestrictions concerning the territory intowhich or the customers to whom thebuyer may sell. This restriction relates to

market delineation by territory or bycustomer. Distributors must remain freeto decide where and to whom they sell.The third and fourth restrictions concernselective distribution. Firstly, selecteddistributors, while being prohibited tosell to unauthorized distributors, cannotbe restricted as to the end-users to whomthey may sell. Secondly, the appointeddistributors must remain free to sell orpurchase the contract goods to or fromother appointed distributors within thenetwork. A vertical agreement is coveredby this BER if both the supplier and thebuyer of the goods or services do not havea market share exceeding 30 per cent. Forthe supplier, it is its market share on therelevant supply market, i.e. the marketon which it sells the goods or servicesthat is decisive for the application of theblock exemption. For the buyer, it is itsmarket share on the relevant purchasemarket, i.e. the market on which itpurchases the goods or services, whichis decisive for the application of the BER.To qualify for block exemption, verticalagreements should not contain thefollowing elements i.e. non-competeobligations18 during the contract and aftertermination of contract and the exclusionof specific brands in a selectivedistribution system. When theconditions are not present, verticalrestraints are covered under the BER. TheBER continues to apply to the remainingpart of the vertical agreement if that partis severable from the non-exemptedvertical restraints.19

16 See “Exemption for Vertical Supply and Distribution Agreements” http://europa.eu/legislation_summaries/competition/firms/cc0006_en.html.

17 See Commission Regulation (EU) No. 330/2010.

18 Article 1 of the Commission Regulation (EU) No. 330/2010 defines ‘non-compete obligation “as“ any direct or indirect obligation causing the buyer not to manufacture, purchase, sell orresell goods or services which compete with the contract goods or services, or any indirectobligation on the buyer to purchase from the supplier or from another undertaking designatedby the supplier more than 80% of the buyer’s total purchases of the contract goods or servicesand their substitutes on the relevant market, calculated on the basis of the value or, where suchis standard industry practice, the volume of its purchases in the preceding calendar year.

19 Richard Whish, COMPETITION LAW, 6th ed. 2009, p. 636.

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‘Single branding’ is one such obligationwhich makes the buyer purchasepractically all his requirements in aparticular market from only one supplier,i.e. the buyer will not buy and resell orincorporate competing goods or services.The possible risks are foreclosure of themarket to competing and potentialsuppliers, facilitation of collusionbetween suppliers in cases of cumulativeuse and, where the buyer is a retailercatering to end-use consumers, a loss ofin-store inter-brand competition. All thethree restrictive effects of single brandinghave a direct impact on inter-brandcompetition. The market position of thesupplier is of primary importance toassess the possible anti-competitiveeffects of single branding. Also, theduration of such agreements is ofsignificance because longer the durationof the agreement the more significantforeclosure is likely to be. However, suchagreements for a period of less than oneyear and by non-dominant companiesare not considered to give rise toappreciable anti-competitive effects.Appreciable anticompetitive effects arelikely to occur in such cases when thesupplier has some degree of marketpower and the agreement leads to thecreation, maintenance or strengtheningof that market power or allows the partiesto exploit such market power.

Indian Competition Law on ‘ExclusiveSupply Agreements’

An exclusive supply agreement, as underthe Indian Competition Act, 2002 is anagreement between a manufacturer and

distributor wherein it is agreed that thedistributor will deal exclusively withmanufacturer’s product(s). Such anagreement will have the effect of cuttingoff from the manufacturer’s competitorsa part of the market that would haveotherwise been available to thecompetitor(s) of the supplier.20 Such kindof an agreement falls under the broadercategory of “vertical agreements/restraints” because the two parties to theagreement are not competitorsthemselves but belong to different levelsin a production - distribution chain. Anexclusive supply agreement isessentially anti-competitive as it restrictsthe purchaser from acquiring any goodsor services from anyone other than theseller or any other person. The purchaseris required to procure all his tradepurchases from one seller.

Before the coming into force ofCompetition Act, 2002, such verticalagreements were prohibited under“restraint of trade” and were void underSection 27 of the Indian ContractAct, 1872.21 Restraint of trade means any

An exclusive supplyagreement is essentially anti-competitive as it restricts the

purchaser from acquiringany goods or services fromanyone other than the seller

or any other person

20 Avtar Singh, Competition Law, 1st ed. 2012, p. 20.

21 Section 27, Indian Contract Act, 1872. Agreement in restraint of trade void. - Everyagreement by which any one is restrained from exercising a lawful profession, trade orbusiness of any kind, is to that extent void. Saving of agreement not to carry on business ofwhich good- will is sold. Exception 1.

One who sells the good- will of a business may agree with the buyer to refrain from carryingon a similar business, within specified local limits, so long as the buyer, or any personderiving title to the good- will from him, carries on a like business therein, provided thatsuch limits appear to the Court reasonable, regard being had to the nature of the business.


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sort of stipulation in the contract thatrestricts the other party from enjoying fairtrade negotiation and is in contraventionof right to freedom of trade of the otherplayers in the market. One of the ways toexercise such restraint is by way ofentering into a sole dealing agreementswhereby the manufacturer or thewholesaler requires a distributor to dealwith his goods exclusively for certainperiod of time in return of someremuneration. Such stipulations havethe effect of closing channel ofdistribution for other players in themarket and a better chance of promotinggoods in comparison to other playersand that is not a fair game or a fair meansof competition. Such agreements werealso condemned under Section 33(1)(c)of the Monopolies and Restrictive TradePractices Act, 1969. Section 3(4) of theCompetition Act, 2002, specificallyprohibits exclusive supply agreements.Any agreement amongst enterprises orpersons at different stages or levels of theproduction chain in different markets, inrespect of production, supply,distribution, storage, sale or price of, ortrade in goods or provision of services,including- (a) tie- in arrangement; (b)exclusive supply agreement; (c)exclusive distribution agreement; (d)refusal to deal.22

This category of agreements includes anyagreement restricting in any manner, thepurchase from acquiring or otherwisedealing in any good other than those ofthe seller or any other person23.Agreements covered under Section 3(3)are presumed to have an appreciable adverseeffect on competition and cannot becriticized, whereas agreements set outunder Section 3(4) should be proved to haveappreciable adverse effect on competition inIndia. In order to determine whether anyagreement is in contravention of

Section 3(4) of the Competition Act, thefollowing essentials have to be satisfied:

a) Existence of an agreement amongstenterprises or persons,

b) Parties to agreement must be atdifferent stages or levels ofproduction chain, in respect ofproduction, supply, distribution,storage, sale or price of, or trade ingoods or provision of services, andparties must be in different markets,

c) The agreement should be of thenature as illustrated in clauses (a)to (e) of sub-section 4 of Section 3 ofthe Act,

d) The agreement should cause orlikely to cause appreciable adverseeffect on competition.

Vertical restraints are to be examinedunder the “rule of reason”, by which theeffect of competition is judged on the factsof the case, the market, and the existingcompetition, the actual or probablelimiting of competition in the relevantmarket etc. What determines the issue is,on the facts, the actual or probablerestraint on competition. This is asopposed to the per se rule where the actsor practices specified under the Act aredeemed to be or presumed to have anappreciable adverse effect oncompetition and are by themselvesprohibited.

An exclusive supply agreement isfundamentally an anti-competitiveagreement under the competition law ofIndia and restricts the purchaser fromacquiring any goods or services fromanyone other than the seller. Thepurchaser is required to affect all histrade purchases from one seller. It is amethod by which competition in thesupply of a product or service may bereduced. An exclusive supply agreementbeing a vertical restraint is anti-

22 For full text of Section 3 of the Competition Act, 2002, refer to the Bare Act.

23 Explanation (b) to Section 3 (4) of the Competition Act, 2002.

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competitive practice by virtue ofSection 3(4) of the Competition Act, 2002.Such a restraint would be anti-competitive only if the agreementproviding for this practice causes or islikely to cause an appreciable adverseeffect on competition in India. Anappreciable adverse effect oncompetition is to be assessed by takinginto account factors enumerated underSection 19(3) of the Act. Section 19(3) saysthat the Commission shall, whiledetermining whether an agreement hasan appreciable adverse effect oncompetition under Section 3, have dueregard to all or any of the followingfactors that are enumerated as follows:

(a) Creation of barriers to new entrantsin the market;

(b) Driving existing competitors out ofthe market;

(c) Foreclosure of competition byhindering entry into the market;

(d) Accrual of benefits to consumers;

(e) Improvements in production ordistribution of goods or provisionof services;

(f) Promotion of technical, scientificand economic development bymeans of production ordistribution of goods or provisionof services.

Conclusion & Solutions

The Indian Competition law is heavilyborrowed from the US and EC law butwithout some of the safeguards and thestringency present in those laws whichidentify and eliminate some agreementsfrom being examined by competition lawIn India, there are no separate rulesgoverning any specific category of

vertical agreements and all suchagreements are required to be tested foradverse effects under Section 19(3) only.Vertical agreements like resale pricemaintenance and exclusive supplyagreements are different in many aspects.It is essential that there are certainstandards to deal with specific type ofvertical agreements. Indian law does notprovide any exemptions like the Blockexemption under EU law to excludeagreements which do not foreclosemarkets of affect competition. Allagreements are tested on the pedestal ofappreciable adverse affect oncompetition and the concept of relevantmarket is also absent in the anti-competitive agreements.

India being a developing country has itsown problems like high entry barriersand high concentration ratios andgreater instances of dominance byerstwhile public sector companies.These characteristics often call for amodified approach to the enforcement ofcompetition law, e.g. more protection andbenefits to domestic industries andstronger control over multinationals.There is ample scope for strengtheningthe existing regime governing verticalagreements. Since vertical agreementsmay or may not be benign, the key lies instriking the right balance betweencompetition and regulation. Whereverpossible enterprises should be able toenter into such agreements without beingunnecessarily hauled up by theauthorities and at the same time, there isalso a need that Competition Authorityof India should be freed from the task ofprobing into each and every verticalagreement and concentrate specificallyon adverse agreements.


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Regulation of Anti-Competitive Practices and TradeSecret Laws under Competition Legislation of India:A Paradigmatic Analysis

By Zafar Mahfooz Nomani* and Faizanur Rahman**

Indian industrialists, fearful of the power of multinational corporations, whichhave become active in India’s economy in very significant numbers since thebeginning of the process of liberalization, had also demanded legislative action toensure a level playing field. It is generally opined that the Competition will biteyou if you keep running, and if you stand still, they will swallow you’. Thecompetition attracts as magneting factor for economic rivalry between market andcustomers besides increasing economic efficiency and equally prone to volatilityand collusive behaviour. This has underlined the need for competition law to controlanti - competitive behaviour. The paper locates anti-competitive practices prevalentunder trade secret regime and logically connects to innovation laws and competitionlegislation of India. This seems germane in the context of globalized, liberalizedand competitive oriented Indian economy. The regulation of anti-competitivepractices necessitated institutional support and adjudicatory mechanism. SinceIndia responded to globalization, the Monopolies and Restrictive Trade PracticesAct, 1969 has become obsolete. In the backdrop of international trade and intellectualproperty laws shifted focus from curbing monopolies to promoting competition.As a natural corollary of this, the Government decided to enact a renovateinnovation and competition law by dealing with unfair competition or antitrustissues The Competition Act, 2002 fulfill the World Trade Organization mandate.The paper locates anti-competitive practices prevalent under trade secret regimeand logically connects to innovation laws and competition legislation of India.Thus the paper provides a holistic picture of the evolution and developments ofcompetition law and examines anti-competitive agreements, abuse of dominance,acquisitions, and mergers to have a successful competition regime in India.

* Associate Professor, Department of Law, Aligarh Muslim University, Aligarh-202002 (U.P.)E-mail:<[email protected]>

** Assistant Professor, Department of Law, Aligarh Muslim University Centre, Murshidabad-742229 (WB) E-mail:<[email protected]>

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I. Regulation of Anti-Competitive Practices

The business thrives on intensecompetition and dynamic of marketenvironment. The LiberalizationPrivatization Globalization (LPG)reduced governmental control andwitnessing aggressive competition andeconomic efficiency.1 This necessitatedrehabilitation of monopolies andrestrictive trade practices laws in Indiaand fostered the competition law. India’sCompetition Act, 2002, enacted to fulfillthe twin objectives of regulation of anti-competitive practices and give effect tothe World Trade Organization (WTO)Agreements. To appreciate evolution anddevelopment of Indian competitivelegislation, it is imperative to look in toMonopolies and Restrictive Trade PracticesAct, 1969. The MRTP Act was framed todeter and also dismantle anyconcentration of economic power to thecommon detriment, for the control ofmonopolies, for the prohibition ofmonopolistic and restrictive tradepractices. The Act provided for theformation of a MRTP Commission. ThisCommission dealt with the functionalaspects of the Act and implemented itsprovisions.2 The MRTP Act wasperiodically amended as and howdeemed appropriate. The working of theMRTP Act found inadequate for fosteringcompetition in the market andeliminating anti-competitive practices innational and international trade. Toprovide impetus to liberal trade, theGovernment of India in October 1999appointed a high level committee onCompetition Policy and Law popularlyknown as the Raghavan Committee toadvise on the competition law. The

MRTP Act was found inadequate to dealwith anti-competitive practices in an eraof globalization and liberalization. TheRaghavan Committee recommended thatthe MRTP Act is short of addressingcompetition and anti-competitivepractices. The Committee concluded thatthere was a need for new competitionlegislation, whereafter the MRTP Actwould be repealed and the MRTPCommission to be wound up. The newcompetition law would not cover unfairpractices since such practices cameunder the purview of the ConsumerProtection Act, 1986. This altogether ledto formation of the CompetitionCommission of India (CCI) under theCompetition law. All monopolistic tradepractices and restrictive trade practicescases pending before the MRTPCommission would be taken up by thisnew Commission.

