Competition Law Alert
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 February, 2013:
1.
Sh.
Surinder Singh Barmi v. Board for Control of Cricket in India, decided
on February 8, 2013
The case was filed by Surinder Singh Barmi (“Informant”)
against Board for Control of Cricket in India (“BCCI”) alleging the
abuse of dominance by BCCI. Informant alleged that BCCI has abused its dominant
position, while organizing and granting media rights of Indian Premier League
(“IPL”).
BCCI
submitted that it is a private
society, registered under the Tamil Nadu Societies Registration Act, 1975. Its primary objective is to control and
promote cricket in India by framing laws of cricket in India and selecting
teams to represent India in Test matches, One Day Internationals and Twenty-20
matches.
BCCI
contended that it is a
non-profit based society for promotion of cricket and the revenue generated through cricket (including IPL) is
ploughed back into promotion of cricket. BCCI further asserted that it is not
an enterprise under the provision of the Act and accordingly its conduct does not
come under the purview of section 3 and of the Act.
De
facto regulator
CCI,
while ascertaining the status of BCCI took into account the historical
background of BCCI, its institutional form and approach of Government of India
(“GOI”) towards BCCI. On the basis
of the historical background, CCI observed that BCCI got the advantage of ‘first mover’ in the organization of
cricketing events in India. CCI also noted that GOI has given implicit
recognition to BCCI as national cricket federation, by allotting lands on
subsidized rates and by providing tax exemptions to it.
BCCI
is a fulltime member of International Cricket Council (“ICC”). CCI noted
that as per section 32 of the ICC regulations,
every member of ICC has to approve cricket matches before it could be played in
its territory. CCI stated that BCCI’s right to approve is regulatory in nature,
which makes it a custodian and regulator of Indian cricket. The word ‘custodian’
as also used by ICC clearly highlights the intent of ICC and its
members to regulate/control the sport of cricket in their respective nations.
CCI
also noted that in an affidavit
filed by GOI in Supreme Court in a case against BCCI, GOI has given de facto
recognition to BCCI as national cricket federation. The affidavit also
mentioned that BCCI has to seek prior permission of GOI, before sending Indian
team to play in foreign country and before inventing a foreign country to come
to play in India. GOI further mentioned in the said case that the activities of
BCCI are of public body and not of a private club.
Based
on the above analysis, CCI held
that BCCI is a de facto regulator of cricket in India.
Enterprise
CCI
noted that the functions
performed by an entity decide whether that entity qualifies as enterprise for
the purpose of the Act or not. Thus, the mere fact that BCCI is a
‘not-for-profit’ society does not automatically take BCCI out of the definition
of the enterprise.
CCI
observed that apart from selecting team and arranging training camps, BCCI also
organizes cricket events in
India. CCI stated that activity of organizing events is economic in nature, as
it generates huge revenues to it.
CCI
also referred a foreign case, where the Grand Chambers of ECJ, a public body organizing
motor cycle event was held to be
an enterprise. Based on this judgment CCI stated that “all Sports Associations are to be regarded as an enterprise in so far as their entrepreneurial conduct is
concerned and treated at par with other business establishments”.
CCI
further relied on a judgment of Delhi High Court, where India Chess Federation
that performs similar functions as BCCI was held to be an enterprise for the
purpose of the Act.
Relevant Market
CCI
took into consideration the revenue data and viewership data of cricket and
compared it with other sources of entertainment i.e. TV and films. On the basis
of comparison, CCI stated that the relevant market for the present case is the market of organization of Private
Professional Cricket Leagues in India (like IPL).
Dominance of BCCI
CCI
observed that that BCCI is a de facto regulator of cricketing events in
India and as mentioned above has the right to decide whether a cricket match
which will take place in India or not. Therefore for organizing professional
leagues, approval of BCCI is crucial, which makes BCCI a dominant player.
Further, BCCI has power to select the team and to organize cricketing events.
Lastly on the basis of DG report, CCI observed that BCCI has refused to approve
ICL (another professional cricket league like IPL). Based on regulatory role,
monopoly status, control over players and control over entry of other leagues,
CCI held that BCCI is a dominant player in the relevant market.
Abuse
of dominance
On
the analysis of the IPL media rights agreement, CCI observed that clause of
9.1(c)(i) the Media Rights Agreement binds BCCI not to organize, sanction, and
recognize any other private professional domestic league/event, which would
compete with IPL. CCI observed that, BCCI by agreeing to such clause abused its
regulatory power to fulfill its contractual obligation. Hence, BCCI has denied
market access for potential competitors. CCI held that BCCI has violated
section 4 (2) (c) of the Act and has compromised with its objective of
promoting cricket in India.
