Sarthak Advocates & Solicitors

Competition Law Alert

August, 2012

ORDERS By COMPETITION COMMISSION OF INDIA

A.            Anti-Competitive Agreements

Synopsis of the legal provisions

Section 3 of the Competition Act, 2002 (“Act”) prohibits an enterprise or association of enterprises or persons to enter into agreements in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause appreciable adverse effect on competition in India.

Following kinds of agreements between enterprises, persons or association of persons or enterprises, or practices or decisions taken by association of persons or enterprises, including cartels, engaged in similar or identical trade of goods or provision of services is presumed to have appreciable adverse effect on competition:

a)      Agreements or decisions that directly or indirectly determine purchase or sale price.

b)      Agreements that limit or control production, supply, market, technical development, investment or provision of services.

c)      Agreements to share market or source of production or provision of services by way of allocation of geographical area of market or type of goods or services, or number of customers in the market or any other similar way.

d)      Agreements that, directly or indirectly, result in bid-rigging or collusive bidding.

However, agreements entered into by way of joint ventures are excluded from above restriction if such agreements increase the efficiency in production, supply, distribution, acquisition, or control of goods or provision of services.

Under the Act, ‘cartel includes an association of producers, sellers, distributors, traders, or service providers who, by agreement amongst themselves, limit control or attempt to control the production, distribution, sale or price of, or trade in goods, or provision of services’.

Further, under section 19(3) of the Act, following factors are to be considered by Competition Commission of India (“CCI”) in determining whether an agreement has appreciable adverse effect on competition:

a)      Creation of barriers to new entrants in the market.

b)      Driving existing competitors out of the market.

c)      Foreclosure of competition by hindering entry into the market.

d)      Accrual of benefits to consumers.

e)      Improvement in production or distribution of goods or provision of services.

f)       Promotion of technical, scientific and economic development by means of production or distribution of goods or provision of services.

B.            Abuse of Dominant Position

Synopsis of legal provisions

Section 4 of the Act prohibits any enterprise or group to abuse its dominant position. ‘Dominant position’ has been defined to mean ‘a position of strength enjoyed by an enterprise, in the relevant market, in India, which enables it to –

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

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

In light of the above provisions, we produce the summary of CCI’s orders passed in the month of August, 2012:

1.        Iqbal Singh Gumber and Mrs. Hardeep Kaur v. Purearth Infrastruture Limited and others decided on August 7, 2012

Background facts and allegations

·         The case was initiated with the information filed by Mr. Iqbal Singh Gumber and Mrs. Hardeep Kaur (“Informants”) to CCI under section 19 of the Act against M/s Purearth Infrastructure Private Limited (“Respondent Developer”) and Others for violation of the provisions of the Act.

·         The Informants informed that they booked a show room in a proposed mall/commercial complex developed by the Respondent Developer at Central Square Bara Hindu Rao, Delhi. The booking was done in April, 2006 by Informants by paying Rs.16 lakhs to the Respondent Developer. The initial agreement between Informants and Respondent Developer was signed on June 20, 2006 (“Agreement”). The Informants paid the entire amount by July 2, 2008. 

·         During the construction phase, Informants were informed that they will be given possession by end of 2008. However, later in the year 2011, Informants were informed that they are required to further pay Rs. 900 per square feet towards conversion charges of the land use, as Respondent Developer was constructing flatted factories and not shopping plaza/mall. Informants alleged that it was never told to them, either orally or under the Agreement that Respondent Developer was constructing flatted factories. Informants alleged that Respondent Developer, from the beginning represented that that it was constructing a shopping plaza and had also invited people to book only commercial space in the shopping plaza. Further, under the Agreement, it was nowhere reflected that the land was permitted to be used only for flatted factories.

·         Apart from the above allegations, Informants contended that the Agreement was completely one sided. Under the Agreement, Respondent Developer had reserved for itself 18% interest in case of delay in payment by Informants. However, there was no similar clause for delay in completion of construction and handing over of possession by the Respondent Developer. Further, the Agreement empowered Respondent Developer to cancel the booking in case of delays in payment by allottees. However, no reciprocal consequences were mentioned for not handing over possession on time by Respondent Developer.

·         On the basis of the above averments, Informants submitted that the acts of the Respondent Developer constituted abuse of dominant position and amounted to violation of section 4 of the Act.

Rulings

·         CCI held that the relevant market in the instant case was the market of services for development of commercial space for shopping malls in Delhi.

·         While considering the dominant position of Respondent Developer in the relevant market, CCI referred to the information available in public domain regarding prominent builders/real estate developers. On the basis of the available information, CCI noted that Respondent Developer’s presence was not substantial in comparison with other big player of the relevant market like Ansal, Omaxe, TDI, Vatika etc.  

·         In addition to the above, CCI referred to the research report of Knight Frank and Asipac, conducted on retail market of malls in India. According to these reports, the total space for malls in Delhi was approximately 11.89 million square feet. Respondent Developer was developing approximately 2, 00,000 square feet, spread across four plazas. This is approximately 3.71% of the available space in 2010, 2.43% of the available space in 2011 and 1.68% of total projected space by the end of year 2012.

·         On the basis of the above information, CCI held that the Respondent Developer was not a dominant player in the relevant market. Further, as the Respondent Developer was not a dominant player in the relevant market, there was no possibility of abuse of the dominant position.