The Competition Act, 2002 was stalled bypublic interest litigation relating tocertain issues concerning theCompetition Commission of India3,challenging the constitutional validity ofthe Act. The Supreme Court hasrecommended changes to beincorporated in the Act, before it can beenforceable. In the backdrop of SupremeCourt ruling the Government then hasproposed to amend the Competition Act,2002 which inter alia led to bifurcatingCompetition Commission and aCompetition Appellate Tribunal in 2007.This is supplemented by Ministry ofCorporate Affairs, has issued anotification in 2009, whereby the mostcontroversial the Monopolies andRestrictive Trade Practices Act, 1969 standsrepealed and is replaced by the

1 Poorvi & Madhooja, “Competition Law and Intellectual Property Laws, ” available at<http://www.legalserviceindia.com/article/l307-Competition-Law-and-Intellectual-Property-Laws.html>

2 Amitabh Kumar, ‘Evolution of Competition law in India’, in Vinod Dhall (ed.) , ‘CompetitionLaw Today’ (New Delhi, Oxford University Press, 2007) , pp.479-480

3 Brahm Dutt v. Union of India MANU/SC/0054/2005: AIR 2005 SC 730

Regulation of Anti-Competitive Practices and Trade Secret Laws underCompetition Legislation of India: A Paradigmatic Analysis

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Competition Act, 2002, with effect fromSeptember 1, 2009.4 The notificationmandated that MRTP Commission willcontinue to handle all the old cases filedprior to September 1, 2009 for a period of2 years. It will, however, not entertainany new cases from now onwards. Anticompetitive agreements (Section 3) andAbuse of dominant power (Section 4) hasalready come into force on 20-5-09 videsnotification dated 15-5-09, while mergercontrol became effective from June 01,2011. In the recent years, the CCI hasanalyzed and ruled on variousprovisions of the Act in several ordersand in the process, highlighted thelacunae where the Act could possibly beamended. On December 10, 2012, theIndian government introduced theCompetition (Amendment) Bill, 2012 inthe parliament. This Bill aims to modifycertain provisions of the Act as well asinsert some new provisions to meet theevolving needs of industry. The Bill stillhas to be debated and passed by twohouses of the parliament before itbecomes law.5

II. Competition Law Framework

The legislative history of anticompetitivepractices received impetus in the wakeof the post liberalized economy. The postWTO resulted in shift from monopolisticand restrictive trade practices regime tohighly competitive and liberalizedenvironment. The enactment ofCompetition Act, 2002 prevented practiceshaving adverse effect on competition topromote and sustain competition inmarkets. It also protects the interests ofconsumers and to ensure freedom oftrade carried on by other participants inmarkets. The Act cast duty of theCommission to eliminate practiceshaving adverse effect on competition,promote and sustain competition, protectthe interests of consumers and ensurefreedom of trade carried on by otherparticipants, in markets in India’.6 Acombined reading of the preamble andSection 18 of the Act envisageCompetition Commission of India andthe Enforcing tribunal.7 In the words ofthe Supreme Court, the objectives ofCompetition Law appear as under:

The main objective of competition law isto promote economic efficiency usingcompetition as one of the means ofassisting the creation of market responsiveto consumer preferences. The advantagesof perfect competition are three-fold:allocative efficiency, which ensures theeffective allocation of resources,productive efficiency, which ensures thatcosts of production are kept at a minimumand dynamic efficiency, which promotesinnovative practices.8

The enactment ofCompetition Act, 2002

prevented practices havingadverse effect on competition

to promote and sustaincompetition in markets

4 Competition (Amendment) Act, 2009 - Amendment in Section 66 and Repeal of Ordinance6 of 2009 [Act no. 39 of 2009]

5 Dhruv Suri, ‘Proposed amendments in the Competition Act: A positive step forward?’ E-Newsline January, 2013 available at <http://www.psalegal.com/upload/publication/assocFile/ENewslineJanuary2013.pdf>

6 Section 18 of Competition Act, 2002

7 Vinod Dhall, ‘The Indian Competition Act, 2002’, in Competition Law Today (New Delhi,Oxford University Press, 2007) , pp.499-525

8 Judgment in Civil Appeal No. 7999 of 2010 pronounced on 9th September, 2010

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The court understanding of three-foldadvantage seems progressive in bringingchanges in behavioural approach andstructural approach followed underprevious legal regime. The regulation ofMerger and Amalgamation (M&A) hasreturned to the scope of Indiancompetition law, although the new lawsets rather high turnover thresholds forcombinations to fall under its purview.The new law has extraterritorial reach.This provision is based on “effectsdoctrine” in preference to “conductdoctrine” . Thus, actions or practicestaking place outside India but having anappreciable adverse effect oncompetition in the relevant market inIndia would come within the ambit ofthe Act.9

The new competition law, the CompetitionAct, 2002, is arguably a better piece oflegislation as compared to itspredecessor, the MRTP Act. The new lawprovides for a modern framework ofcompetition is typically concerned withthree issues: firstly, anti competitiveagreements that have the object or effectof preventing, restricting or distortingcompetition; secondly, abusivebehaviour by a monopolistic or dominant

firm with significant market power thatcould be harmful to consumer welfare;and thirdly mergers that would reducerivalry between firm in the market, againwith detrimental consequences forconsumer welfare.10 The extended featureof the system of competition law is theestablishment of a “competitionadvocacy” role for competitionauthorities to create public awareness onthe benefits of competition and the roleof competition law.

III. Anti-Competitive Agreements

The paradigmatic structure of regulationof anti-competitive practices in India isingrained under Section 3 of the Act. Itprohibits agreements which restrict theproduction, supply, distribution,acquisition or control of goods orprovision of services, which cause or arelikely to cause an appreciable adverseeffect on competition within India.Further Section 3(2) provides that anyagreement in contravention of thisprovision shall be void.

The ambit and need of the provision is tobe examined, it sets out the generalprohibition of any agreement having an“appreciable adverse effect oncompetition” (“AAEC”) within India.Agreements entered into betweenenterprises or associations of enterprises,or persons or associations of persons orenterprises (including cartels) thatdirectly or indirectly determine purchaseor sale prices; limit or control production,supply, markets or technicaldevelopment, investment or provision ofservices; directly or indirectly result inbid rigging or collusive bidding; or share

The paradigmatic structureof regulation of anti-

competitive practices inIndia is ingrained under

Section 3 of the Act

9 Pradeep S Mehta and Manish Agarwal, ‘Time for a Functional Competition Policy and Lawin India : Mainstreaming competition principles into policy and legal framework is pro-development, ’ CUTS International 2006, available at http://www.cuts-international.org/pdf/compol.pdf

10 Richard Whish, ‘Control of Cartels and other Anti-Competitive Agreements, ’ in VinodDhall (ed.) , ‘Competition Law Today, ’ (New Delhi, Oxford University Press, 2007) , p.39


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the market or source of production byway of allocation of geographical area ofmarkets or the type of goods or servicesor the number of customers in the marketare presumed to have an adverse effecton competition and are considered to beper se illegal. There is a presumption thatsuch agreements would have anappreciable adverse effect oncompetition:11 However, suchpresumption is not applicable in case ofany agreement entered into by way ofjoint ventures if such agreement increasesefficiency in production, supply,distribution, storage, acquisition orcontrol of goods or provision of services.Such an agreement is void as a matter oflaw.

The framework of analysis fordetermining whether an agreement hasan AAEC is different for hard core“horizontal” agreements (betweencompeting firms) and “vertical”agreements (between firms that are activeat different levels of an industry) andother “horizontal agreements”. The Actstates explicitly that egregious horizontalagreements – i.e., price-fixing, outputrestrictions, market-sharing, bid-rigging– are presumed to give rise to an AAEC.This approach is in line with the severeanti-cartel enforcement policy of antitrustauthorities world-wide. Other categoriesof horizontal agreements are analyzedunder a “rule of reason”, balancing thebenefits arising from the agreementsagainst the restrictions on competition.This applies also to joint ventures thatcan be proven to be efficiency-enhancing;these will not be presumed to give rise toan AAEC – even if involving competitorsand “hard-core” restrictions.

Section 3(4) deals with verticalagreement. It lists, in particulars, fivecategories of vertical agreements, namely,(a) tie-in-agreement; (b) exclusive supply

agreement; (c) exclusive distributionagreement; (d) refusal to deal; and (e)resale price maintenance; which wouldbe in contravention of subsection (1) ifthese cause or are likely to causeappreciable adverse effect oncompetition in India. The approach forall vertical agreements is uniform: theseare to be analyzed under a “rule ofreason” in order to determine whetherthey give rise to an AAEC. This softertreatment acknowledges that vertical canhave beneficial aspects as well, and theseneed to be weighed against the harmfuleffects to see if the agreement is on balanceanti-competitive. The harmful effect mayinclude restrictions on intra-brandcompetition, foreclosure of competition,and compartmentalization of markets,and the pro-competitive effects caninclude efficiency gains, increase in inter-brand competition, and preventing offree-riding.

Section 3 (5) provide exemption to thegeneral rule. The prohibition does notapply to “reasonable” conditions inagreements that aim to protect certainintellectual property rights (for instancepatents, copyrights and trademarks).Similarly, although agreements relatingto the export of goods are capable of beingprohibited under competition lawsoutside India, they are unimpeachableunder the Indian Act. The law will needto develop on how these rules are tooperate in practice.

The remedies that can be ordered by theCommission in case of contravention ofSection 3 (relating to anti-competitiveagreements), has been provided inSection 27 of the Act. The CompetitionCommission of India (CCI) can enjoin aninfringing party from continuing or re-entering an illegal agreement and, inaddition, impose upon such a party finesnot exceeding 10 per cent of the average

11 Section 3 (3) of the Competition Act, 2002

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turnover for the last three financialyears.12 For any firm, such a sanction isconsiderable. The fact that – in additionto firms – individuals may also be heldliable for competition law violations issignificant and expected to incentivescompliance. The CCI can impose anyother related order or direction. In respectof cartels, sanctions are potentially evenmore severe: the CCI may impose on eachcartel member a penalty for each year ofthe cartel of up to three times its profitsor 10 per cent of its turnover, whicheveris higher.13

Any contravention of the CCI’s orderscan entail imposition of further penalties,and ultimately, the CCI can file acomplaint against contravention of itsorders in the criminal court, which, inturn, may order additional fines andeven a prison term up to three years.14

The Act includes a leniency programme,in the case of a cartel. The CCI will operatea leniency programme to firms thatdisclose evidence and information oncartels to the CCI under this programmecan obtain reduced fines or avoid finesaltogether15. It is worth noting that theleniency provision may save thecooperating party from a larger penalty,but it does not protect the party from aclaim for compensation for loss ordamage suffered by a person on accountof the alleged violation by the party, orfrom any other direction or order of theCommission.16

IV. Abuse of Dominance

The provisions of Competition Act (CA),2002 dealing with abuse of dominancedraws heavily from EuropeanCommunity (EC) jurisprudence on thetopic and Article 82 of the EC treaty.

Dominant position refers to a position ofstrength wherein the enterprise hasgained such a position in the market byway of big market share or otherwise thathe is able to play independent of marketforces. It refers to the position where theplayer can manipulate the markets. Thecompetition act does not prohibit thedominant positions as was the case inMRTP act but it prohibits the abuse ofthe same.

The Act under Section 4 (1) prohibitsabuse of dominant position by anyenterprise. The term “dominant position”has been defined in the Explanation (a)below Section 4 (e) which states that thedominant position means a position ofstrength, enjoyed by an enterprise, in therelevant market in India. Such a positionenables a firm to: - (i) operateindependently of competitive forcesprevailing in the relevant market; or (ii)affect its competitors or consumers or the

The Competition Act doesnot prohibit the dominantpositions as was the case inMRTP act but it prohibits

the abuse of the same

Abuse of dominant position by anenterprise or a group is also prohibitedunder the Act. An enterprise or groupmust evaluate whether it has a dominantposition in the market, and whether ithas abused its dominance. The keyquestions to be addressed are: (i) what is“dominant position;” and (ii) what typeof behavior constitutes “abuse ofdominant position.”

12 Section 27 (a) & (b) of the Competition Act, 2002

13 Proviso to Section 27 (b) of the Competition Act, 2002

14 Section 42 (2) & (3) of the Competition Act, 2002

15 Section 46 of the Competition Act, 2002

16 <http://www.linklaters.com/pdfs/publications/competition/IndiaAntitrustGuide.pdf>


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relevant market in its favour. Dominantposition defined in Explanation (a)relates to the relevant market and it istherefore necessary first to determine therelevant market in which the dominantposition is alleged. The term “relevantmarket” itself has been defined in Section2 (r) “relevant market” means the marketwhich may be determined by theCommission with reference to therelevant product market17 or the relevantgeographic market18 or with reference toboth the markets.

Once the relevant market has beendetermined, the next stage would be toinquire whether the enterprise enjoys adominant position. The Act specifiestwelve factors which shall be taken intoaccount by the Commission eitherindividually or cumulatively whiledetermining the question whether anenterprise enjoys a dominant position19:Any compliance program must run adiagnostic analysis to determine whichof these factors the company may be atrisk of infringing at a given point in time.

