CCI uses advocacy powers to launch a Knowledge Partnership Initiative

Greetings Readers!

I am back in India and am currently enjoying an amazing month of rest at home. There is of course no rest for Indian Competition Law as the CCI has recently announced the launch of a Knowledge Partnership Initiative (KPI) in partnership with 10 law schools across the country. The KPI is aimed at encouraging further research in the field of competition law, spreading awareness about competition law to encourage more students to take up the subject and competency building in this field for teachers. (news article can be accessed here).  A welcome move from the CCI and a much needed impetus to the study of competition law in India I must say. The CCI has also announced that this initiative will be extended to Management and Economics schools in the second phase.

Silence and Car makers

Dear Readers

Apologies for the recent lull in activity on this blog. This can be partly attributed to Anshuman and I being extremely busy with work and partly to the relative inactivity within the CCI in the past month. As a new competition body, the CCI's work load is bound to ebb and flow and I must say there has been more ebb than flow in the last month. After the record breaking fine in the cement cartel case, there really haven't been any 'blog-worthy' happenings in Indian competition law.

Recently, however a news report caught my eye due to a personal interest in the case. The CCI is investigating into an alleged abuse of dominance by car manufacturers who supply spare parts only to authorized dealers who then sell them on at higher rates. (news article can be accessed here) My personal interest (nothing too serious of course) is that I was an intern at the law firm advising one of the car manufacturers when the complaint was first filed and had dug up quite a bit of research on the matter. Without giving away too much (lest I be sued for breach of confidentiality) all I can say is that the case is bound to throw up some interesting questions about the markets for spare parts and their relationship with the primary market (i.e cars), and whether a firm can be dominant in the market for its own spare parts. These questions have of course already arisen and much discussed in the EU and the US. It will be interesting to see how the CCI will handle these questions.

Ashok Chawla to head UNCTAD's group of experts on competition law and policy

Mr.Ashok Chawla, Chairperson of the Competition Commission of India (CCI) has been unanimously elected to chair the 12th session of the Intergovernmental Group of Experts (IGE) on Competition Law and Policy. The IGE is an initiative started by the United Nations Conference on Trade and Development (UNCTAD) to serve as a forum for consensus building and cooperation among developing countries' competition authorities. Mr.Chawla's name was proposed by the Chairperson of the Competition Commission of Pakistan. (full details are available in the press release)

Was the 'Cement' decision a 'concrete' one?

Following a lull in activity in June the CCI recently dropped the bombshell with its Cement cartel decision. A fine of Rs.6307 crore (approximately 1.1 billion USD) has sent the media in a frenzy with reports  glorifying or demonizing the CCI in turn. Apart from the sheer size of the penalty, the decision has plenty of other interesting and important points regarding the CCI's approach to cartels and the interpretation of S.3:

1. Notion of 'Agreement': Competition authorities around the world have had to grapple with two interrelated yet separate issues with respect to the notion of an 'agreement'. Firstly, how broadly/narrowly do we construe the term 'agreement'? and secondly, What should  the evidentiary standard be to prove an 'agreement'? 

To my knowledge the CCI has not ventured to give a proper definition of the term 'agreement' so far and perhaps it is not their intention to do so either. It must be noted that the law can ultimately only be laid down by the courts (the Supreme Court or the COMPAT) as and when appeals are decided. However the CCI has indicated in a lot of decisions including the present one that the word 'agreement' is to be construed widely and can include informal arrangements as long as there is a 'meeting of minds'. This certainly seems to be the correct approach to take and is in line with international practice. It remains to be seen how the CCI would construe the term 'agreement' in cases of pure conscious parallelism (also called 'tacit collusion' or  'oligopolistic interdependence' or simply the 'oligopoly problem') and pure information exchanges.

As far as the second question is concerned the CCI goes on to clearly state that circumstantial evidence would be sufficient to establish an 'agreement' in the absence of direct evidence. It lays down various factors from which it inferred an 'agreement' among the cement manufacturers which include price parallelism, production and dispatch parallelism, meetings of the Cement Manufacturers' Association (CMA) where information about retail prices was exchanged  and increases immediately after that, reduced output and capacity utilization and supra normal profits earned by the companies. Thus the CCI has clearly accepted that mere price parallelism although indicative cannot be sufficient proof of an 'agreement'. Other corroborating factors are needed which the CCI found in this case. In a sense the CCI seems to be following the 'plus' factors approach followed in the US where something more than mere parallel behavior is needed to establish an 'agreement'. What is still not clear is to what standard or how much circumstantial evidence is needed to prove an 'agreement' under S.3. Should it be mere 'balance of probability' or 'tending to exclude independent action'? In the EU a presumption is raised that parallel behavior is indicative of concerted action if there seems to be no other plausible explanation for it. Again only the courts can answer this question.