2.        Sajjan Khaitan v. Eastern India Motion Picture Association and others decided on August 9, 2012.

Background facts and allegations

·         The information under the present case was filed by Sajjan Khaitan, proprietor of Heart Video (“Informant”) against the President, Eastern India Motion Picture Association (“Eastern India Association”), General Secretary, Co-ordination Committee of Artist and Technicians of West Bengal Film and Television Industry (“Co-ordination Committee”), Mr. Kunal Ghosh of M/s Channel 10 (“Channel 10”) and Mr. Sanjoy Das of CTVN PLUS Channel (“CTVN Plus”) (collectively referred to as “Opposite Parties”) for contravention of section 3 and 4 of the Act.

·         The Informant is engaged in the business of distributing video cinematographic TV serials and telecasting regional serials in the states of eastern India. Eastern India Association is a regional association of the film producers, distributors and exhibitors, having its office at Kolkata and operating mainly in the state of West Bengal. Coordination Committee is the joint platform of ‘Federation of Cine Technicians and Workers of Eastern India’ and ‘West Bengal Motion Pictures Artistes Forum’ to coordinate amongst various stake holders including producers’ associations and affiliated bodies.

·         M/s B.R. TV, Mumbai, producer of the TV serial ‘Mahabharata’ entrusted sole and exclusive rights to M/s Magnum TV Serials to dub the Hindi version of the said serial in Bengali language and to exploit its satellite, pay TV, DTH, IPTV, Video, Cable TV and internet rights till September 2016. The Informant was appointed as sub-assignor by M/s Magnum TV Serials.

·         Informant entered into an agreement on time slot revenue sharing basis with Channel 10 and CTVN Plus for telecast of the dubbed version of serial ‘Mahabharata’. Subsequently, Informant, Channel 10 and CTVN Plus started receiving various letters from Eastern India Association and Co-ordination Committee to, either stop the telecast of the serial or face non-cooperation. A demonstration and one day strike was also organized by the Co-ordination Committee in Kolkata.

·         Both the channels were asked to stop telecast as a convention on restricting telecast of Bengali dubbed National programs was subsisting in Kolkata since the year 1997. In one of their letter to Channel 10 and CTVN Plus, the reason stated by Coordination Committee for such restriction was maintaining prestige and international acclamation of Bengali film and television Industry, thereby creating job for artists, workers and allied people associated with this industry.

·         Pursuant to the above developments, Channel 10 wrote a letter to the Informant, whereby Informant was informed that due to agitations, demonstrations and strikes conducted by Coordination Committee, it was forced to stop the telecast of the serial ‘Mahabharata’.

·         Informant alleged that Opposite Parties abused their dominant position by forcing channels to discontinue the telecast. Further, the actions taken by the Opposite Parties imposed restrictions on the free and unrestricted distribution and exhibition of dubbed non-Bengali TV serials and hence were anti-competitive in nature.

Rulings  

No Abuse of Dominant Position

·         CCI referred to its earlier order in case no. 25 of 2010 (“Order of 2010”) involving Eastern India Association and other association, where it was held that “Eastern India Picture Association or other film associations as named in those cases do not qualify to be “enterprise” since they are not engaged in any activity enumerated in section 2 (h) of the Act. The Commission also held in that case that once an association is not an ‘enterprise’ in terms of section 2 (h) of the Act, its conduct also cannot be examined under section 4 of the Act since it is only the conduct of an ‘enterprise’ or a group of enterprise as defined in section 5 of the Act, which is subject matter of examination as is apparent from wordings of section 4 (1) which states that no enterprise or group shall abuse its dominant position.” Therefore, CCI held that in the instant matter, Eastern India Association and Co-ordination Committee were out of the purview of section 4 of the Act, as they are not ‘enterprise’.

Anti-Competitive Agreement

·         With respect to anti-competitive agreements, CCI held that Eastern India Association and Co-ordination Committee were subject to inquiry under section 3(3) of the Act, as they comprise of associations whose members are engaged in production, distribution and exhibition of films. CCI noted that they are taking decisions relating to production, distributions and exhibitions on behalf of the members, who are engaged in the similar or identical business of production, distribution and exhibition of films. Any decision taken by them reflects collective intent of the members. CCI accordingly held that giving call of boycott of a competing member amounted to depriving the Informant, the due opportunity of fair and free competition in the market.

·         CCI referred to various letters sent to both the channels by Co-ordination Committee and Eastern India Association, whereby Co-ordination Committee and Eastern India Association asked the channels to stop telecasting the said dubbed version of the serial. CCI observed that Co-ordination Committee and Eastern India Association threatened the channels with non-cooperation, agitation, demonstration and strike. Accordingly, CCI opined that Co-ordination Committee and Eastern India Association had exerted undue pressure on Channel 10 and CTVN Plus by threatening to impose restrictions on them.

·         Section 19(3) of the Act provides certain parameters to evaluate the anti-competitiveness of an agreement, namely, creating barrier for new entrants and driving out existing competitors, foreclosure of competition and accrual of consumer benefits etc. When CCI examined the actions of Eastern India Association and Co-ordination on the touch stone of section 19(3), it found that their conduct have created barriers to the entry of new content in form of dubbed TV serial and caused harm to the consumers, as they were deprived from watching the dubbed serial.

·         CCI also referred to rule 12 of registration rules of Eastern India Association, which prohibited registration of dubbed films, unless the original is produced in any of the languages specified in bye-laws. CCI observed that given to the said rule, there is a restriction on the registration and exhibition of the films of other languages, if dubbed in Bengali, in the territories under the control of Eastern India Association. Therefore, CCI held that the said rule 12 goes against the spirit of competition.