Although the definition of “dominance”does not correspond word by word20 withthe definition given in the jurisprudenceof the European Court of Justice, the CCIis expected to interpret the conceptaccording to this jurisprudence.Dominance is not incriminating on itsown: a firm holding such a position musthave engaged in conduct characterizedas an abuse. In this regard, the Actcontains an exhaustive list of potentiallyprohibited practices. According to theSection 4(2), abuse of dominance by anenterprise or a group has been definedin the Competition Act to include directlyor indirectly imposing unfair ordiscriminatory conditions or prices inpurchase or sale of goods or services;restricting or limiting production ofgoods and services, or the market, orlimiting technical or scientificdevelopment relating to goods orservices to the prejudice of consumers;indulging in practices resulting in denialof market access; or using dominance inone market to move into or protect othermarket.

17 Section 2 (t) of the Competition Act, 2002 defined relevant product market as ‘a marketcomprising all those products or services which are regarded as interchangeable orsubstitutable by the consumer, by reason of characteristics of the products or services, theirprices and intended use’

18 Section 2 (s) of the Competition Act, 2002 states that the “relevant geographic market”means a market comprising the area in which the conditions of competition for supply ofgoods or provision of services or demand of goods or services are distinctly homogenousand can be distinguished from the conditions prevailing in the neighbouring areas.

19 Section 19 (4) of the Competition Act, 2002 states factors namely, : (i) market share of theenterprise, size and resources of the enterprise; (ii) size and importance of the competitors,(iii) economic power of the enterprise, including commercial advantages over competitors;(iv) vertical integration of the enterprises or the sale or service network of such enterprises;(v) dependence of consumers on the enterprise; (vi) monopoly or dominant position whetheracquired as a result of any statute or by virtue of being a Government company or a publicsector undertaking or otherwise; (vii) entry barriers, including barriers such as regulatorybarriers, financial risk, high capital cost of entry, marketing entry barriers, technical entrybarriers, economies of scale, high cost of substitutable goods or service for consumers; (viii)countervailing buying power; (ix) market structure, and size of market; (x) social obligationsand social costs; (xi) relative advantage, by way of the contribution to the economicdevelopment, by the enterprise enjoying a dominant position having or likely to have anappreciable adverse effect on competition; and (xii) any other factor which the Commissionmay consider relevant.

20 Within the terms of this prohibition, an enterprise is regarded as dominant when it enjoys aposition of strength enabling it either to operate independently of the competitive pressureexisting on the relevant market, or to affect its competitors or consumers in its favour.

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All the sanctions described in the case ofanticompetitive agreements are availableto the CCI against abuse of dominance. Ifthe CCI is satisfied that there has beenan abuse dominance, it may issue a“cease and desist’ order i.e. it can directthe enterprise to desist from practiceswhich constitute such abuse and imposea penalty of up to 10 percent of theaverage turnover of last three precedingfinancial years.21 In addition, the CCI canimpose structural remedies: it can orderdivision of a dominant firm with a viewto ensure that the undertaking does notabuse its dominant position. 22It appearsthat such an order can be only corrective,not pre-emptive, i.e., the CCI mustidentify an ongoing abuse beforeordering division of a dominantenterprise; however, the direction inwhich the law will develop has to bewatched.

V. Regulation of Merger andAmalgamation

One of the biggest threat to competitionsis the mergers and acquisition activitiesby which the factors governing the

competition in the market are grabbedby a few or a single enterprise. But not allthe combinations (mergers &acquisitions) are within the purview ofthe Act, it specifies a limit beyond whichall the desired combinations need to beapproved by the competition commissionto see the light of the day. The Actregulates the various forms of businesscombinations and not prohibits theirformation.

Under the Act, “no person or enterpriseshall enter into a combination, in theform of an acquisition, merger oramalgamation, which causes or is likelyto cause an appreciable adverse effect oncompetition in the relevant market andsuch a combination shall be void”.23 But,all combinations do not call for scrutinyunless the resulting combination exceedsthe threshold limits in terms of assets orturnover as specified by the CompetitionCommission of India.

The Commission while regulating a“combination” shall consider thefollowing factors24: (i) actual andpotential import competition, (ii) barriersto entry, (iii) the degree of marketconcentration; (iv) degree ofcountervailing power in the market; (v)the likelihood that the combinationwould allow the parties to significantlyand sustainably increase prices or profitmargins, (vi) the extent of likely effectivecompetition (vii) the extent to whichsubstitutes are available or likely to beavailable in the market; (viii) the marketshare, in the relevant market, of thepersons or enterprises in a combination,individually and as a combination (ix)the likelihood that the combinationwould result in the removal of a vigorousand effective competitor in the market;(x) the nature and extent of vertical

Under the Act, "no person orenterprise shall enter into acombination, in the form ofan acquisition, merger or

amalgamation, which causesor is likely to cause an

appreciable adverse effect oncompetition in the relevant

market and such acombination shall be void

21 Section 27 (a) (b) of the Competition Act, 2002





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integration in the market; The analysisalso includes consideration of whetherone of the firms in the combination is afailing business and the nature andextent of innovation. In addition, theCommission must consider the possiblebenefits that might flow from thecombination that would contribute toeconomic development and whether thebenefits outweigh the adverse impact ofthe combination, if any. These factors arean indication of a rule of reasonapproach.25

The threshold limits varies according towhether the combination is by anenterprise or by a group26, and also variesaccording to whether enterprise or grouphas assets or turnover only in India or

has these worldwide. The thresholdlimits have been prescribed for thepurpose of combination under theCompetition Act.27 Such threshold limitscontemplates an essential Indian nexus.The Act sets a threshold below which amerger, acquisition or acquiring ofcontrol is not regarded as a combinationand is therefore outside the mergerregime of the Act The threshold is fairlyhigh and is defined in terms of assets orturnover. The threshold varies accordingto whether the combination is by anenterprise or by a group, and also variesaccording to whether enterprise or grouphas assets or turnover only in India orhas these worldwide. Assets or Turnoveris displayed in the table given below:

In order to proceed with a combination,prior approval of the CCI is required. Thisis a pre-emptive measure so thatcombination does not end up in apotentially abusive position becausesubsequent unbundling can be difficultand costly. Such pre-emptive measureavoids any uncertainty pertaining to

validity of a combination. But suchcontrol over merger or acquisition leadsto delays, especially as the approvalprocess is time consuming. Theprocedures and time limits for aCommission inquiry into a combinationare set forth in detail in the Act underSection 29 & 31. Thus, the Act does not

25 Vinod Dhall, ‘Essays on Competition Law and Policy’ Available at <http://www.cci.gov.in/images/media/articles/essay_articles_compilation_text29042008new_20080714135044.pdf>

26 Group means two or more enterprises which, directly or indirectly, are in position to exercise26% or more of voting rights in other enterprise or appoint more than 50% of members of theboard of directors in the other enterprise control the management or affairs of the otherenterprise (Explanation (b) to S 5)


Operations No Group Group

India Total value of assets more than Total value of assets of moreRs.1000/- crores or turnover of than Rs.4000/- crores orRs.3000/- crores turnover more than Rs.12000/-

crores.

India or Aggregate value of assets more Aggregate value of assets ofOutside than $500 mn (including at least more than $2 bn (including atIndia in India Rs.500 cr.) Or turnover least assets of Rs.500 cr. in

more than $1500mn (including at India) or turnover of $6 bnleast turnover of Rs.1500 cr. in (including Rs.1500 cr. turnoverIndia.) in India).

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seek to eliminate combinations but onlyaims to eliminate their harmful effects.

VI. Articulation of CompetitionAdvocacy

In a country where the competitionculture is relatively weak, competitionadvocacy acquires a great significancein creating general awareness about thebenefits of competition and the role ofcompetition law, as well as in influencinggovernment policy in a more procompetition direction. In line with theHigh Level Committee’srecommendation, the Act extends themandate of the Competition Commissionof India beyond merely enforcing the law.The Regulatory Authority under the Act,namely, Competition Commission ofIndia (CCI), in terms of the advocacyprovisions in the Act, is enabled toparticipate in the formulation of thecountry’s economic policies and toparticipate in the reviewing of lawsrelated to competition at the instance ofthe Central Government. Section 49 of theAct provides that in formulating a policyon competition (including review of lawsrelated to competition), the governmentmay make a reference to the Commissionfor its opinion, though the opinion is notbinding on government. Further, the Actrequires that the Commission “shall takesuitable measures, as may be prescribed,for the promotion of competitionadvocacy, creating awareness andimparting training about the competitionissues.”28

Thus, Competition advocacy has createda culture of competition. There are many

possible valuable roles for competitionadvocacy, depending on a country’slegal and economic circumstances. Theinstitutional framework is the key tosuccessful implementation of any lawand competition law is not an exceptionto the general rule.29 In India, the Act hasbasically created three enforcementinstitutions namely: (1) CompetitionCommission, (2) Director General and (3)Competition Appellate Tribunal. Thedetails of institutional framework, howthe CCI is inter dependent on a host ofother institutions and what is imperativeof all to do, in order to achieve the intentand purpose of law, is narrated hereinbelow:-

VII. Administrative Mechanism &Structure

The administrative structure for thepromotion of competition is auguredthrough Competition Commission ofIndia. The Commission was establishedon 14th October, 2003 and startedaccepting cases under the Act after 1st

September, 2009, is an expert body whichfunctions as a regulator for preventinganti-competitive practices in the countryand also has advisory and advocacyfunctions.30 CCI is a quasi-judicial andcorporate body, having perpetualsuccession and a common seal withpower to acquire, hold and dispose ofproperty, both movable and immovableand can contract in its own name31. Inthe discharge of its functions, the CCIshall be guided by the principles ofnatural justice, and has the power toregulate its own procedures. The


29 G.R. Bhatia, ‘Institutional Framework under the Indian Competition Act, 2002, ’ availableat http://www.indialawjournal.com/volume2/issue_4/article_by_bhatia.html

30 Rini Mitra, ‘Enforcement of Competition Law in India: A Comparative Analysis with U.K& EU, ’ available at <http://legalservicesindia.com/article/article/enforcement-of-competition-law-in-india-a-comparative-analysis-with-u-k-&-eu-392-1.html>



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commission consists of a chairpersonand not less than two and not more thansix other members appointed by centralgovernment.32

The Commission is vested with bothregulatory and quasi-judicial powers toeliminate practices having AAE oncompetition, promote and sustainCompetition, protect interests ofconsumers, and facilitate competitionadvocacy and spread awareness.

The Commission has suo moto power toenquire whether any anti-competitiveagreement or abuse of dominant positionmay cause or has caused an appreciableadverse effect on competition. The CCImay, if it is satisfied that a prima faciecase exists, direct that an investigationinto any alleged anti-competitiveconduct be caused, either on its own onthe basis of information and knowledgein its possession, or on receipt of acomplaint from any person33, or onreceipt of a reference by the Central orState government or a Statutoryauthority.34 With these powers, theCommission would not be hamstrung toact against cases of infringing conduct ifinstances come to its attention throughany source, formal or informal. Further,the CCI can intervene effectively as it candirect any enterprise or their associationto discontinue their anti-competitiveconduct and can demand the productionof specific documents and informationfrom an enterprise.35

Thus, the CCI can make the cost ofinfraction high to deter such illegalconduct. The CCI may, if it finds afterenquiry that an agreement is anti-competitive, or that its action constitutesabuse of dominance, pass an orderdirecting the offender to discontinuesuch agreement or abuse of dominantposition. It may impose such penalty asit may deem fit, which shall not exceed10% of the average of the turnover for thelast three preceding financial years, uponeach of such persons or enterprises thatare parties to such agreements or abuse.If such an agreement has been enteredinto by a Cartel, the CCI may imposeupon the offending party a penalty up tothree times its profits for each year of thelife of such agreement or 10% of itsturnover for each year of the life of theagreement, whichever is higher. TheCommission can also issue directionsthat such agreement shall be modified tothe extent and in such manner as may bespecified. It may also issue directions tothe concerned parties for payment ofcosts and for obeying the orders as theCommission may pass. The Commissionmay also pass such other orders or issuesuch directions as it may deem fit.