These are of course difficult questions with no ready answers. One way of dealing with this problem would be to actually just go after direct evidence through effective use of the leniency program and investigatory powers of the CCI. This would reduce reliance on circumstantial evidence and improve the enforcement system as a whole. This is something the CCI must focus on more. The CCI has recently announced that it would seek to encourage whistleblowers by making details about ongoing investigations public. (news report can be accessed here)

2. Adverse Effect on Competition: A horizontal price fixing/output limitation agreement is 'presumed' to have an appreciable adverse effect on competition (AAEC) under S.3(3). There has been some debate over whether such a presumption means that these agreements are per se illegal (as they are in the US) i.e no pro-competitive justifications can be offered for these agreements whatsoever. As common sense would tell you a 'presumption' merely means that the burden of proving that the agreement does not have an AAEC shifts to the parties under investigation. Further it is really important that parties have the opportunity to justify their conduct in terms of consumer benefits especially in complex and tricky cases.  Fortunately the CCI has clarified this in the Cement decision by stating that it was open to the parties to put forward any 'efficiency defense' under S.19 (3) of the Competition Act. No efficiency defense was found in this case according to the CCI. Another positive thing the CCI seems to be doing in recent cases is that despite the 'presumption' of AAEC raised under S 3(3) for horizontal agreements, it goes ahead and does a full economic analysis of the case according to the factors mentioned in S.19(3) thus making sure that its decisions are well backed by economic evidence.

3. Level of Penalty: As mentioned above there has been quite a big debate about how the sheer size of the fine imposed in this case. First of all it must be noted that the figure of Rs.6307 crore is the total fine imposed on 11 cement companies. Thus comparisons to the EU Intel fine of 1.3 billion $ which was on a single company are a little misplaced. Further in order to ensure greater transparency in the fining process the CCI is in talks with other competition regulators on coming up with on guidelines on penalties (news report can be accessed here). S.27 of the Competition Act gives full discretion to the CCI to impose any penalty that it deems fit subject to the statutory limits mentioned therein. However generally competition authorities around the world take into account the gravity and duration of the infringement while deciding a penalty and presumably the CCI penalty guidelines will also be guided by these two general factors.

All in all whether the cement decision was a 'concrete' one will depend on how widely the term 'agreement' is construed and to what extent circumstantial evidence is accepted as proof of such 'agreement' by the courts.

Combinations Update

The Competition Commission of India (CCI) has approved the purchase of 26% of Max New York Life Insurance Company Limited by Mitsui Sumitomo Insurance Company Limited.


The order is available here.

Silarpuri Colonizers v. Emaar MGF

In what prima facie looks like a consumer complaint, the Competition Commission of India (CCI) in an order dated May 16, 2012, has held there has been no abuse of dominance by Emaar MGF.


The order can be accessed here.


A detailed analysis of the orders will come up in the round-up shortly.

GKB Hi Tech Lenses v. Transitions Optical

In an order dated May 16, 2012, the Competition Commission of India (CCI) has held that there has been no contravention of Sections 3 and 4 of the Competition Act, 2002 by  Transitions Optical India Private Limited (Transitions)


GKB Hi Tech Lenses Private Limited (GKB) filed information with the CCI stating that Transitions was a dominant player in the plastic photochromic lenses and was abusing its dominant position by indulging in a number of anti-competitive practices.


The main order is available here. The dissenting orders of Mr. R. Prasad and Mr. M.L. Tayal are available here and here respectively.


A detailed analysis of the orders will come up in the round-up shortly.

Combinations Update

In a first, the Competition Commission of India (CCI) has stated in an order dated November 28, 2011 that a notice is not a valid notice in terms of Section 6 of the Competition Act, 2002.


Fomento (Karnataka) Mining Company Private Limited's notice for acquisition of the Redi Business of Tata Metaliks was held not be a valid notice as the thresholds mentioned under Section 5 of the Competition Act, 2002 were not met.


The order can be accessed here.

Combinations Update

The Competition Commission of India (CCI) has approved the purchase of Zero Coupon Optionally Convertible Debentures of RB Mediasoft Private Limited, RRB Mediasoft Private Limited, RB Media Holdings Private Limited, Adventure Marketing Private Limited, Watermark Infratech Private Limited and Colorful Media Private Limited by the Independent Media Trust.


The order is available here.

National Competition Policy in final stages of implementation

Greetings folks! I apologise for my absence from the blog in the past few weeks. I've been too busy juggling exams, searching for a house for the summer and resisting the temptations of the wonderful english summer!

I have only been able to have a 'quick look' at the draft  National Competition Policy (NCP) which the government has announced is in the final stages of adoption (click here for the press release). So I strongly suggest that readers also have a look at the actual draft NCP which can be accessed here.