·         In the background of the forgoing observations, CCI held that the act of Eastern India Association and Co-ordination Committee of imposing restrictions on the free and unrestricted distribution and exhibition of non-Bengali TV serials, dubbed in Bengali language was anticompetitive in nature. This conduct of limiting and controlling the supply of serials dubbed in Bengali language was held to be in violation of section 3(3) (b) of the Act.

Relief Granted

·         CCI directed Eastern India Association and Co-ordination Committee to ‘cease and desist’ from the following practices and take suitable measures to modify or remove them from their articles of association, rules and regulations (as applicable):

§  The existing rules of Eastern India Association on dubbing must be dispensed with and there should be no bar or prohibition on exhibition of dubbed films or serials produced in any language in the areas under its control.

§  The Coordination Committee should not impose any restrictions in any manner on distribution and exhibition of the films or TV serials in the areas under its control.

3.        Arshiya Rail Infrastructure Limited v. Ministry of Railways and Container Corporation of India Limited.

and

KRIBHCO Infrastructure Limited v. Ministry of Railways decided on August 14, 2012

Background facts and allegation

·         Through the order under this case, CCI has disposed three separate informations, with similar and related issues, filed by Arshiya Rail Infrastructure Limited (“ARIL”) and KRIBHCO Infrastructure Limited (“KRIL”) (collectively referred to as “Informant Operators”) against the Ministry of Railways (MoR) and Container Corporation of India (CONCOR) for the violation of section 3 and 4 of the Act.

·         In February 2005, MoR and Government of India allowed private operators to run container trains on the Indian Railways network and decided to open rail container freight segment to private parties under Public Private Partnership (“PPP”) model.

·         On September 26, 2006 MoR notified the Indian Railways (Permission for operators to move container trains on Indian Railways) Rules, 2006 (“Rules”) granting, inter alia, permission to carry all goods and access to rail network, where Indian Railways has the right to operate, on payment of uniform haulage and other charges.

·         Pursuant to the PPP policy and Rules, a Model Concession Agreement (“Concession Agreement”) was drafted for execution between MoR and Private Container Train Operators (“PCTOs”), which guaranteed, among other things; (a) non-discriminatory access to the rail network including rail terminals, (b) non-discriminatory access to PCTOs trains on networks not owned by MoR (i.e. private sidings), (c) uniform haulage charges to be levied on non-discriminatory basis and not to be revised more than twice a year; and (d) level playing field for all concessionaires. Subsequently, licenses were issued to eligible parties to operate container trains on Indian Railways network. AIRL and KRIL were issued such category I licenses.

·         AIRL is a provider of an integrated supply chain and logistics infrastructure solutions. KRIL is a wholly owned subsidiary of Krishna Bharti Co-operative Limited (“KRIBHCO”). KRIBHCO transferred its category I license of running container train to KRIL in 2007. CONCOR is a public sector company set up with an intention of developing multi-modal transport and logistic support for domestic and international containerized cargo.

·         Informant Operators alleged that by letter dated October 11, 2006 MoR brought ores, minerals, coal and coke under category of restricted commodities for rail freight transportation. As a result, market access was denied to PCTOs to the extent of 60-65% of the freight traffic on rail. Later, Indian Railways without any justification, increased haulage and other charges payable by PCTOs.

·         Informant Operators alleged that Indian Railways had unsettled the level playing field between CONCOR and other PCTOs by giving land to CONCOR at favorable terms and conditions. It was also alleged that PCTOs were denied access to the terminals and sidings owned and exclusively used by CONCOR, which lead to the increase in the cost of operations of PCTOs.

Rulings

Jurisdictional Issues

Arbitration Agreement and Sovereign function

·         MoR questioned the jurisdiction of CCI on the basis that it is carrying out a sovereign function and therefore not liable to be examined under the Act, by virtue of section 2(h) of the Act. CCI while rejecting this contention held that circulars issued by MoR prescribing rates were in the nature of commercial activity and therefore cannot be called sovereign function.

·         MoR further contended that there was a subsisting arbitration agreement, which should be the first recourse to any dispute between MoR and the Informant Operators. CCI disposed the objections on the basis of its earlier order dated May 3, 2011, where it observed that the arbitration agreement only covered the contractual obligations assumed by the parties and does not address the competition issues brought before CCI.  

MoR and CONCOR as one ‘group’

·         Negating the submission of the Informant Operators that MoR and CONCOR should be treated as one ‘group’ CCI held:

§  Government of India has no directional control on the day to day working of CONCOR, as it is managed by its board of directors.

§  Directors are being appointed by government only on the basis of recommendation of Public Enterprise Selection Board, which is an independent body.

§  Government can issue directives to board of directors only on the approval of concerned minister in charge, which happens under exceptional circumstances.

§  Out of the 10 directors of CONCOR, only two are appointed by MoR, which is less than 50 % of the total strength of CONCOR’s board of directors.

·         CCI further opined that for two enterprises can be considered as forming group, only if they operate in the same relevant market.

Acts committed prior to the notification of Section 3and 4 of the Act

·         While referring to case of Kingfisher Airlines Limited v. CCI WP No 1785/2009, CCI stated that the Act does not impose penalty on the acts done prior to the date of notification of section 3 and 4 of the Act. However, if the contravention has continued even after the enforcement of the said provisions, as has happened in the present matter, CCI can take cognizance of the violation.

Competition Issues

Relevant Market   

·         CCI noted that relevant product market as defined in the Act mandates substitutability, as reflected by consumer preferences. Therefore in the present case, CCI looked for substitution between wagons and containers for movement of goods over rail network. CCI further analyzed alternative modes of transportation, like water, road and air to assess substitutability between them.