The mandate of the CompetitionCommission extends beyond theboundaries of India. It has been explicitlyprovided that acts taking place outsideIndia but having effect on competition inIndia also fall within the ambit of theCommission.36 The Commission has been


33 Person here includes an individual, Hindu Undivided Family (HUF) , company, firm,association of persons (AOP) , body of individuals (BOI) , statutory corporation, statutoryauthority, artificial juridical person, local authority and body incorporated outside India.A consumer is also a person who buys for personal use or for other purposes. ( Section 2 (l)of the Competition Act )

34 Section 19 (1) of the Competition Act

35 Ravi Singhania and Sunil Kumar Competition Compliance Programme in India availableat <http://www.terralex.org/publication/8fcdd16743>


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vested with the powers of a civil courtwhile trying a suit, including the powerto summon and examine any person onoath, requiring the discovery andproduction of documents and receivingevidence on affidavits.37 To complementand supplement the domain of the CCIin determining and eliminating anticompetitive practices, the Act specificallyprohibits civil courts to entertain any suitor proceeding which the Commission isempowered to determine.38 Thejurisdiction of Competition Act extendsto all the sectors of the economy and sectorregulated by sector specific laws. Hencewithin the purview of the Act the CCIcan make reference to a statutoryauthority 39 or receive reference fromstatutory authority. Further where in thecourse of a proceeding before anystatutory authority an issue is raised byany party that any decision which suchstatutory authority has taken or proposeto take, is or would be, contrary to any ofthe provisions of this Act, then suchstatutory authority can make a referencein respect of such issue to thecommission.40 The statutory authority

can also make the reference suo motu toCommission.41 The CCI can pass finalorder as well as interim order.42 Howeverit cannot review its own order it can onlyrectify it.43

VIII. Resolution of Competition Dispute

The resolution of competition dispute isadministered through appointment andfunction of directorate of competitionand appellate tribunal. The directorgeneral (DG) is an investigation arm ofthe CCI in conducting inquiry intocontravention of any provisions of theAct. This act as watch dog and performother functions as provided by or underthe Act.44 The director shall, when sodirected by the commission, assist theCommission investigating into anycontravention of the provisions of thisAct or any rules or regulations madethere under. Although, the CCI is notbound by the findings in the report of theDG, it is obligatory for the CCI to refer thematter for investigation to the DG andseek an investigation report once it formsa prima facie opinion that a case ofinfringement of Section 3 or 4 hasoccurred.45 In case of enquiries intocombination, the report from DG may becalled upon by the CCI.46 The DG canalso investigate the conduct of relatedentities, of course, with the authorizationfrom the CCI. The Additional, joint,Deputy and Assistant Director Generalor such officers or other employees soappointed shall exercise his powers and



39 Section 21A of the Competition Act, 2002


41 Section 21 (2) Proviso of the Competition Act, 2002





46 Section 29 1 (A) of the Competition Act, 2002

The Director General (DG) isan investigation arm of theCCI in conducting inquiryinto contravention of any

provisions of the Act


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discharge his functions, subject to thesupervision and direction of the DirectorGeneral.47 The Director-General shallhave all powers as are conferred uponthe commission under section 36(2).48

The Competition Appellate Tribunal(CAT) as an appellate mechanism hearsall appeals against the order of the CCI.It is a quasi judicial body and consists ofChairperson and not more than two othermembers appointed by CentralGovernment.49 The CAT shall not bebound by the Code of Civil Procedure,1908 but by the principles of naturaljustice and any rules made by the CentralGovernment. However, CAT will haveall the powers of a civil court. Theproceedings before CAT are deemed tobe judicial proceedings. 50 The appealagainst the order of the CCI can be filedbefore CAT and provisions with respectto the same are provided in Sections 53Ato 53U. The CAT will hear and disposeof appeals against any direction issuedor decision made or order passed by theCCI51 and adjudicate claims forcompensation and pass orders forrecovery of compensation.52 The appealcan be filed by Central Government, StateGovernment or enterprise or any personwho is aggrieved by decision, directionor order of CCI. Appeal should be filedwithin 60 days. The tribunal will giveopportunity of hearing to other party andthen will pass the order. Copy of order

will be sent to the parties to appeal andCCI.53 CAT can review its own decisions.In case of contraventions of CATS orderwithout reasonable grounds,punishment of imprisonment up to 3 yrsand penalty up to Rs. 1 crore can beimposed by Chief MetropolitanMagistrate (CMM), Delhi.54 Every ordermade by the CAT shall be enforced in thesame manner as if it were a decree of acourt in a suit.55 Appeal against CATSorder can be made to Supreme Courtwithin 60 days from the date of receipt ofan order of the CAT.56

IX. Trade Secrets and CompetitionLaws

IPRs are considered mother of enterprisebut they dampen competition. Theamalgamation of Trade secret andcompetition law took new turn in thenew regime of IPR. The Trade RelatedAspect of Intellectual Property (TRIPS)Agreement in Article 40 deplored thepractices and conditions prevalent in thelicensing of IPRs which restraincompetition, an adverse effect on thetrade and dissemination of technology.The member countries are authorized byarticle 40(2) to prevent or control thepractices or conditions that mayconstitute an abuse of the IPRs havingan adverse effect on competitors in therelevant market. Each member is entitledto specify practices or conditions



49 Section 53C of the Competition Act, 2002

50 Section 53O of the Competition Act, 2002

51 Sub-sections (2) and (6) of Section 26, Section 27, Section 28, Section 31, Section 32,Section 33, Section 38, Section 39, Section 43, Section 43a, Section 44, Section 45 Or Section46 of the Act, 2002

52 Section 42A or 52Q (2) of the Competition Act, 2002

53 Section 53B of the Competition Act, 2002

54 Section 53Q of the Competition Act, 2002

55 Section 53P of the Competition Act, 2002

56 Section 53T of the Competition Act, 2002

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associated with IP licensing which may,in particular cases, constitutes abuse ofIPRs.57

When IP right holders fix unreasonablyhigh prices compared to the cost ofproduction resulting into large monopolyprofits, necessarily it is a case of unjustenrichment; and an abuse of IPR. Thereis a “carte blanche” for the governmentto make any legislation necessary toprevent the abuse of IPRs throughsuitable change in Trade secret andcompetition law.

Article 8(2) of TRIPSAgreement, 1994 ismore explicit in recognizing competitionpractices which unreasonably restraintrade. The provision clearly establishesthat the TRIPS do not interfere withmeasures taken by Government againstanti-competitive, dominant ormonopolistic conduct of right-holders.

The Competition Act, 2002 directs allenterprises not to enter into an agreementwhich causes or is likely to cause anappreciable adverse effect oncompetition within India.58 Theagreement may be with regard toproduction, supply, distribution, storage,acquisition or control of goods orprovision of services. All such anti-competitive agreements are declared tobe void.59 It also lays down theagreements which are presumed to havean appreciable adverse effect oncompetition.

The law gives limited exemption60 to IPright holders from the provisions ofSection 3, to take all or any steps tovindicate any of the IP rights grantedthrough six named enactments. It permits

IP right holders – a) to engage in aconduct including entering into anti-competitive agreements to restrain anyinfringement of IP rights, or b) ‘to imposereasonable conditions’ as may benecessary for upkeep of the rights whichare conferred on the IP right- holder,under six statutes named therein. Thesaving clause says that nothing in thissection shall restrict the right of anyperson to restrain any infringement of,or to impose reasonable conditions, asmay be necessary for protecting any ofhis rights which have been or may beconferred upon him under CopyrightAct, 1957, Patent Act, 1970, Trade andMerchandise Marks Act, 1958 or now theTrade Marks Act, 1999, GeographicalIndications of Goods (Registration andProtection) Act, 1999, Designs Act, 2000,Semi-conductor Integrated CircuitsLayout- Design Act, 2000.

In the conclusion it lays down that theright of any person to export goods fromIndia to the extent to which the agreementrelates exclusively to the production,supply, or control of goods or provisionof services for such export. In this contextRaghavan Committee seems relevant,which stated as follows:

All forms of IP have the potential toraise competition policy/lawproblems. IP provides exclusive rightsto the holders to perform a productiveor commercial activity, but this doesnot include the right to exert restrictiveor monopoly power in the market orsociety…But at the same time there isa need to curb and prevent anti-competition behaviour that maysurface in the exercise of IPRs.

57 Ashwani Kr Bansal, ‘Economic vs. Morality of IPRs: Strengthen Competition Act, 2002’, inJournal of Constitutional and Parliamentary Studies (Vol.40, July –Dec 2006) , pp. 243-251

58 Section 3 (1) of CA, 2002

59 Section 3 (2) of CA, 2002

60 Section 3 (5) of CA, 2002


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The dichotomy between IPRs andCompetition law need to be appreciatedin the context of anti-competitive tradepractices and consumer interest. Theexercise of IPRs has to be in a mannerwhich promotes competition as alsoupholds reward in the form of IPR forhuman creativity, effort and investmentin the subject matter of IPRs. The exclusiverights granted under IPRs should not beallowed to become tools to justify anti-competition behaviour or trade practicesthat are clearly detrimental to publicinterest.

Therefore, the CA, 2002 has to fulfill theaspirations of consumers fromoperations of anti-monopoly legislationor curbing unjust enrichment or curbingpredatory practices that are particularlyallowed to the governments against IPright-holders.61

X. Conclusion and Summation

A perusal of Monopolies and RestrictiveTrade Practices Act, 1969 and CompetitionAct , 2002 has compels a completeoverhaul to marks a landmark shift inapproach towards regulating businessin India at par with UK, USA and EU infree market. The competition law regimepromoted competition, prevented anticompetition practices and protectedconsumer interest by ensuring freedomof trade. The enactment of the CompetitionAct is a commendable step in fostering“open market economy”,“liberalization” and bringing paradigmshift in policy and law. However, thereform in competition laws on anti-competitive business practices seems tobe an onerous. The Competitionadministration mechanism from theperspective of free market functioning inIndia resulted in a stagnation of thecorporate legal framework. Thus thereforms need to be undertaken to boostlucrative market to foreign enterprisesand the Competition Act would help inreinforcing that belief. The competitionlegislations should provide for goodcorporate governance, governmentalfreedom, consumer and public interestto meet the needs of the global businesscommunity.

The exclusive rights grantedunder IPRs should not beallowed to become tools tojustify anti-competition

behaviour or trade practicesthat are clearly detrimental to

public interest

61 See Article 8 (2) & 40 , TRIPS Agreement, 1994

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Competition Regulation & Corporate Strategy : Needto Connect*

by Anurag Goel**

Competitiveness – not only in today’s markets but in markets not yet born – is thekey to sustained economic growth in a globalized world. This paper seeks to explorethe underlying factors common to market regulation by competition agencies anddevelopment of corporate strategy by firms, and the relationship between the two.Competition is evidently the critical issue, with the agencies striving to ensure faircompetition and the firms strategizing to beat the competition. The paper arguesthat effective regulation creates pressure on firms to innovate, and CEOs & businessschools need to focus on competition law not only for compliance, but also as partof the corporate strategy for innovation and growth.

The strategy for development andtransformation of the economy throughinstitutionalization of fair competitionhas been adopted by many a countrywith notable success. India, afterbecoming independent in 1947, decidedto pursue the strategy of plannedeconomic development as the means forgrowth in agriculture, as well as in theindustrial sector. Much emphasis waslaid on public sector, and the productionand prices used to be determined/fixedby the Government. Indian industries

were protected as competition fromabroad was restricted by the Governmentpolicies in terms of quantitativerestrictions, high tariff walls andrestrictions on foreign investment. Areview of the position in 1965[Monopolies Inquiry CommissionReport] indicated that there was highconcentration of economic power in over85 per cent of industries in India. TheMonopolies and Restrictive TradePractices (MRTP) Act, 1969 was,therefore, passed and India became one

* Paper presented in 6th Astana Economic Conference during 22-24 May, 2013 at Astana,Kazakhstan. Comments to [email protected] are most welcome.

** Anurag Goel is Member, Competition Commission of India (CCI). He is the only person inIndia who has been directly involved both in framing of the competition law [the game-changing Competition (Amendment) Act, 2007 as Secretary to Government of India, Ministryof Corporate Affairs] and it’s enforcement [as Member, CCI]. The views are entirely personal.

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of the first developing countries to havea competition law.

The strategy worked well for some time,but by the eighties, the low rate ofeconomic growth became a cause forserious concern. This led to majoreconomic reforms in 1991, when Indiaembarked on liberalization, andembraced a market driven economy withcompetition as the key driver. Indiaundertook a number of reforms indifferent sectors of the economy,including reduction in tariff barriers,opening foreign investment, technologyadvancement, removal of controls infinancial sector, tax structure etc. Manycontrols on trade and industry wereremoved to foster competition, efficiencyand productivity in all major sectors ofthe economy. Indian economy wasopened to competition from within andabroad. The two central components ofthese economic reforms were theliberalization of India’s private sector,and the reforms of the public sector. As aresult, India achieved significant growthin various segments of economy e.g.telecommunications, civil aviation,transport, manufacturing etc.

Apart from achieving higher economicgrowth, India also witnessed reductionin poverty and malnutrition during theperiod. Other economic indicators, wheremajor improvements were noticed wereliteracy rate, employment growth,inflation, balance of payments, factormobility etc. Indeed, the economic growthand the rapid industrialization due tothe economic reforms led to higherinvestments, which paved the way forthe entry of private players andsimultaneously accelerated theemployment generation. Per capitaincome went up, and India emerged as avibrant and dynamic economy.

The reforms of 1991 led to the evolutionof industry and structural changes in theeconomy. However, along withindustrialization the rapidly and

vibrantly changing, Indian economy alsowitnessed the impact of anticompetitivepractices in different sectors. TheCompetition Act, 2002 was, therefore,passed by the Indian Parliament to curbsuch practices, along with ensuring theprotection of interest of consumers aswell as enterprises. The Act was amendedby the Competition (Amendment) Act,2007 and in May, 2009, CompetitionCommission of India (CCI) became fullyoperational for anti-trust enforcement.The provisions relating to merger reviewwere notified two years later.

It may be noted that the origins of moderncompetition policy can be traced to theUS business response, in the late19th century, to the transformationaltechnological changes, particularly intransportation and communication,leading to formation of a large singlemarket. The firms sought to exploit theresultant economies of scale. In thewords of Chandler (1990: 71),“Increasing output and overcapacityintensified competition and drove downprices.” As observed by Massimo Motta(2004) : “Firms often tried to respond toprice wars and market instability by wayof price agreements which enabled themto maintain high prices and margins.The organization of cartels and trusts(railroad and oil companies are the bestknown examples of these) had exactlythis purpose”.

This created a situation in which the bigbusiness reaped exploitative profits tothe detriment of consumers as well assmall producers. Sherman Act, 1890 wasthe legislative response to this marketsituation, and contained the fundamentalprinciples of competition law, both inregard to illegal agreements, verticalrestraints & cartels, and unilateralconduct or abuse of dominance. Itsanctified promotion and preservationof competition, and provided thenecessary legal structure and powers forthis purpose.