Order
under section 27 of the Act
CCI
directed BCCI to:
· Cease and desist from any activity of
denying market access to competitor.
· Cease and desist from using its regulatory
power, in any way, while deciding on any commercial matter.
· Delete clause 9.1(c)(i) of the Media Rights
Agreement.
·
Pay
penalty at the rate 6% of the average annual revenue of past three years, which
was computed to be Rs. 52.24 crores.
2.
H.L.S. Asia Limited, New Delhi v.
Schlumberger Asia Services Limited, Gurgaon and Oil and Natural Gas Corporation
Limited, New Delhi, decided
on February 06, 2013
The
case was filed by H.L.S. Asia Limited (“Informant”)
against Schlumberger Asia Services Limited (“SASL”) and Oil and Natural Gas Corporation Limited (“ONGC”) alleging
violation of section 4 of the Act. Informant alleged that SASL has engaged in
the predatory pricing by quoting unreasonably low
rates while bidding for tender
floated by ONGC for wireline logging and perforation services.
Informant
submitted that the price quoted by SASL was 40% lower than the internal
estimates of ONGC and 50% lower than the previous running contract rates. SASL
on the other hand refuting such allegations contended that the prices of the
services were decreased due to global recession and discovery of shale gas
and development of technology to extract shale gas economically in USA.
This has
considerably reduced the dependence of USA on conventional fuel and has brought pressure
for reduction of price in normal exploration of offshore and onshore oil and
gases. SASL also contended
that all the players have reduced their price by 36%, including Informant, which has itself quoted
prices 21% below than the estimates of ONGC.
CCI
noted that there will always be a divergence in the estimates between the bid
inviting party and the bidder,
owing
to the asymmetric information available to parties. CCI
further noted that a party bidding for providing a service takes
into account cost of his equipment, the life of equipment, the maintenance
requirements of equipment, the operational cost and reasonable returns on the
capital invested. It is not
viable for a party to keep its capacity stagnant and quote price, which is
higher than its minimum average variable cost.
CCI
observed that the operating cost of service providers depends on the nature of
technology available with service providers.
The other bidders have also quoted prices lower than the earlier bids, which
shows the presence of competition in the market. Further, ONGC brought to the
notice of the CCI, a letter written by
the Informant to ONGC seeking contract on the same
rates on which SASL had given its bids, without saying that these rates were predatory
or would result in loss to the Informant. CCI observed that the Act envisages better
quality at lower prices as the essence of competition. CCI further observed that the act of the Informant suggests that the Informant lost the contract in a competitive bid
and after it lost the contract, it raised the issue under the Act, without there being any substance.
On
the basis of the above analysis,
CCI held that no prima facie case could be established against SASL.
3.
Dr
Anoop Bhagat v. Spectra Medical System India Pvt Ltd & M/s Solta
Medicals, Inc., USA decided on February 15, 2013
Dr.
Anoop Bhagat (“Informant”) filed a complaint against M/s
Spectra Medical System India Private Limited (“Spectra”) and M/s Solta Medicals, Inc., USA (“Solta US”) alleging contravention of section 3 and 4 of the Act. As
per the Informant, Spectra is a distributer of medical equipment of Solta US,
which is a leader in the medical aesthetics market. Both Spectra and Solta US
have entered into a distributorship agreement, wherein Spectra has been awarded
the sole distributorship right by Solta US in India.
The
Informant stated that he bought a machine from Spectra in the year 2008, which
stopped functioning in the year 2011. Spectra offered their alternate machine
to the Informant at the rate of Rs 5000/- per session till Informant’s machine
is repaired. The Informant accepted the offer, however alleged that the status
of the repair of the informant’s machine was not communicated to him even after
repeated attempts by the Informant. Informant further alleged that the after
sale services related to the machines including tips, repair and spares are
non-substitutable and the said machine being very expensive, its accessories
and other things, repair and spares are not provided by anybody other than
Solta US. On the basis of the above submission, Informant contended that the
said distributorship agreement between Spectra and Solta US was in the nature
of exclusive dealership agreement and was therefore in contravention of section
3(4) of the Act.
Negating
the contention of the Informant, CCI concluded that the agreement falling
within the meaning of section 3(4)(c) of the Act are not automatically presumed
to be anti-competitive. Rather, the
appreciable adverse effect on competition arising out of such agreements is
required to be assessed in the light of the factors mentioned under section 19
(3) of the Act. On the basis of the available information, CCI held Solta US
and Spectra did not contravene section 3 of the Act, as it did not create
barriers to new entrants in the market and did not foreclose competition in the
market.