·         CCI noted that in the parlance of logistics, container-freight refers specifically to high value non-bulk goods. Containers allow easy and flexible handling of non-bulk goods from point of production to point of consumption and, are therefore, preferred by transporters and consignors. Also, chances of damage and pilferage are considerably reduced when freight is transported in containers. Furthermore, where transshipment of cargo is required, container is the only option. Wagons do not meet these conditions, as they cannot be taken off rails. Further, CCI opined that the mere fact that railway freight was not open for entire rail freight but only for running containers trains clearly implies that MoR distinguishes container and wagon freight as two separate segments within the overall ambit of rail transportation. Therefore, CCI held that classifying wagon and container in the same category will be inappropriate.

·         While deciding on the substitutability between rail and road transport, CCI noted that PCTOs operate not only container trains, but also own fleet of trucks of various capacities to offer road freight services, thus complementing the rail container services. The two major modes of container transport in India, i.e. road and rail offer competitive constraint to each other.

·         As road and rail transport are substitutable for container freight operations, CCI held that the relevant market in the present case is the transportation of containers within the boundaries of India.

Dominance in the relevant market

·         CCI referred to the RITES report of 2005 and Comptroller and Auditor General of India’s (CAG) report of 2010-11, while deciding the dominance of the Indian Railways in the relevant market. RITES report stated that the major ports in India handled a combined volume of over 4 million TEUs, of which less than 1 million was carried over the rail network. The report also mentioned that freight forwarders operating on roads enjoy dominance under the export market. As per the CAG’s report, the share of railways in the total transport sector has come down from 53% in 1972-1977 to 37% in 1997-2002. Therefore, CCI held that container freight is largely carried on roads, and railways are not dominant in container freight.

Abuse of dominance

·         CCI held that as the dominant position of Indian Railways and CONCOR could not be established under the relevant market, they cannot be said to have abused their position.

Prohibition from movement of coal, coke, ores and minerals by PCTOs

·         CCI noted the importance of the difference in the types of goods usually carried on in containers on one hand and wagons on other. CCI observed that bulk freight is normally transported in wagons, while non-bulk high value goods are transported in containers. CCI accordingly held that as restricted commodities (like coal, coke ore and minerals) form part of bulk goods, which is transported in wagons, the plea that Informant Operators’ market access has been denied does not stand.

Increase in hauling charges

·         Informant Operators contended that by increasing haulage charges on containers, MoR had put PCTOs in a disadvantageous position vis-à-vis wagon transportation. Negating the contention, CCI held that the comparison of rates between wagons and containers on rail is inappropriate. CCI observed that as people prefer road for container transport over rail, comparison of rates must be between haulage charges of containers on rail network vis-à-vis roads. CCI further observed that setting excess charges was a tariff matter, which is outside the purview of CCI.

Unfair trade conditions in violation of sections 4(2)(a)(i) and 4(2)(c) of the Act

·         Informant Operators alleged that Indian Railways had given unfair advantage to CONCOR by giving it land at favorable terms and conditions. Negating this contention, CCI observed that CONCOR was established in 1988 as a public sector enterprise with the objective of facilitating primarily export import container movement and providing other logistics like one-window custom clearing, Inland Container Depot (ICD) and Container Freight Station (CFS) etc. In order to let it function properly, India Railways provided it with surplus land on terms, which were now being termed as unsettling the level playing field. CCI noted that in case of scarce natural resource, any company that is a pioneer will enjoy substantial cost benefits with passage of time.

·         On the contention of denying access to PCTOs in CONCORs terminals, CCI opined that there were no technical, legal or even economic reasons as to why other PCTOs should not be creating their own terminals or similar facilities. Even under Indian Railways (Permission for operators to move container trains on Indian Railways) Rules, 2006, model concession agreement and Gazette Notification No. 458 dated September 26, 2006, PCTOs were obligated to build their own terminals at their cost.    

Imposition of supplementary obligation and contravention of section 3(4) of the Act

·         Informant Operators alleged that by Concession Agreement, PCTOs were obligated to get maintenance of private railway rakes only from MoR on payment basis. Informant Operators alleged that this amounts to a supplementary obligation, which restricts competition in the derivative aftermarket. CCI observed that even if maintenance is a different market, the need for maintenance of rakes only by railways, arises from safety and security considerations, which are entirely the responsibility of the Indian Railways. Accordingly, such grounds of safety and security were held not to be competition issues.

·         It was also alleged that MoR has resorted to tie-in agreement by forcing Informant Operators to get maintenance done by Indian Railways only, which is prohibited as per section 3(4)(a) of the Act. On this issue CCI stated that tie-in agreement can be a strategic action on part of a business entity that has dominant position in respect of one product and wishes to promote another product in which it is lacking. By resorting to tie-in arrangement, it would be able to promote one product on the basis of reputation of the other, which CCI held did not happen in the instant case. CCI further noted that there is no other entity at present, which is engaged in the business of providing maintenance services. Therefore, CCI held that no provision of section 3(4) of the Act has been contravened. 

4.        Saurabh Bhargava v. Secretary, Ministry of Agriculture and Cooperation and others decided on August 27, 2012.

Background facts and allegations

·         This information was filed by Mr. Saurabh Bhargava (“Informant”) against Ministry of Agriculture and Cooperation (“MoA”), Agriculture Commissioner, Central Insecticide Board (“CIB”) & Registration Committee (“RC”) (collectively referred to as “Respondent Administrators”) for violation of section 3 and 4 of the Act. Informant was aggrieved with the rules and regulations framed by the Respondent Administrators in respect of the import of insecticides in India. 