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Today, more than 120 countries in theworld have competition law. Over aperiod of time, the importance ofeconomic analysis was recognized andthe law as well as the regulatory analysisgot modified accordingly. This has ledto a much stronger economics – lawinterface. To be successful, thecompetition lawyers need to understandeconomics while the competitioneconomists need to understand the law.

In the words of Eleanor Fox (2010) : “ForUS and EU, it is now generally acceptedthat antitrust/competition law should bedesigned and enforced to removeimpediments and help make marketswork, for the benefit of consumers andthe efficient and potentially efficient andinnovative firms that are trying to servethem”. This applies largely to otherjurisdictions also.

competitors strive to produce new andbetter products for consumers. This is aparticularly important feature of hightechnology markets.

Looking at the issue in the Indian context,it may be noted that the CompetitionCommission of India (CCI) has themandate to regulate, inter alia,combinations (M&A and takeovers),agreements with suppliers, distributorsand customers and interactions ofbusinesses with other businesses.Cartelization and abuse of dominanceare specifically prohibited. Accordingly,Indian business have to create newcapabilities and business processes thatare compliant, and also build internalcapabilities around new strategies tocompete or cooperate.

Recent orders of CCI indicate heavypenalties can be imposed by the regulatorin case of serious violations, e.g. a penaltyof nearly Rs. 6,700 crore (US $ 1.20billion) was imposed on some cementcompanies for cartelization, while apenalty of Rs. 630 crore (US $ 115 million)was imposed on a real estate firm forabuse of dominance i.e. unilateralconduct. Apart from the penalty, thecompanies are also liable for any claimof compensation by adversely affectedindividuals/firms. The fact is that legal,economic and reputational risks of non-compliance to companies outweighpossible advantages accruing fromviolation. Non-compliance can alsoresult in negative publicity, loss ofmanagement time, significant legal costsetc. Competition Act, 2002 also providesfor the directors/officers of the firms tobe held personally liable and bepenalised in case of violation by the firm,with this penalty being in addition to thepenalties imposed on the firm.

It is important for firms to put effectivecompliance systems in place. The successof such programmes would largelydepend on determination and supportof the top management, presence of

The benefits of competitionare lower prices, better

products, and wider choicefor consumers, and greaterefficiency than what wouldoccur under conditions of

monopoly

The benefits of competition are lowerprices, better products, and wider choicefor consumers, and greater efficiencythan what would occur under conditionsof monopoly. Theoretically, in conditionsof perfect competition, allocative andproductive efficiency are enhanced. Thecombined effect of allocative andproductive efficiency is that society’soverall wealth is maximized. Consumerwelfare, which is specifically concernedwith gains to consumers as opposed tosociety at large, is also maximized inperfect competition. A related benefit ofcompetition is that it has the dynamiceffect of stimulating innovation, as

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An effective regulator will not allow anyanti-competitive practices, includingcartelization, anti-competitiveagreements and unilateral conduct(abuse of dominance). This will meanthat supernormal profits will normallynot be possible because of pricecompetition, and a major portion ofprofits in the market would need to beearned by firms on innovations. Thus,effective competition regulation shouldlead to increased competitiveness andinnovation, thereby contributing tohigher economic growth.

A competition regulator would need toregulate in a manner that does notadversely affect innovation, and insteadcreates conditions that facilitateinnovation. The firms adopting thestrategy of becoming more competitiveand innovative may engage theregulator, with a view to create acompetition culture which, in turn, willencourage competitiveness andinnovation.

The basic hypothesis here is that firmswill increase efficiencies and focus oninnovation much more when there is faircompetition in the market. That is whenmanagement theories, skills andleadership become the deciding factor.Otherwise, firms may indulge in

unethical practices to shore up theirbottom lines.

Management and competition regulationboth deal with the same subject, i.e.impact of firms’ behaviour on the market.Both deal with ‘competition’ and‘market’, but from different perspectives.What is intriguing, however, is the factthat in regulating competition agenciesdo not seem to take the managementtheory/expertise into account.

The objective of management theory is togive competitive advantage to a firm vis-à-vis the competitors in the market. It,therefore, talks of market, competing firmsand the firm’s strategy and conduct.Huge amount of literature is available inmanagement theory on each of theseelements and their inter-linkages.Whether it is Michael Porter talking of hisFive Forces in the relevant industry(Harvard Business Review, January 2008),or the Blue Ocean Strategy advocated byW. Chan Kim and Renee Mauborgne(HBR, October 2004) focussing oncreating new demand or markets orchanging an existing market through anew/innovative product, the underlyingtheme is dealing with competition in themarket, in a manner which givescompetitive advantage to a firm, so as tomaximize profits. Higher efficiencies,increased productivity & production andeconomic growth are expected to be thenatural consequences of the way in whichthe invisible hand functions.

A look at the following five forces inPorter’s model illustrates the relationshipbetween the factors relevant forcompetition regulation and formulationof corporate strategies :-

i) Rivalry among existingcompetitors;

ii) Threat of substitute products orservices;

iii) Threat of new entrants;

iv) Bargaining power of suppliers;

v) Bargaining power of buyers.

An effective regulator will notallow any anti-competitive

practices, includingcartelization, anti-competitive

agreements and unilateralconduct (abuse of

dominance).

proper policy and procedures,continuous training, a systematicassessment process, and consistentdiscipline and incentive practices.

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All the above factors are part ofcompetition law and analysis. Forexample, the first factor can be nullifiedby cartelization or anti-competitiveagreements with existing competitors,while the second and third factors maybe countered by a dominant firm throughunilateral conduct (abuse of dominance).The fourth and fifth factors are alsoconsidered/examined in-depth whiledetermining whether a firm is dominantor not. In fact, Porter himself says thatthese are the five forces that shapeindustry competition. The linkagebetween management theory(particularly strategy) and competitionregulation, therefore, seems self-evident.

As a matter of fact, some of these factorsare considered in a slightly differentfashion even today. The competitionagencies do look at the business modelof the firms in the process of caseassessment. At a conceptual level, sincethe decisions and conduct of the firmsare related to the market situation anddynamics, these have to be part of theanalytical matrix. The question iswhether adequate weightages is beinggiven, and whether the analysis isrigorous and well informed.

In a nutshell, it could be argued that apartnership between regulators, firmsand business associations would bebeneficial for the economy, as well as thefirms. A competition agency would needto help create an enabling regulatoryenvironment for innovation, thecorporate leadership would need toprioritise strategies for innovation as wellas compliance, and business schoolswould need to include in their coretraining a course on the practicalapplications of competition law andeconomics in deciding corporatestrategy. However, this raises some veryimportant questions for competitionagencies and CEOs :-

i) Does the above line of thought fitwithin the existing structure of

competition regulation andcorporate management? If so, howand to what extent?

ii) Do we need to move fromenforcement oriented regulation toinnovation/growth orientation? Ifso, how and whether this wouldinvolve only changes in internalpriorities and approach of theagency or require amendment in thelaw also (in India, the CompetitionAct, 2002 gives the CompetitionCommission enough powers tomove in this direction)?

iii) Are the above issues not relevantat all in the context of competitionregulation and corporate strategyrespectively, with no requirementof change in the present system,notwithstanding the dynamicnature of markets today?

Those deeply involved in competitionregulation would agree that these couldbe potentially controversial issues. Thelawyers may argue that competitionagencies have to be guided by the lawalone, and firms should have certainlyin regulation. The economists may saythat firms’ behaviour, with reference totheir objective of profit maximisation, isalready factored into the economicanalysis. The CEOs themselves may feelthat legal compliance and corporatestrategy are entirely different issues.Business Schools may not see a readyconnection with their charter. And, aboveall, the competition agencies maythemselves not be inclined to add a newelement to the practices andjurisprudence developed over decades.

All these arguments are not withoutmerit. However, these issues need to belooked at in-depth by all the stakeholderstogether in the interest of economicgrowth, in line with the topic for thissession i.e. “development andtransformation of the economy throughthe prism of fair competition”. This isimportant as the linkages between

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competition, it’s regulation andinnovation, are directly connected todevelopment and transformation of theeconomy.

In conclusion, it may be argued thateffective regulation creates pressure onfirms to innovate, and CEOs & businessschools need to focus on competition lawnot only for compliance, but also as part

of the corporate strategy for innovationand growth. There is need forconstructive interaction betweencompetition agencies, corporateleadership and business schools, todeliberate on the critical issuesmentioned earlier, and explore thepossibility of establishing newpartnerships for greater innovation andeconomic growth.

* M.S. Ananth is a Senior member of the Litigation and Dispute Resolution Practice.

1 Case No. 36/2011, decided on 3rd July, 2012 (‘Kansan Order’).

2 Case No. 16 of 2011, decided on 9thAugust, 2012 (‘Khaitan Order’).

3 Any agreement entered into between enterprises or associations of enterprises or persons orassociations of persons or between any person and enterprise or practice carried on, ordecision taken by, any association of enterprises or association of persons, including cartels,engaged in identical or similar trade of goods or provision of services, which—

(b) limits or controls production, supply, markets, technical development, investment orprovision of services

4 CCI assures there is no conflict, turf wars among regulators, available at, http://www.firstpost.com/business/cci-assures-there-is-no-conflict-turf-wars-among-regulators-587491.html.

Anti-competitive practices in broadcasting:Competition Commission’s perspective

M.S. Ananth*

In two different rulings in 2012 the Competition Commission of India (‘CCI’)has ruled on issues relating to broadcasting in India. In M/s. Kansan NewPvt. Ltd. v. M/s. Fast Way Transmission Pvt. Ltd. & Ors.1, CCI ruledthat non-transmission by Multi System Operators (‘MSOs’) could be incontravention of the Competition Act, 2002 (‘Act’) and in Sajjan Khaitan v.Eastern India Motion Pictures Association & Ors.2, CCI has ruled thatimposing restrictions on exhibition of serials which are not in the regional languageare in violation of Section 3 (3) (b) of the Act.3 Certain important issues havearisen in the context of these two cases, namely, the separation of jurisdictionbetween CCI and Telecom Regulatory Authority of India (‘TRAI’) and clearguidelines as to what practices are anti-competitive. The jurisdictional conflictbetween CCI and other regulatory bodies – such as TRAI, Central ElectricityRegulatory Commission etc. also needs to be resolved to provide greater claritywith respect to roles of such specialized commissions.4 As a quasi-judicial body

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1. Kansan case

A. Facts

Both cases are fairly unique and distinctand hence it is important to set out thefacts of each case in detail. M/s. KansanNews Pvt. Ltd. (“Informant”) abroadcaster of “Day and Night News”(the “Channel”) operating in the statesof Punjab, Haryana, Himachal Pradeshand Union Territory of Chandigarh hadmade allegations of non-transmission ofthe Channel and abusing dominantmarket position against the OppositeParties (“Ops”) - Ms/ Fast WayTransmission Pvt. Ltd., M/s. HathwaySukhamrit Cable & Datacom Pvt. Ltd.,M/s. Creative Cable Network Pvt. Ltd.,M/s. Wires& Wireless India Ltd., MSOsunder Telecom Regulatory Authority ofIndia, Act, 1997 (“TRAI Act”). As perTelecommunication (Broadcasting andCable Services) InterconnectionRegulations, 2004 (“Regulations”) andbusiness practices, broadcasters transmitor “up-link” the content signals to thesatellite (from where they are ‘down-linked’ by the distributor). Thebroadcasters own the content to betelevised and received by the viewers.MSOs downlink the broadcasters’signals, decrypt any encrypted channelsand provide a bundled feed consisting

of multiple channels to the Last-mileCable Operators (“LCO”). LCOs receivea feed (bundled signals) from the MSOsand re-transmit these signals tosubscribers in his area of operation.6 TheInformant had entered into a ChannelPlacement Agreement dated1st August, 2010 (“Agreement”) fortelecast of the Channel with the OPs. OPstransmitted the Channel in accordancewith the Agreement for about two monthsafter the same was executed. FromOctober 2010, the OPs started disruptingthe transmission of the Channel andsubscribers had forwarded variouscomplaints regarding the transmissionof the Channel.7

In this background, the allegations madeby the Informant were that OPsdisconnected/distorted the service,blacked out certain programs, blackedout images and then muted audio, alteredthe slot of the Channel withoutintimation to the Informant in severalparts of Punjab and unilaterallyterminated the Agreement withoutassigning any reason.

The Director General (“DG”) in hisReport8 (“Kansan Report”) after studyingthe business of the OPs and the telecommarket returned the following materialfindings:

which interprets the Act, CCI ought to provide its interpretation of key provisionsof the Act, such as Sections 3 and 4 so that industry participants are aware ofpractices that are anti-competitive.

This article examines the two rulings in brief and argues that CCI needs toprovide greater clarity on interpretation of the provisions of the Act in order forindustry to carry on business with certainty.5

5 See Namit Sharma v. Union of India 2012 (8) SCALE 593, for a discussion on role of tribunalsand commissions and nature of decisions pronounced by such quasi-judicial bodies.