First a few of the salient features of the draft NCP:

1) Purpose :According to the foreword the NCP is aimed at "laying down an overarching policy framework for infusing competition principles in various statutes, regulations and policies of the Government and promoting a competitive market structure in the economy..." The NCP is meant to be an overall policy aimed at infusing 'competition culture' into state regulations.

2) Relationship with competition law: As the draft succinctly puts it competition law is a sub-set of competition policy. Thus while competition policy includes all government measures aimed at promoting competitive markets, competition law is specifically aimed at checking anticompetitive behavior of enterprises.

3) Need for competition policy: The draft goes on to identify the link between a healthy competition culture and accelerated economic development particularly because of the links between competition policy and other policies like fiscal policy, trade policy etc.

4) Premise: The draft NCP notes in particular that very often state policies and laws are themselves responsible for distorting the market. The NCP aims to correct this situation and further aims to bring about transparency and accountability in governance (perhaps a much needed thing given the recent record of the government ;) ). Interestingly the NCP stresses here that the it is not meant about to bring about complete deregulation and laissez faire markets and recognizes the need for a balance between competition and other policy considerations like prudential supervision, social service commitments etc 

5) Principles: The NCP then goes on identify the main principles of the NCP the most important ones being effective enforcement of the Competition Act, institutional separation between policy making and operations, fair behavior by public utilities (including access to essential facilities), competition friendly public policies and coordination between the CCI and sectoral regulators

6) Implementation: The policy is to be implemented through the following methods

a) Defined deviation: Any deviation from the competition principles must only be to meet other desirable national objectives and must be clearly spelt out.

b) Competition Impact Assessment (CIA): Existing government policies are to be subject to review from a competition perspective and any proposed policies will have to go through a competition impact assessment. Sectoral regulation must also take into account competition principles and must be diluted as and when the sector becomes more competitive. In-house cells will be set up within ministries/departments at the Central, State and local level to conduct the CIA. The in-house cells will be assisted in this task by the National Competition Policy Council (NCPC).

c)NCPC: The NCPC will also be the main body overseeing the implementation of the NCP and will encourage adoption of the competition principles and undertake sectoral reviews and studies.

d) Coordination between CCI and sectoral regulators: This has been an issue of much controversy in the past and the NCP seeks to address it by envisaging a framework which seeks to identify and address areas of concern while ensuring that all bodies stick to their area of expertise. The exact details of the framework are still unknown. A forum for exchange of ideas between the CCI and the sectoral regulators through mutual cooperation is also proposed.

Now for my thoughts. Lets start with the positives first

1) The NCP, if implemented well has the potential to completely transform the economic regulatory regime of the country and could possibly be the most important reforms since the 1991 liberalization process. The NCP has great potential to bring in competition principles into regulation of the economy thereby bringing in transparency and accountability in governance.

2) The NCP seeks to address in a coherent way of number of competition issues that arise with respect to state authorities which many other advanced competition jurisdictions still have trouble dealing with.

That being said there are some areas of concern which may need further clarification

1) Competition Policy and Competition law: While it may be simple enough to state in theory that while competition law applies to 'enterprises' the competition policy is aimed at state measures, distinguishing in practice between the two is bound to be a daunting task. Expect cases and controversies galore on the meaning of 'enterprise' under the Act. E.g The Railways Ministry is certainly a government department but the Indian Railways has been held to be an 'enterprise' subject to competition law. Can the Indian Railways claim that a certain measure has already been subject to CIA and hence not amenable to competition law?

2)NCPC and CCI: The draft NCP seeks to establish the NCPC consisting of representatives from the CCI , Planning Commission, Finance Ministry and other ministries. A lot of the tasks assigned to the NCPC like advocacy and undertaking sectoral reviews are at present also carried out by the CCI. More clarity will be needed on the exact demarcation of tasks between these two bodies so as to avoid duplication.

3) 'Essential Facilities': The draft NCP places special emphasis on the need for dominant infrastructure owners to grant access to open up competition. It must be kept in mind that the essential facilities doctrine is highly controversial in other jurisdictions as granting such access may actually be bad for competition in the long term as it discourages other firms to invest in building new infrastructure. While it is acceptable to mandate access to facilities  owned by state entities (which have traditionally held a monopoly through state protection) to open up the sector to  competition caution must be adopted in applying the principle to purely private enterprises. Although most of the examples mentioned by the policy do relate to state owned infrastructure like railways, electricity etc the NCP just mentions 'dominant firms' which could include private firms as well. Another point to be noted here is that there is a growing recognition in other jurisdictions that sectoral regulators are more suited to the task of mandating access to essential facilities than competition authorities because of the difficulties of monitoring and setting access prices. The draft NCP certainly seems to imply that it is the regulators who will take care of such access but a clarification would be desirable.

Phew that was a long post! Hope you guys find it useful though!