·         Import of insecticides is regulated by the Insecticides Act, 1968 (“Insecticides Act”) and the regulations framed under it by CIB. The Insecticides Act provides for the registration of the insecticides by RC, after scrutinizing their formulae and verifying claims of the importers or manufacturers with regards to the efficacy and safety to human beings and animals.

·         Informant alleged that the conditions prescribed for the grant of registration certificate were burdensome and constrained the entry of new entrants. Therefore, the insecticide importers and manufacturers were encouraged to charge exorbitant prices.

·         Informant submitted that Insecticides Act provides for two types of registrations i.e. first entrants’ registration under section 9(3) of the Insecticides Act and second or onwards entrants’ registration under section 9(4) of the Insecticides Act. Second or onwards entrants get their insecticides registered with reduced field trial parameters, as on-going testing had already been done on such insecticides.

·         It was alleged that terms and conditions under section 9(3), i.e. first entrant registration are difficult to achieve because of financial impracticability and high entry cost. Further, as per the new rules and regulations introduced in 2010, the entry of the second or onwards entrants was suspended.

·         Informant alleged that the new rules under the Act restrict the entry of new entrants in the field of insecticides. Accordingly, the Informant prayed to declare the rules and regulations of 2010 to be anti-competitive and void.

Rulings

·         CCI noted that the Informant had not submitted any material to prove that insecticide importers and manufacturers were charging exorbitant prices. CCI observed that neither was there evidence of any anti-competitive agreement between existing insecticide importers and manufacturers nor were there any dominant player amongst them, who were abusing their dominant position in the relevant market.

·         CCI held that Respondent Administrators are neither engaged in any activity, which qualifies them to be enterprise(s) under section 2(h) of the Act nor could they be construed as being participants in the relevant market. CCI further observed that the Respondent Administrator are primarily responsible for administration of the Insecticides Act and rules framed thereunder, including the related technical and procedural responsibilities and, as such, their activities were not covered under the Act.

·         For the forgoing reason, CCI held that the impugned conditions prescribed for grant of registration certificate cannot be termed as either anti-competitive agreement under section 3 of the Act, or abuse of dominant position in terms of the provisions of section 4 of the Act. Therefore, no prima facie case of violation of section 3 and 4 of the Act was made out against the Respondent Administrators.  

C.            Combination Registration

1.             Combination Registration No C-2012/05/57 decided on August 1, 2012 

Background facts

·         On May 21, 2012 CCI received a notice under section 6(2) of the Act for the proposed combination of Pfizer Inc. (“Pfizer”) by Nestle S.A. (“Nestle”) under a Stock and Asset Purchase Agreement (“Agreement”) between Pfizer and Nestle (collectively referred to as “Parties”). As per the Agreement, Nestle would acquire global nutrition business of Pfizer, which includes infant nutrition and nutritional supplement products, including maternal supplements and adult nutrition products.  

·         Nestle is a public limited company organized under the laws of Switzerland and is engaged in the production, marketing and sale of a large variety of food and beverage products, including healthcare and infant nutrition products. Nestle India Limited, a public limited company and subsidiary of Nestle is engaged in production, marketing, distribution and sale of milk products, confectionaries and nutritional supplements including infant maternal and adult nutritional products.

·         Pfizer is a company incorporated under the laws of the State of Delaware, USA and is a global research based pharmaceutical company. Pfizer Nutrition is a business division of Pfizer, which is engaged in the nutrition business outside India. Pfizer has its presence in India through its many subsidiaries, but as per the information filed, none of them were engaged in nutrition related business.   

Order

·         As per the information provided, CCI observed that since Pfizer is not engaged in the nutrition business in India and that there is no horizontal overlap or vertical relationship between both the Parties, the proposed combination shall not cause adverse effect on competition in India.

·         Negating the factor of removal of potential competitor in the market by the proposed acquisition, CCI noted that as per the information provided by Nestle, no proposal to enter into nutrition business in India was approved by Pfizer. Further, there was no pending application filed by Pfizer with any authority in India, in relation to nutrition business.

·         Therefore, CCI approved the combination under section 31(1) of the Act. 

2.             Combination Registration no. C-2012/07/65, decided on August 1, 2012

Background facts

·         On July 5, 2012 CCI received a notice under sub-section (2) of section 6 of the Act notifying the proposed amalgamation of Dhampur Sugar Mills Limited (“DSML”) and J K Sugar Limited (“JKSL”) (collectively referred to as “Parties”), pursuant to the provisions of sections 391 to 394 of the Companies Act, 1956 (“Companies Act”).

·         JKSL is a public listed company, engaged in the business of manufacture of sugar and generation of electric power. It generates electricity from bagasse for its captive use and excess electricity is sold to Uttar Prasesh State Electricity Grid. JKSL sells the other by-product, molasses in open market.

·         DSML is a public listed company, engaged in the business of manufacture of sugar, ethanol and chemicals, as well as generation of electricity from bagasse for captive use. The excess electricity produced is sold to Uttar Pradesh State Electricity Grid. The other by-product, molasses is used by the distillery division of DSML to manufacture ethanol and other industrial chemicals. The excess molasses is sold in the open market.    

Analysis

Impact on sugar market

·         CCI noted the fact that sugar industry in India is heavily regulated by government. By such regulations, government controls the price of sugarcane and therefore indirectly controls the cost of production of sugar. CCI further noted that as per the available data on the whole sale prices of sugar, the price difference between the whole sale prices of sugar prevailing in different zones are very insignificant. As the transportation of sugar from one zone to another zone involve substantial costs along with the regulatory controls exercised by the central and the state government, CCI observed that it may not be commercially viable to sell the sugar produced in a particular zone to a distant market in another zone.