6 Para 4.2 and 4.3 of the Kansan Order.

7 Para 6.4.7 sets out complaints from various viewers; averments of Informant at para 2.7.

8 CCI, on being satisfied about a prima facie case directed the Director General to cause aninvestigation under section 26(3) of the Act

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a. Fast Way group, consisting of OPNo.1, No.2 and OP No.3 was foundto be a “Group” within themeaning of the Act for the purposesof gaining control over the market.The market share of the “Group”was found to be 85 per cent;

b. There was a dependence on theOPs by other participants for thetransmission and relay of theirchannel;

c. Fast Way Group abused itsdominant position9 and OPscommitted violations of Section 4(2) (a) (i)10, 4 (2) (a) (ii)11, Section 4(2) (b) (i).12

of the Agreement was amenable tojurisdiction only before the TelecomDisputes Settlement Appellate Tribunal(‘TDSAT’) and hence CCI did not havejurisdiction to adjudicate the issue.Materially, OPs also argued that refusalto deal with the Informant did notamount to denial of market service andthat there was no obligation on the partof the OPs to transmit the Channel.14

B. Kansan Order

CCI noted that OPs held dominantposition in the relevant market. However,it is a salutary feature of the KansanOrder that while CCI holds that OPs helddominant position the same was not ipsofacto contravention of Section 4 of the Act.Surprisingly, CCI did not deal with thejurisdictional objection at all. CCI wasbound to adjudicate the issue relating tojurisdiction objection and its failure toadjudicate an objection raised by a partybefore it is clearly a lapse on the part ofCCI.15 The issue of jurisdiction was alsonecessary to prevent future litigants fromresorting to multiple fora to agitate thesame issue and unfortunately, CCI didnot deal with the jurisdictionalobligation. On the basis of the pleadingsand the Kansan Report, CCI hadidentified issues to be adjudicated,however, objection to jurisdiction wasnever identified as an issue.16

CCI was bound to adjudicatethe issue relating to jurisdiction

objection and its failure toadjudicate an objection raisedby a party before it is clearly a

lapse on the part of CCI

The primary contention of the OPs wasthat CCI did not have jurisdiction toadjudicate the dispute as the same wasamenable to jurisdiction before TDSAT.13

In this regard it was submitted by theOPs that issues relating to termination

9 ‘dominant position’, as per Explanation to 4 (2) (e) of the Act, is a position of strength,enjoyed by an enterprise, in the relevant market, in India, which enables it to:-

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

ii. affects is competitors or consumers or the relevant markets in its favour;] by refusing todeal and supply to the broadcaster on its network;

10 abuse of dominant position through unfair/discriminatory conditions in purchase/sale ofgoods/services

11 abuse of dominant position through unfair/discriminatory price in purchase/sale of goods/services

12 limit or restricts production of goods/services or market] and 4 (2) (c) [denial of market access

13 The OPs in their Reply submitted that any allegedly wrongful termination of the Agreementought to be adjudicated by Telecom Disputes Settlement Appellate Tribunal (‘TDSAT’)under section 14 of the Telecom Regulatory Authority of India, Act, 1997, see para 5.1.38and para 5.2.16 Of the Kansan Order.

14 Para 6.4.9 of the Kansan Order.15 Jai Bhagwan vs. The Management Of The Ambala CentralCooperative Bank Limited 1984 AIR 286, 1984 SCR (1) 158

16 Para 6.1 of the Kansan Order.

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On the basis of the material on record, CCIheld that the termination of the Agreementwas without any “justification”. CCIfurther ruled that shortage of spectrumand even low TRPs are not justifiablegrounds for termination of the Agreementsince TRP was never contemplated as abenchmark to review performance underthe Agreement. CCI concluded that dueto the conduct of the OPs, Informant wasdenied “market access and opportunityto compete” and consequently OPs wereguilty of violating Section 4 (2) (c) of theAct. However, CCI ruled that denial of re-transmission was not an anti-competitivepractice under Section 4 (2) (b) (i) of theAct since the relevant market for thatpurpose was cable TV market in theterritory of Punjab and Chandigarh. CCInotes that since the relevant market wascable TV services, the denial of access bythe OPs to the cable network cannot besaid to have restricted Informant’s accessto the market of cable service sinceInformant is not a participant in therelevant market. The application of theAct to the facts as determined by CCI isclearly leading to prima facie inconsistentfindings – one the one hand, the conductof the OPs was ‘practices resulting indenial of market access’ and yet, OPsconduct was one which did not “limit orrestricts production of goods or provisionof services …”. The Kansan Order doesnot provide a clear analysis of the

provisions of the Act which would serveas guidelines to other MSOs, broadcastersand participants in the telecom market.

2. Khaitan case

A. Facts

Sajjan Khaitan, proprietor of a firm HeartVideo (“Khaitan”) had executed anagreement for telecast of the Hindi serial“Mahabharata” in Bengali (“Serial”)with Bengali Media Private Limited andCalcutta Television Network PrivateLimited (Opposite Party No. 3 and 4respectively). The Serial was to bebroadcasted at a particular time andadvertisements to the same effect weremade in media. Khaitan alleged that OPNo.4 had been receiving letters fromCo-ordination Committee of Federationof Cine Technicians and Workers ofEastern India and West Bengal MotionPictures Artistes Forum, OP No.2, to stoptelecast of the Serial in the ‘interest ofhealthy growth of film and televisionindustry in West Bengal’. Khaitan hadalso alleged that similar letters wereissued by Eastern India Motion PicturesAssociation, OP No.1. In his report, theDG (Khaitan Report) ascertained that OPNo.2 passed a resolution objecting to thetelecast of the Serial by OP No.4. DGnoted that it was only after persistentcommunication on the part of OP No.1and OP No.2 that OP No.4 stoppedtelecast of the Serial.17 In theirrepresentations before the DG, OP No.1and OP No.2 had stated the economicimpact of dubbed serials on local artistes,technicians etc. and argued that dubbedserials would affect the welfare of suchpersons and cause joblessness amongsuch workers. The DG however rejectedthese contentions and observed thatagreements to limit of control the supplyof a program could not be justified andthat it would be anti-competitive innature. It is interesting to note that theDG rejected the objections of the OPs

The Kansan Order does notprovide a clear analysis of theprovisions of the Act whichwould serve as guidelines toother MSOs, broadcasters

and participants in thetelecom market

17 Para 5.5 of Khaitan Order.


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(contesting OPs were OP No.1 and OPNo.2) on the ground that the objectionsof the OPs were not based on facts.18 TheKhaitan Report consequentiallydetermined that the conduct of OP No.2was in violation of the Act and furtherthat provisions of the bye-laws of OP No.1were in violation of the Act.

In their reply to the Khaitan Report beforeCCI, OP No.1 and OP No.2 submitted thatthey were not engaged in the business ofproduction and telecast of serials andtheir requests per se was not a violationof the Act. OP No.1 and No.2 furthersubmitted that neither were marketparticipants and were not competitorsof Khaitan and hence could never beconstrued as being in a dominantposition. OP No.2, also contested thatCCI had no jurisdiction since OP No.2was a body to be governed under TradeUnions Act and would not be amenableto jurisdiction of CCI.

B. Khaitan Order

CCI noted that the conduct of OP No.1and OP No.2 was such that it exertedpressure on OP No.3 and OP No.4 to nottelecast the Serial.19 Although CCI hasnot used the expression, it would be seenthat the letters issued by OP No.1 andOP No.2 20 clearly had the effect of beingthe proximate cause of cessation oftelecast of the serial. The letters used byOP No.1 and OP No.2 threatened OPNo.3 and OP No.4 with strikes, non-

cooperation and other coercive actions21

if they continued telecast of the Serial.

Noting that neither OP No.1 nor OP No.2were in fact engaged in the business ofproducing serials and were notcompetitors of the Informant, CCIhowever noted that they wieldedsignificant influence over those engagedin similar or identical business ofproduction of films or distribution offilms. CCI rejected the argument relatingto alleged job loss and held that theconduct of OP No.1 and OP No.2 “createdbarriers to the entry to a new content inform of a dubbed TV serial” and that the“rules of the Associations also did nothave any efficiency defence in terms ofimprovement of services or production.”

3. Analysis

A. Jurisdictional Conflict

CCI has inadvertently failed to considerthe objection of the OPs in the Kansan casewhich goes to the root of possible conflictof laws between anti-competition lawsand telecommunication laws. Section 11of the TRAI Act empowers TRAI to “makerecommendations to facilitatecompetition and promote efficiency in theoperation of telecommunicationservices”.22 Thus, there is some manifestoverlapping of powers of bodies andjurisdiction between some specializedinstitutions and the CCI. These issuescan only be resolved by a higheradjudicatory body and in this case, such

18 An important aspect that emerges from this conclusion of the DG is significance of economicevidence and that its failure would result in rejection of objections which are not supportedby facts.

19 A dissenting opinion was given by one of the Members and the same has not been considered.Only the Majority Opinion has been considered for examination in the present case. Thedissenting opinion holds that the tactics adopted by OP No.1 and OP No.2 had no economicimpact and further that OP No.1 and OP No.2 were entitled to their freedom of expressionunder Article 19 (1) (a) of the Constitution of India, 1950, and that the Act could notabridge these rights.

20 Various letters set out in para 5.2 and 5.17. See also extract of letter dated 18.02.2011 setout in CCI’s findings in para 7.1.5 of Khaitan Order.

21 Para 7.1.9 of Khaitan Order.

22 Section 11 (1) (a) (iv) of TRAI Act.

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a body would be the Supreme Court ofIndia. This is required to provide claritynot merely with respect to jurisdictionbut also providing the final word on aprovision of law. Although CCI does nothave jurisdiction to return findings onobligations of participants under TRAIAct and regulations thereunder, it isimportant for CCI to consider suchobligations from the perspective ofsupply and demand of services in themarket from the perspective of whatactions may constitute appreciableadverse effect. CCI has however notconsidered the TRAI Act. While it maybe considered transgression ofjurisdiction for CCI to express an opinionor interpret a provision of law which issubject matter of another quasi-judicialbody, it is important for CCI to take intoconsideration other specializedlegislations.

The Kansan Order assumes significantimportance in the context of the interplaybetween TRAI Act and the Act. However,the lack of discussion on TRAI Act,Regulations and Telecommunication(Broadcasting and Cable Services)Interconnection (Digital AddressableCable Television Systems)Regulations 2012, (‘Regulations 2012’) isa little disconcerting. Although theInformant invoked the provisions ofRegulations there is no discussionspecifically on Regulation 3.1 whichprohibits exclusionary agreements thatprevent other distributor from obtainingchannels for distribution. Regulation 3.4makes it compulsory for an agent of anMSO (or other intermediary) to respondto request for providing TV signals.Further, as per Regulation 3.10 ofRegulations 2012 an MSO shall, within60 days of receipt of request from abroadcaster, provide access to a network

on a non-discriminatory basis or providereasons for rejection.23 Annex A toRegulations includes an ExplanatoryMemorandum which sets out issuesrelating to competition law – namely,fragmentation of market, inability ofsmaller players to bargain with largeMSOs or broadcasters, need for non-discriminatory access etc. A discussionon these provisions in the present casewould have been useful for providingclarity in respect of obligations ofparticipants in a dynamic industry andwould have helped identify anti-competitive practices. The Kansan Orderalso lacks clarity on the “must carry” rule.CCI has not dealt with the balancebetween “must provide” obligation of theInformant and the “must carry”obligation of the MSO, assuming anysuch obligation is to be cast on eitherparties. A parallel may be drawn with aruling of the United States SupremeCourt (“US Supreme Court”) in Contrastthis ruling with Verizon Communicationsv. Law Offices Curtis V. Trinko24 whereinthe US Supreme Court upheld theprinciple that a party had a right to refuseto deal with other firms. The US SupremeCourt reiterated its earlier observationthat the anti-competition law did notrestrict the right of a trader to exercisehis discretion as to which parties hewould deal with, subject to certainexceptions.

Thus, a discussion on the relationbetween the obligations of parties underRegulations and Regulations 2012 andtheir freedom to not enter into a businesstransaction with another party wouldhave shed light on the complicated issueof obligations under telecommunicationlaws and anti-competitive practices. Inthe Kansan Order, there has been nodiscussion whether, and if so to what

23 Although, admittedly Regulations 2012 were not in force when the acts complained of werecommitted by OPs in the Kansan case.

24 124 S.Ct. 872


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The omission to examine TRAI Act andregulations is also glaring in the KhaitanOrder. The case involved broadcastingof broadcasting service which wasartificially restrained by the OP No.1 andOP No.2 therein. It is pertinent to notethat OP No.1 and OP No.2 were notthemselves engaged in the activity oftransmission of broadcasting services,OP No.3 and OP No.4 were engaged insuch services. However, the KhaitainOrder fails to set out any obligations onthe part of OP No.3 and OP No.4particularly when there were nocontractual considerations for cessationof broadcasting of service by OP No.3 andOP No.4. It is pertinent to note that theKhaitan case was never examined fromthe perspective of Section 3 (4) (d), refusalto deal, when the bye-laws of OP No.1

clearly provided for “refusal to deal”clauses. It is important to bear in mindthat a distinction needs to be madebetween cases where there is a statutoryobligation to deal and cases where CCIdeems it obligatory for a party to dealwith another.25

As submitted above, while CCI does nothave jurisdiction to adjudicate ondisputes relating to TRAI Act,consideration of obligation ofparticipants under TRAI Act might helpidentify roles and responsibilities of cableoperators, MSOs and broadcasters. Thisin turn would ensure that there is greateraccountability and better enforcementunder specialized legislations.

B. Ingredients of Section 3 and Section 4

Anti-competitive practices are set out inSection 3 of the Act. Although the actionof the OPs in the Kansan Order has beenexamined under Section 3, the KansanOrder does not set out the key ingredientsfor an action / agreement to be violativeof Section 3 of the Act. Since an actionagainst an entity under Section 3 wouldhave severe consequences, it would beimportant for CCI as a quasi-judicialbody to set out ingredients of actions thatfall afoul of Section 3 or Section 4 of theAct. In the Kansan Order, CCI notes thatOPs have abused their dominantposition while they have not engaged inanti-competitive practices. It is certainlyincongruous that an entity has abusedits dominant position and yet has notengaged in anti-competitive practice. Asthe Kansan Order notes, refusal to dealenvisages an agreement between twoparties at different levels of productionand in Kansan there was no suchagreement between the MSOs. However,there is a clear inconsistency in CCI’sreasoning since in Khaitan, CCI holdsthat the action of OP No.1 and OP No.2

25 See Trinko supra note 23.

It is pertinent to note that theKhaitan case was never

examined from the perspectiveof Section 3 (4) (d), refusal to

deal, when the bye-laws of OPNo.1 clearly provided for"refusal to deal" clauses

extent, an MSO has a right to not transmita broadcasting service to cable operators.The Kansan Order notes that OPs hadalleged that TRP of Informants Channelwas low but has rejected low TRP on theground that the Agreement was neverreviewed in the context of TRP. However,if CCI was adjudicating on whether TRPwas a reasonable ground for terminationof the Agreement, it must have takenrecourse to Regulations and morepertinently, the interplay between TRAIAct and Regulations and the Act.

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to be violative of Section 3 (3) (b) whenthere was no “agreement” betweenparties therein. Although the KhaitanOrder is subsequent to the Kansan Order,CCI has not referred to the same – norindeed to any other order passed by CCIwhich sets out key ingredients ofSection 3 (3) (b).

Admittedly in Khaitan, there was arestriction on the broadcasting of theSerial – however, whether suchrestriction was a restriction within themeaning of Section 3 (1) of the Act hasnot been satisfactorily explained. Areading of the Kansan Order and theKhaitain Order does not give a clearindication of the ingredients of Section 3,nor when an action by a party would beviolative of Section 3 of the Act.

4. Conclusion

The Supreme Court of India has held inseveral cases that reasons are required

for rulings by judicial bodies and whilethere are admittedly reasons provided inthe present cases, there is however nointerpretation of the provisions of the Actin the context of the facts of each case.26

As has been reasoned above, twodifferent conclusions have been arrivedat in similar facts. Recently, the SupremeCourt of India has emphasized the needfor uniformity of approach andpredictability of decisions and that theseare essential ingredients of rule of law.In Namit Sharma’s case, it has been heldthat the function discharged by theInformation Commission under the Rightto Information Act, 2005, is a judicialdecision making process and not merelyadministrative. Therefore, it is hoped thatCCI, which has otherwise done excellentwork in disposal of cases and addressingissues related to supply and demand ofservices in the market, apply certainjudicial tests to its orders.

26 M/s. Hindustan Times Limited v. Union of India & Others (1998) 2 SCC 242 and KeralaSolvent Extractions Ltd. v. A. Unnikrishnan and Anr. 1994 (1) SCALE 631.


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I. Introduction

Competition Law almost everywhere,prohibits three kind of activities, namelyanti competitive agreements, abuse ofdominance (or monopolization), and anticompetitive mergers.

Indian Competition Act, 2002 replacedThe Monopolies and Restrictive TradePractices Act, 1969.The Statement ofObjects and Reasons1 annexed to theCompetition Bill 2001, states the reasonsfor enacting the new law in the followingwords: “In the pursuit of globalization,India has responded by opening up itseconomy, removing controls, andresorting to liberalization. The MRTP acthas become obsolete in certain respects

and there is a need to shift our focus fromcurbing monopolies to promotingcompetition.”

Competition Act, 2002 states that noenterprise or association of enterprisesor person or association of persons shallenter into any agreement in respect ofproduction, supply, distribution, storage,acquisition or control of goods orprovision of services, which causes or islikely to cause an AAEC within India.2

A. Anti Competitive Agreements

Section 3(1) prohibits any agreementwith respect to production, supply,distribution, storage, acquisition, orcontrol of goods or provision of services

* 5th Year, B.A. (LLB.) Hons., Rajiv Gandhi National University of Law, Punjab, Patiala

** 4th Year, B.Sc (LLB.) Hons., National Law University, Jodhpur

1 See Competition Bill, 2001, Statement of Objects and Reasons

2 Indian Competition Act, 2002, § 3

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Cartels and Competition: An Antithetical Relationship

Vishesh Arora* and Yashita Sharma**

Cartels distort free competition in market and Competition law regulates andmaintains free competition in the market. This article will deal with the mosttalked about anti competitive agreement i.e. Cartel. Author has included all theprovisions and procedures related to it and even the position in various othercountries along with the case laws.

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as well is aware of this. So it includednot only an ‘agreement’ properly socalled but any ‘arrangement’, howeverinformal.” However, in the EU in somecases, for example, Bayer6 andVolkswagen,7 the court disagreed withEC’s expansive interpretation of“agreement” and has effectivelytoughened the standards for proof ofagreement in cases of restrictivedistribution.

Anti Competitive agreements betweenenterprises that restrict competition fallinto two categories: “horizontalagreements” which are those betweenenterprises at the same stage of supplychain and “vertical agreements” whichare between enterprises at differentstages of the supply chain. Usually, it isthe horizontal agreements that cause thegreatest concern to competitionauthorities.

The Supreme court in Telco’s Case8 andMahindra and Mahindra Ltd v. Union ofIndia9, held that a trade practice does notbecome a RTP merely because it fallswithin one or the other clauses ofSection 33(1), but that it must also satisfythe definition of “restrictive tradepractice” contained in Section 2(o).

Hence on an introspection of theCompetition Act 2002, the modusoperandi of proving that an agreementis anti competitive is as follows.

Anti Competitive agreementsbetween enterprises that

restrict competition fall intotwo categories: "horizontal

agreements" which are thosebetween enterprises at thesame stage of supply chainand "vertical agreements"

which are between enterprisesat different stages of the

supply chain

3 Indian Competition Act, 2002, § 3(1)


5 [1969] 3 All ER 1065; [1969] 1 WLR 1460.

6 Bundesverband der Arzneimittel- Importeure and Commission of the European Communitiesv. Bayer AG C-2/01 P and C-3/01P

7 European Commission v. Volkswagen Case No. C-74/04P.

8 Telco Case [1977] 47 Com Cases 520 (SC)

9 [1979] 2 SCC 529 (SC)


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In Registrar of Restrictive Trade Agreementv. W.H. Smith and Sons5, the courtobserved, “people who combine togetherto keep up prices do not shout it from thehouse tops. They keep it quiet. They maketheir own arrangements in the cellar,where no one can see. They will not putanything into writing nor even intowords. A nod or wink will do. Parliament

which causes or is likely to cause anappreciable adverse effect oncompetition within India.3 Further,Section 3(2) provides that any agreementin contravention of this provision shallbe void.4



Are you an enterprise or a person as defined

under Section 2?

YES Have you entered into an

agreement with any ‘person or’ enterprise engaged in identical or similar trade?

Does your agreement fall under any one of

the categories specifically enlisted under Section 3(4)?

YES

YES

Does your trade practice fall under any

of the presumptive provisions of Section 3(3)?

Does this agreement cause or likely to cause an appreciable adverse effect on competition

within India?

YES

YES

Anti-Competitive Agreement under Section 3

YES

Does your trade practice fall under provision to Sub-section (3) of

Section 3

NO

II. CARTEL

Cartels are agreements betweenenterprises10 (including association ofenterprises) not to compete on price,product (including goods and services)or customers. The objective of a cartel is

to raise price above competitive levels,resulting in injury to consumers and tothe economy. For the consumers,cartelization results in higher prices, poorquality and less or no choice for goodsor/and services.

10 Indian Competition Act, 2002, § 2(h) (discussing the definition of Enterprise).

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In the European Union, Mario Monti, theformer commissioner for Competition,once described cartels as “cancers on theopen market economy”11, and theSupreme Court in US has referred tocartels as “the supreme evil ofantitrust”,12

“Cartels” are included in the category ofagreements, which are presumed to haveappreciable adverse effect oncompetition. The term “Cartel” isexplicitly defined in the Act as:-

“Cartel includes an association ofproducers, sellers, distributors, tradersor service providers who, byagreement amongst themselves, limit,control or attempt to control theproduction, distribution, sale or priceof, or , trade in goods or provision ofservice”.13

A. Establishing A Cartel

Three essential factors have beenidentified to establish the existence of acartel, namely

1. Agreement by way of concertedaction suggesting conspiracy;

2. The fixing of prices

3. The intent to gain a monopoly orrestrict/eliminate competition14

Parity of prices coupled with a meetingof minds has to be established to prove acartel. The test for concerted practice isthat the parties have co-operated to avoidthe risks of competition, and this hasculminated in a situation which does notcorrespond with the normal conditionsof the market.

A cartel is a horizontal agreement to fixprices, allocate customers or territories,restrict output or rig bids. A cartel isregarded as the most pernicious form ofviolation of competition law since itunequivocally damages competition andcauses loss to the economy and toconsumers. Owing to the seriousness ofcartels, they are subject to the per se rule15

in many jurisdictions e.g., in the US16 andin the European Union.17

B. Price Manipulation Not PriceParallelism

The most crucial ingredient ofcartelisation behaviour is collusivemanipulation of prices by thecompetitors. A mere simultaneous

11 Press Release, available at www.europa.eu/rapid/pressReleaseAction.do?reference=SPEECH/00/295&format=HTML&aged=0&language=EN&Tguilanguage=en.

12 See Verizon Communication Inc. v. Law offices of Curtis v. Trinko,www.supremecourtus.gov/opinions/03pdf/02-682.pdf.

13 Indian Competition Act, 2002, § 2(c)

14 See ITC Ltd v MRTP Commission (1996) 46 Comp Cas 619.

15 BLACK’S LAW DICTIONARY 1162 (1999), (The per se rule is the judicial principle that atrade practice violates the Sherman Act simply if the practice is a restraint of trade, regardlessof whether it actually harms anyone).

16 See White Motor Co. v. United States 372 US 253 (1963); C.A.A. V. Board of Regents of theUniversity of Oklahoma 468 US 85 (1985); Federal Trade Commission V. Superior CourtTrial Lawyers Association 493 US 411 (1990); Ernited States v. Topco Associates Inc 405US (1972); Copperzueld Corporation V. Intieptlhicirce TubeCorp. 467 US 752 (1984), etc,(Price-fixing, market allocation, output limitation etc are subject to the per se rule in theUnited States.)

17 EC Treaty, Article 81 (In EU law, the prohibition in Article 81 applies in particular to, inter-alia Agreements to directly or indirectly fix purchase or selling prices or any other tradingconditions; agreements to limit or control production, markets, technical development; orinvestment and agreements to share markets or sources of supply).


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movement of prices, especially forhomogeneous products, is not by itselfsufficient to prove a cartel18

C. Hard Core Cartel

A “hard-core” cartel as defined in theOECD Recommendation is: ananticompetitive agreement,anticompetitive concerted practice, oranticompetitive arrangement bycompetitors to fix prices, make riggedbids (collusive tenders), establish outputrestrictions or quotas, or share or dividemarkets by allocating customers,suppliers, territories or lines ofcommerce.19 Adam Smith, oftenrecognized as the father of moderneconomics, wrote in 1776 in The Wealthof Nations, “People of the same tradeseldom meet together, even for merrimentand diversion, but the conversation endsin a conspiracy against the public, or insome contrivance to raise prices.”20

D. Appreciable Adverse Effect onCompetition (AAEC)

The term appreciable adverse effect hasnot been defined in the Act, butSection 19(3) of the Act provides forcertain factors to be given due regard bythe commission while determiningwhether an agreement have AAEC or not,namely:—

• Creation of barriers to new entrantsin the market;

• Driving existing competitors out ofthe market;

• Foreclosure of competition byhindering entry into the market;

• Accrual of benefits to consumers;

• Improvements in production ordistribution of goods or provisionof services;

• Promotion of technical, scientificand economic development bymeans of production or distributionof goods or provision of services.21

The first three factors, relates to negativeeffect on competition while theremaining three factors relates tobeneficial effects. Thus in assessingwhether an agreements have appreciableadverse effect on competition, both theharmful and beneficial effects shall betaken into consideration whiledetermining any case under Section 3 bythe commission.

18 See Re Alkali and Chemical Corporation of India Ltd, Calcutta and Bayer(I) Ltd, BombayRTPE 21 of 1981, Order dated 3/7/1984; Association of State Road Transport Undertakingsv. Kar Mobiles Ltd, 2002 CTJ 433 (MRTP).

19 Hard Core Cartels: Third report on the implementation of the 1998 Council Recommendation,OECD Journal of Competition Law and Policy, Vol. 8, No-1, June 2006, OECD Publishing

20 Smith Adam, An Inquiry into the Nature and Causes of the Wealth of Nations in THE WEALTHOF NATIONS 125 (2007)


22 Yarn Spinners Agreement Case [1959] LR 1 RP 118

128

In assessing whether anagreements have appreciableadverse effect on competition,

both the harmful andbeneficial effects shall be taken

into consideration whiledetermining any case underSection 3 by the commission

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1. The Balancing Test

In Yarn Spinners Agreement Case22, it washeld by the MRTP Commission thatwhile the removal of the restrictionswould be likely to have a serious andpersistent adverse effect on the generallevel of unemployment in an area, thedetriment to the public resulting from theoperation of the restrictions (inparticular the waste of national resourcesin the form of excess capacity), was suchthat the restrictions were unreasonable.In Blanket Manufacturers Agreement Case,23

the court upheld the minimumsubstance restriction (but not the otherrestrictions). In Glazed and floor tile hometraders Associations Agreement,24 thecourt held that there were no detrimentsflowing from the agreement other than acertain restriction of choice for the publicand some small surcharges on deliveries,the court held that these detriments wereconsiderably outweighed by the benefitof lower overall prices resulting fromstandardization and the restrictionswere not unreasonable within thebalancing provision.