Impact on molasses market

·         Even in the case of molasses, CCI noted that Uttar Pradesh Sheera Niyantran Adhiniyam, 1964 regulates marketing activities and sale price of molasses in Uttar Pradesh. DSML consumes most of the molasses as raw material for further processing in their distillery. CCI noted that even molasses is sold in the nearby local markets, as there is substantial cost for transportation.

Impact on electricity market

·         CCI noted that under the Power Purchase Agreement and Uttar Pradesh Energy Policy, 2009, Parties produce electricity for captive use and are required to sell the sell the excess electricity produced to the Uttar Pradesh Power Corporation Limited (“UPPCL”) at the prices set by the state government.

Order

·         On the basis of the publicly available information as well the information provided in the notice, CCI noted that the combined market share of the Parties in sugar market at both national and Uttar Pradesh’s level is very small. Further CCI noted that, since there are many major players in the sugar industry, operating at the national as well as at the state level, and since the production and supply of sugar are regulated by the government, the proposed combination would not give rise to any competitive concern in the market for sugar.

·         As regards molasses, CCI observed that the combined market share of Parties in Uttar Pradesh is insignificant. Further, the supply of molasses in the state is regulated by Uttar Pradesh Government. CCI accordingly observed that no competitive concerns would arise by the proposed combination in the market for molasses.

·         CCI noted that as per the publicly available information, the total generation capacity of all sugar mills in Uttar Pradesh is approximately around 1000 megawatts, which is less than 10 % of the total electricity generation capacity in Uttar Pradesh. Further, as stated in the notice, the combined electricity generation capacity of the parties to the combination is less than 1% of the total electricity generation capacity in Uttar Pradesh. Further, the electricity generation market is wider than the market of the concerned state, as the grids are interconnected and electricity transmission cost is low. Moreover, approximately one fourth of the electric power produced by the Parties is captively consumed and only the remaining is sold to the Uttar Pradesh State Electricity Grid. CCI accordingly observed that the proposed combination will not give arise to any competitive concern in the market for electricity.

·         Therefore, CCI approved the combination under section 31(1) of the Act.

3.             Combination Registration No C-2012/07/70 decided on August 8, 2012

Background facts

·         On July 27, 2012, CCI received a notice under section 6(2) of the Act for the proposed amalgamation of India Securities Limited (“ISL”) with Essar Capital Limited (“ECL”).

·         As per the information filed, ECL is involved in investment activities as well as financial advisory and consultation services. ISL is also engaged in the business of investment as well as financial advisory and consultation services. ECL holds 95.5% equity shares in ISL. 

Order

·         CCI observed that as both ESL and ISL were engaged in similar business and ultimate control over the activities of ISL before and after the proposed combination will rest with ECL, The proposed combination was not likely to have an adverse effect on competition in India.

·         Therefore, CCI approved the combination under section 31(1) of the Act.

4.             Combination Registration No. C-2012/07/67 dated August 8, 2012

Background facts

·         On July 6, 2012, CCI received a notice under section 6(2) of the Act for the proposed combination of Sanlam Emerging Markets (Mauritius) Limited (“Sanlam”), Shriram Financial Venture Chennai Private Limited (“Shriram Chennai”) and Shriram Capital Limited (“SCL”). The proposed combination was in pursuance of Share Subscription Agreement and Shareholders Agreement entered into by Sanlam Mauritius, Shriram Chennai and Shriram Ownership Trust (“SOT”).

·         Sanlam Mauritius, an investment holding company, is a limited liability company incorporated under the laws of Mauritius and is an indirect wholly owned subsidiary of Sanlam Limited, which is parent company of Sanlam Group. Sanlam Group provides financial solutions including individual, group and short-term insurance, personal financial services, saving and linked products, investment and capital market activities.

·         Shriram Chennai, an investment holding company, is a private company incorporated under the provisions of Companies Act. As per the notice, it currently holds only 0.0001% equity share capital of SCL. Shriram Chennai is a part of Shriram Group, which is engaged in the business of lending/financing activities and providing life and general insurance services.

·         SCL is an unlisted public company incorporated under the provisions of the Companies Act. SOT holds 85% of the issued and paid up capital of SCL. SCL presently holds 74% of issued and paid-up equity share capital in both Shriram General Insurance Company Limited (“SGIC”) and Shriram Life Insurance Company Limited (“SLIC”). The remaining 26% in SGIC and SLIC is held by Sanlam Limited and Sanlam Life Insurance Limited, a wholly owned subsidiary of Sanlam Limited, respectively.

·         As per the notice, the proposed combination will take place in following three steps :

§  SCL shall acquire 26% of the issued and paid-up equity share capital of SGIC and SLIC, which is currently being held by Sanlam Limited and Sanlam Life Insurance Company, respectively.

§  Shriram Chennai shall subscribe to 51.10% of the issued and paid up share capital of SCL.    

§  Sanlam Mauritius will acquire 49.05% of the issued and paid-up share capital of Shriram Chennai.

·         On completion of the transactions, Sanlam Mauritius will hold 49.05% of share capital of Shriram Chennai, and as a result will indirectly hold 26% of issued and paid-up share capital in SCL.