The commission held in the case ofFICCI- Multiplex Association of India v.United Producers/ Distributors Forum25 Thefactors given in Section 19(3) of the Act,for determination of appreciable adverseeffect on competition, have beendiscussed in detail in the report of theD-G. As has been shown in the report,out of the six factors mentioned therein,the first three relating to creation of entrybarriers in the market for multiplexeshave been indisputably violated. As

regards the last three factors, there areno benefits to the consumer nor are thereimprovements in distribution of films orpromotion of scientific, technical oreconomic development in the industry.

E. Tools for Detection of Cartels

Cartels are not easy to detect since thecolluding parties go to great lengths tocover their tracks. Therefore, competitionagencies have been resorting to andseeking greater investigative powers forunearthing evidence.

1. Dawn Raids:

Upon request by the Federal CompetitionAgency, the Austrian Cartel Court issuesa search warrant (provided there isreasonable suspicion of a cartelinfringement). With a search warrant, theFederal Competition Agency can, similarto the EU Commission, enter premises,search documents and computers, etc.Notably, the inspection can start withoutthe search warrant being served on theundertaking(s) concerned; the law onlyprovides that it must be served within 24hours.26

2. Incentives and Rewards

Under US law, the Civil False Claims Actenables a private citizen to bring an ctionin the name of the US Governmentclaiming fraud by governmentcontractors and other entities that usegovernment funds, and the litigant is thenable to share in any money received. Thislegislation was used in the case of a bid-rigging cartel of wastewater treatmentprojects in Egypt funded by USAID,representing the first time that the

23 Blanket Manufacturers Agreement Case [1959] LR 1 RP 208

24 Glazed and floor tile home traders Associations Agreement Case [1963] LR 4 RP 239

25 FICCI- Multiplex Association of India vs. United Producers/ Distributors Forum Case No.01 of 2009, 25th May 2011

26 Florian Neumayr, bpv Hügel Rechtsanwälte OG, Dawn Raids: The (New) Austrian Way,available at http://kluwercompetitionlawblog.com/2012/07/17/dawn-raids-the-new-austrian-way/


129



legislation had been used to expose alarge multinational cartel.27 In SouthKorea, the Korean Fair Trade Commissionhas established a reward system for thosewho report or give information aboutcompetition law violations.28 A rewardof 66.87 million won (about $US63,700)was paid in June, 2005 to a person whoprovided decisive evidence in a weldingrod cartel case.29

3. Whistleblowing and Leniency

A crucial tool in the detection of cartelshas proved to be the policy of encouragingwhistleblowers to approach thecompetition authorities with informationabout a cartel. Subject to a series ofconditions, such as that the whistleblowerwill cooperate with the investigation ofthe authority in question and that it wasnot a ringleader of the cartel, completeimmunity will be available from anypenalty that might otherwise have beenimposed. Amnesty programs have beenimplemented in many jurisdictions, andhave proved to be highly successful. ForExample 200 the European Commissionreceived 49 applications for immunity andleniency in 25 different cases in 2004.30

III. Rules Applied in the Interpretationof Anti-Competitive Agreements

After taking all the relevant factors intoaccount in a given statute, there shouldbe still some principles on which one canarrive at a conclusion on the effect of theanti-competitive conduct or practice oncompetition. The courts all over theworld including India have come to

judge violations of anti-competitiveagreements by the following three mainapproaches namely:

A. The Rule of Reason

Black’s law dictionary defines the law ofreason in anti-trust law as a judicialdoctrine holding that trade practiceviolates the Sherman Act only if thepractice is unreasonable restraint of trade,based on economic factors31.

Hon'ble Supreme Court of India observed– it will thus be seen thus be seen that the“rule of reason” normally requires anascertainment of the facts or featurespeculiar to the particular business; itscondition before and after the restraintwas imposed; the nature of the restraintand its effect, actual or probable; thehistory of the restraint and the evilbelieved to exist, the reason for adoptingthe particular restraint and the purposeor end sought to be attained and its onlyon a consideration of these factors that itcan be decided whether a particular act,contract or agreement, imposing therestraint is unduly restrictive ofcompetition so as to constitute restraintof trade32

B. The Per Se Rule

The Per se rule and its rationale hasbeen explained by US courts in anumber of cases. Like in Northern PacificRailway Company v. United States33,Arizona v. Maricopa County MedicalSociety,34 and Continental T.V. v. GTESylvania Inc.35 the Court observed thatthere are certain agreements and

130

27 Speech by Bill Koviav, available at www.ftc.gov/speeches/other/030514biicl.htm

28 Reward System, available at www.ftc.go.kr/data/hwp/rewardsystem.doc.

29 Informant Reward, available at www.ftc.go.kr/data/hwp/informant_reward.doc.

30 Paul Crompton and Graham Reynolds, Leniency Programs in Competition Law inCOMPETITION LAW TODAY 108 (2008)

31 BLACK’S LAW DICTIONARY 1033 (1999).

32 Mahindra and Mahindra Ltd v. UOI [1979] 2 SCC 529 (SC)

33 Northern Pacific Railway Company v. United States [1958] 356 US 1

34 457 U.S. 332 (1982)

35 433 U.S. 36 (1977)

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under completion law as such. However,Evidence Act, 1872 under Section 4Clause 3 provides for conclusive proofwhich gives an artificial probative effectby law to certain facts.

C. The Rule of Presumption

The expression shall presume leaves nodiscretion with the Court to make thepresumption and it is a legislativecommand to Courts to raise apresumption and regard such fact asproved unless and until it is disproved37.

The principle of “shall presume”, usedin Section 3(3), has been explained byCourts in India in numerous cases.

Supreme Court in Sodhi Transport co v.State of Utter Pradesh38 observed that thewords “shall presume” have been usedin Indian judicial lore for over a centuryto convey that they lay down a rebuttablepresumption in respect of matters withreference to which they are used and notlaying down a rule of conclusive proof,the Court also observed that apresumption is not in itself evidence butonly makes a prima facie case for the partyin whose favour it exists. It indicates theperson on whom the burden of proof lies.But when the presumption is conclusive,it obviates the production of any otherevidence. But when it is rebuttable, it onlypoints out the party on which lies theduty of going forward on the evidenceon the fact presumed, and when thatparty has produced evidence fairly andreasonably tending to show that the realfact is not as presumed, the purpose ofpresumption is over.39

IV. Landmark Cases of CCI

A. All India Tyre Dealers Federation v. Tyremanufacturers40

• The AITDF alleged that sinceindependence, the behaviour ofdomestic tyre majors has been anti-competitive, anti-consumer andthey have been indulging invarious pricing and trade mal-practices, which had direct bearingon the revenue of the stateexchequer.

• In view of the contentions raisedby the parties and the findingsrecorded by the DG, followingissues arise for determination:


131

In India there is no concept ofper se rule under completion

law as such

practices which because of theirpernicious effects on competition andlack of any redeeming virtue areconfusedly presumed to be unreasonableand therefore illegal without anyelaborate inquiry as to the precise harmthey have caused or the business excusefor their use. In Jefforson Parish HospitalDistt. No. 2 v. Hyde36 the court observedthat the rationale for per se rule, in part,is to avoid a burdensome inquiry intothe actual market conditions in situationswhere the likelihood of anti-competitiveconduct is so great as to renderunjustified the cost of determiningwhether the particular case at barinvolves anti-competitive conduct.

In India there is no concept of per se rule

36 Jefforson Parish Hospital Distt. No. 2 v. Hyde [1984] 466 US 2

37 State of West Bengal v. E.I.T.A India Ltd. AIR 2003 SC 4126; (2003) 5 SCC 239.

38 Sodhi Transport co v. State of Utter Pradesh [1980] AIR 1099 (SC)

39 D. LAL AND R. LAL, COMMENTRY ON LAW OF EVIDENCE, 173 (2011)

40 MRTP CASE: RTPE NO. 20 OF 2008



(i) Whether the Commission hasthe jurisdiction to proceed withthe matter under the provisionsof the Competition Act, 2002?

(ii) Whether the tyre manufacturershave contravened the provisionsof section 3 of the Act?

• CCI undertook detailedinvestigation on various groundsafter the report of DG was preparedand found that there is notsufficient evidence to hold aviolation by the tyre companiesApollo, MRF, J.K. Tyre, Birla, Ceatand ATMA of the provisions ofSection 3(3) (a) and 3(3)(b) readwith Section 3(1) of the Act.

B. Builders association of India v. Cementmanufacturers association and others41

• In a first-of-its-kind order, the CCIhas imposed a penalty of over Rs6,000 crore on 11 leading cementproducers after finding them guiltyof forming cartels to control “prices,production and supply” of cementin the market.

• According to the CCI order, it foundcement manufacturers violating theprovisions of the Competition Act.The CCI issued the order after“investigation by the DirectorGeneral (CCI) upon informationfiled by the Builders’ Associationof India”.

• While imposing the penalty, thecommission considered the“parallel and coordinated

behaviour of cement companies onprice, dispatch and supplies in themarket”. The commission observedthat the act of these cementcompanies in “limiting andcontrolling supplies in the marketand determining prices through ananticompetitive agreement” wasdetrimental to the entire economy.

V. Worldwide Actions Against Cartels

A. Argentina:

In July 2005, five cement companies wereprosecuted in Argentina for a cartel thatlasted for 18years from 1981 to 1999. Thecompanies agreed on a market divisionthat was closely monitored by their tradeassociation. The respondents were finedUS $ 107 million.42

B. Australia:

On 7th April, 2004, the Federal Courtordered fines of Australian $ 14 millionagainst ABB power Transmission Pty.Ltd. and ABB Transmission andDistribution Ltd. For their involvementin power transformer and distributiontransformer cartels. The total penaltiesin this case amounted to Australian $35,045,000, a record for Australiancompetition law. Company Executivesinvolved in the cartel were fined just overAustralian $ 1,000,000.43

C. Brazil:

In 2005, CADE, the Brazilliancompetition authority, found cartels inrelation to pharmaceuticals, steel, andcrushed stone.44

132

41 CASE NO. 29/2010, DATED 20.06.2012

42 Available at www.unctad.org/en/docs/tdrbpconf6d4_en.pdf

43 Available at www.accc.gov.au/content/index.phtml/itemId/516066

44 Available at www.cade.gov.br/publicacoes/cartilhaeng.asp

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D. European Commission:

On 30th November, 2005, the EuropeanCommission imposed fines totalingEURO 290 million on 16 firms for price-fixing and sale quotas by geographicalarea in the industrial bags market.45

It is perhaps worth noting that, in thecalendar year 2001, the EuropeanCommission adopted no fewer than 10decision on hard-core cartels, in whichthe fines totaled EURO 1.836 billion.In 2002, the commission adopted ninedecisions, the fines amounting to aroundEURO 1 billion.46

E. France:

On 1 st December, 2005, France’sCompetition Council imposed fines onthree mobile telephone companies,Orange France, SFR, and BouyguesTelecom, amounting to Euro 534 millionfor operating a cartel.47

F. Germany:

On 23 rd March, 2005, in cartelproceedings against industrial insurers,the Bundeskartellamt in Germanyimposed fines totaling approximatelyEURO 130 million against ten industrialinsurers and against the directorsinvolved. The cartel law violation had anation-wide and cross-industry effect on,

in particular, the industrial propertyinsurances sector as well as transportinsurance and the buildings/monopolyinsurance sector.48

G. Japan:

On 11 th March, 2005, the Fair TradeCommission of Japan ordered sixmanufacturers to pay fines amountingto Japanese Yen 6,776.72 million (aboutthe US $60 million) for fixing the pricesof cold-rolled stainless steel sheets andsteel strips.49

H. South Korea:

On 25th May, 2005, the Fair TradeCommission of South Korea fined KTcorporation a record fine of Korean Won115.9 billion (about $US 115 million) forprice collusion in broadband internetand landline telephone services withtwo smaller rivals, Hanarotelecom andDacom corp.50

I. United Kingdom:

In the UK, the office of Fair Trading hasimposed fines totaling £ 1.026.897 dueto leniency applications granted in threeof the four cases, in the period 2004-5 onfirms involved in collusive tendering forroofing contracts. All these cases cameto light as a result of whistleblowing.51

45 Available at www.europa.eu/rapid/pressReleaseAction.do?reference=IP/05/1508&format=HTML&aged=0&language=EN&guiLanguage=en

46 Press Release, available at http://europa.eu/rapid/pressReleaseAction.do?reference=MEMO/05/454&format=HTML&aged=0&language=en&guiLanguage=en (For a list of ten largestfines imposed by the commission in cartel cases)

47 Press Release, available at www.conseil-concurrence.fr/user/standard.php?id_rub=160&id_article=502

48 Press Release, available at www.bundeskartellamt.de/wEnglisch/News/press/2005_03_23.shtml

49 Press Release ,available at www.jftc.go.jp/e-page/pressreleases/2005/march/050311.html

50 Kftcnews(2005july), available at www.ftc.go.kr/data/hwp/kftcnews(2005july).doc

51 Roofing Contracts in Western Central Scotland, available at www.oft.gov.uk/News/Press+releases/2005/126-05.htm


133



52 Press Release, available at www.usdoj.gov/atr/public.press_release/2005/212002.htm

J. United States of America:

In 2005, Samsung agreed to plead guiltyand pay a criminal fine of US $300million for its role in a price-fixingconspiracy in the dynamic randomaccess memory industry. Three

companies including Samsung, and fiveindividuals were charged and finestotaling more than US $646 million haveresulted from the Department of Justice’songoing antitrust investigation into pricefixing, in the DRAM industry.52