Order

·         CCI noted that Sanlam Group is not actively involved in business activities in India, as it only had 26% of the share capital in SLIC and SGIC that are engaged in providing insurance services in India. Even after the proposed combination, it will only have 26% stake in SCL. CCI further observed that there would be no significant change in Sanlam Group’s presence in insurance sector in India after the proposed combination. CCI also noted that Sanlam Group and Shriram Group are not competitors in the market of other financial services in India, as Sanlam mostly operates outside India.

·         CCI accordingly held that the proposed combination is not likely to give an adverse effect on competition. Therefore, the proposed combination was approved under section 31(1) of the Act.

5.             Combination Registration No: C-2012/06/63 decided on August 09, 2012

Background facts

·         On June 18, 2012, CCI received a notice under section 6(2) of the Act for the acquisition of equity shares of Multi Screen Media Private Limited (“MSM India”) by SPE Mauritius Holdings Limited (“SPE Holdings”) and SPE Mauritius Investment Limited (“SPE Investment”) from Grandway Global Holdings Limited (“Grandway”) and Atlas Equifin Private Limited (“Atlas”). The acquisition was pursuant to two separate share purchase agreement entered into by SPE Singapore Inc. (“SPE Singapore”) with Grandway and Atlas. SPE Investment and SPE Holdings (collectively referred to as “Acquirers”) are the wholly owned subsidiaries of SPE Singapore and currently hold 32.39% in MSM India. As per the notice, Acquirers will acquire 32.39% of the share capital of MSM India from SPE Investment and SPE Holdings.

·         MSM is engaged in the production of television programs in Indian languages primarily for export, sale and distribution of audio-visual content in India, including on cable and satellite owned and telecast by MSM Satellite (Singapore) Pte. Limited (“MSM Singapore”) and Sony Pictures Enterntainment Inc. (“SPE”). It also has subsidiaries as MSM Singapore, MSM Discovery Private Limited (“MSM Discovery”), MSM Asia Limited and MSM North America, Inc. that are engaged in distributing, marketing and administering advertising of television channels.

·         SPE Holdings and SPE Investments are companies incorporated under the laws of Mauritius, and are wholly owned subsidiaries of SPE Singapore. SPE Singapore is an indirect wholly-owned subsidiary of SPE, which in turn, is a wholly owned subsidiary of Sony Corporation (“Sony”). Sony is a Japan based listed company engaged in the business of manufacture and sale of electronic products, production and distribution of movies and television programs, manufacture and sale of mobile phones etc. The Acquirers currently hold 62% of the equity shares in MSM India.

·         Parties submitted that as Acquirers already hold more than 50% shares in MSM India and the transfer will not result in transfer from joint control to sole control, the proposed combination is exempted under Schedule I of the Competition Commission of India (Procedure as regards to the transactions of business relating to combinations) Regulations, 2011 (“Combination Regulations”). As per the information, Acquires had the ability to nominate three directors, whereas Grandways and Atlas could only nominate two directors. Further, as per the shareholders agreement executed between the shareholders of MSM India, there were certain minority protection rights given to Atlas and Grandways, which should not be treated as joint control.

Order

·         Negating the contention of the Parties, that the proposed combination will not result in transfer from joint control to sole control, CCI observed that the collective shareholding of the Grandway and Atlas to the extent of 32.39 per cent is sufficient to block/veto any action that requires special resolution under the provisions of Companies Act. Further, the approval required under the shareholder agreement includes certain strategic commercial decisions of MSM India and the same cannot be considered as mere minority investor protection rights. As per CCI, these minority rights amounted to joint ownership right. CCI accordingly held that such transfer could have an appreciable adverse effect on the competition in India and therefore are not exempted under Combination Regulations.

·         On merits, CCI observed that Sony Group operates three TV channels through SPE, which are viewed by Indian consumers. However, the business of SPE in India is conducted through MSM India and its subsidiaries. Moreover, the Indian broadcasting sector comprises of large number of channels, broadcasters and aggregators that provide enough choice to consumers.

·         Therefore, CCI held that proposed combination would not have an appreciable adverse effect on the competition in India and the same was approved under section 31(1) of the Act.

6.             Combination Registration No: C-2012/07/69 decided on August 14, 2012

Background facts

·         On July 16, 2012, CCI received a notice under section 6(2) of the Act filed by Adiya Birla Nuvo Limited (“ABNL”), Peter England Fashions and Retail Limited (“PEFRL”), Indigold Trade and Service Limited (“ITSL”), Pantaloon Retail (India) Limited (“PRIL”) and Future Value Fashion Retail Limited (“FVFRL”). The notice was pursuant to a Memorandum of Understanding (“MOU”) and Subscription and Investor Rights Agreement (“Subscription Agreement”) executed by and among ABNL, Future Corporate Resources Limited (“FCRL”), PIL Industries Limited (“PIL”), PRIL, ITSL, PEFRL and FVFRL (together referred as “Parties”).

·         As per the combination ABNL would acquire, through its wholly owned subsidiary PEFRL, the Pantaloons Format Business of PRIL by way of demerger and subsequently merger of FVFRL into PEFRL pursuant to section 391-394 of the Companies Act.

·         However, the notice also stated that the said scheme relating to proposal of demerger and merger was yet not approved by the board of directors of the Parties. In one of the replies to CCI, Parties reiterated that they were in discussions and were in the process of finalizing the details of the transaction.     

Order

·         CCI observed that signing of the MOU and the Subscription Agreement were only steps towards negotiation between the Parties, in relation to the finalization of the scheme like,  valuation, exact scope of the assets to be acquired, share entitlement ratio and approval of the same by board of directors of the Parties etc. Since, MOU will terminate if the scheme does not get approval by the board, CCI held that the MOU was not a binding document. Further, the subscription amount under the Subscription Agreement was also kept in an escrow account by the Parties, release of which was contingent on the approval of the scheme by the board of directors.  

·         It was also observed by CCI that the copies of board approvals filed with the notice were not pertaining to the proposed scheme of merger and demerger, which was sanctioned by court under section 391-394 of the Companies Act. Lastly, CCI noted that in terms of Regulation 31 of the Combination Regulations, the notice referred to in section 6(2) of the Act is required to be filed only after final proposals are approved by the board of directors. Therefore, CCI observed that as the notice was filed by Parties after executing only MOU, while the approval of board of directors was pending, it was filed before triggering the provisions of section 6(2) of the Act.

7.             Combination Registration No: C-2012/06/62, decided on August 14, 2012

Background facts

·         On June 18, 2012, CCI received notice under section 6(2) of the Act for the proposed combination of Living Media India Limited (“LMI”) and IGH Holdings Private Limited (“IGH”) pursuance of the share subscription and purchase agreement and shareholders agreement. As per the information filed, the proposed combination relates to the acquisition of 24.9% of the equity share capital of LMI by IGH, which pursuant to certain valuation adjustments may go upto 49%.

·         LMI is the holding company of the India Today Group (“ITG”), which is engaged in the business of print media, newspaper, magazine, directories, publication and distribution of books and print material, broadcasting on television and radio, publication and distribution of music, event management digital business and education consultancy.

·         IGH is an investment company, registered with Reserve Bank of India as a non-deposit taking non-banking finance company. IGH’s principle business is to take and hold investments for Aditya Birla Group (“ABG”), which is engaged in a variety of businesses like non-ferrous metal, cement, textile, chemicals, agribusiness, carbon black, mining, ferrous chemical, wind power, insulators, telecommunication, financial services, retail, information technology and information technology enabled services trading solutions.

·         After such transfer the subsidiaries and associate companies which would form part of the proposed combination include TV Today Network Limited, ITAS Media Private Limited, Today Retail Network Private Limited, Today Merchandise Private Limited, Harper Collins Publishers India Limited, Mail Today Newspaper Private Limited, India Today Online Private Limited, Universal Learn Today Private Limited, Integrated Data Bases India Limited and Automotive Exchange Private Limited.

·         As per the information filed, both ABG and ITG are also engaged in retail business in India.

Order

·         CCI observed that even where both ITG and ABG are engaged in retail business, ITG is engaged in both physical store retail and online non-store retail, whereas ABG is engaged only in physical store retail. CCI further noted that the format of operation of store of both ABG and ITG are different from each other. ITG deals in only media related products like newspaper, magazine and CDs whereas, ABG sells food, grocery items, fruits and vegetables, general merchandise, books, magazine, music CDs, electronics, computers, mobile phones, apparel, footwear sports and FMCG products with national, international and house brands.

·         CCI noted that it came to its notice that ABG and ITG are in vertical relationship with respect to certain products and services. CCI, while holding that such relationships were not significant in nature and did not raise any adverse competition concern, rendered following observations: 

§  ABG gives advertisements in various media like television, internet and radio, which are owned by ITG. However, as per the records the revenue generated to ITG by ABG advertisements is negligible to the revenue of generated in the entire advertisement market.

§  ABG is engaged in the cellular phone business and ITG provides for the Mobile Value Added Services to be used by telecom and internet service providers. But here also the revenue generated forms a very small part of the total market of Mobile Value Added Services.

§  ABG is engaged in the business of textile manufacturing and ITG through its online platform is engaged in sale of products including apparels. CCI however noted that at present ITG’s online stores do not sell the products manufactured by ABG. Further, the revenue of ITG in the online non-store retail segment is again negligible.

·         Therefore, CCI confirmed the proposed combination under section 31(1) of the Act.

8.             Combination Registration No. C-2012/07/66 decided on August 28, 2012

Background facts

·         Wireless Broadband Business Services Private Limited (“WBSPL”), Wireless Broadband Business Services (Delhi) Private Limited (“WBBS Delhi”), Wireless Broadband Business Services (Haryana) Private Limited (“WBBS Haryana”) and Wireless Broadband Business Services (Kerela) Private Limited (“WBBS Kerela”) filed a notice on July 6, 2012 under Section 6 (2) of the Act to CCI, notifying the amalgamation of WBBS Delhi, WBBS Haryana and WBBS Kerela into WBSPL pursuant to resolution passed under Section 391 to 394 of the Companies Act. As per the notice, WBSPL will be the surviving entity after the completion of the proposed amalgamation.

·         WBSPL under the ISP license agreement with the Department of Telecommunications (DoT) was authorized to provide internet services as Internet Service Provider and has Broadband Wireless Access (BWA) spectrum to provide telecommunications services in Mumbai, Delhi, Kerala and Haryan.

·         It was stated under the notice that 51% and 49% equity shares in each of the Parties are held by Qualcomm Asia Pacific Pte Limited, which is wholly owned subsidiary of Qualcomm Incorporated and Bharti Airtel Limited, respectively. Qualcomm Incorporated was one of the successful bidder in the BWA auction conducted by DoT in 2010. 

Order

·         Referring to the submission made under the notice, CCI noted that Qualcomm Asia Pacific Pte Limited currently controls all the Parties. Further, the shareholding pattern of WBSPL, the surving entity, will continue to be the same even after the consummation of the proposed combination.

·         Considering the above facts and records, CCI held that the proposed combination will not have an appreciable adverse effect on the competition. Therefore, the proposed combination was approved under section 31(1) of the Act.

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