As far
as violation of section 4 was concerned, CCI held that even if Solta US and
Spectra are in the dominant position in the relevant market, there was no proof
to suggest that they were abusing their dominant position. Therefore, CCI held
that there was no case of violation of section 4 of the Act. Accordingly, the
matter was closed under section 26(2) of the Act.
4.
M/s Shahi Exports Private Limited
v. Lakshmi Machine Works Limited, decided on February 15, 2013
The
case was filed by Shahi Exports Private Limited (“Shahi Exports”) against Lakshmi Machine Works Limited (“Lakshmi Machine”), alleging the abuse
of dominance. Shahi Exports is stated to be in business of manufacture and
export of readymade garments, whereas Lakshmi Machine is stated to be the
leading manufacturer of Spinning Textile Machineries (“Machineries”).
Shahi
Exports entered into an agreement with Lakshmi Machine to purchase Machineries,
where it was required to pay 10% of the consideration as advance payment. Shahi
Exports accordingly paid 10% of the total consideration as advance.
Subsequently, Lakshmi Machine unilaterally increased the price of Machineries
and asked Shahi Exports to pay the increased price. Aggrieved with the conduct
of unilateral increase of price by Lakshmi Machine, Shahi Exports approached
CCI alleging the abuse of dominance by Lakshmi Machine.
CCI
while considering the relevant market noted that the Machineries can be
purchased from domestic manufacturers as well as foreign manufacturers. Thus,
CCI determined relevant market to be the market of sale of spinning machineries for textile in India.
CCI
analyzed the data provided by the Centre for Monitoring Indian Economy Private
Limited and the information available on the website of Lakshmi Machine, for
ascertaining its position in the relevant market. CCI concluded that Lakhsmi
Machine is among the top three manufacturers of the Machineries in the world
and has 60% share of the sale of Machineries in the domestic market. Therefore,
CCI held Lakshmi Machine to be the dominant player in the market.
However,
CCI opined that dominance per se does not amount to contravention of provisions
of the Act. CCI noted that in an earlier arbitration proceeding on the same
issue, Lakshmi Machine has provided reasons for increase in price such as
increase in labour cost, raw materials etc. The contract for the purchase of
Machineries also provides for the provision for the increase in the price. CCI
further noted that Lakshmi Machine has been increasing price of Machineries on
regular intervals in past and it has increased prices for all its customers and
not just Shahi Exports. CCI observed that mere increase in price for valid
economic reasons does not amount to violation of section 4 of the Act.
Therefore, CCI held that no prima facie case could be established
against Lakshmi Machine.
5.
Mr. Karan Sehgal v. M/s Lakme
Lever Private Limited , decided
on February 19, 2013
The
case was filed by Karan Sehgal (“Informant”)
against M/s Lakme Lever Private Limited (“Lakme”)
alleging abuse of dominant position. Informant is engaged in the business of
running and operating beauty salons in New Delhi and Gurgaon. Lakme provides beauty
and wellness services and it also sells products for salon services for women.
In year
2010, Informant entered into a Franchise Agreement (“Agreement”) with Lakme to set up and develop 6 beauty salons in
Gurgaon and 1 salon in Delhi. As per the terms of the Agreement, Lakme did not
have a right to plan any other Lakme salon in the territory of Informant’s
salons, during the term of the Agreement.
In the
year 2012 Lakme started setting up, company owned and company run salons in
Gurgaon. Aggrieved with this, Informant initiated arbitration proceedings
against Lakme. During pendency of arbitration proceedings, Lakme terminated
Agreement.
CCI
took into account nature of beauty salons sector and approach of the consumer
towards it. CCI noted that beauty salons cater needs of all strata of society
i.e. from lower middle class to high class women. CCI noted that the
substitutability of beauty salons is available for consumers in Delhi and
Gurgaon, as the choice of salon depends on personal satisfaction and financial
condition of the consumers. Therefore, the relevant market in the case is market of beauty and wellness services
exclusive for women through saloon in the territory of Gurgaon as well as
Delhi.
On the
issue of dominance of Lakme in the relevant market, CCI stated that the beauty
salons can be found on almost every street/mohalla of Delhi, however some
players are well known such as VLCC, Lakme, Javed Habib and Shanaz Hussian. CCI
also noted that VLCC and Sahanaz Hussain have a large presence in Delhi and
Gurgaon, whereas Lakme has planned only 7 salons in these areas. Based on the
above observations, CCI held that Lakme is not a dominant player in the
relevant market. As Lakme is not a dominant player there could not be abuse of
dominance.
6.
Sponge
Iron Manufacturers Association v. National Mineral Development Corporation, and
others, decided
on February 19, 2013
The
case was filed by Sponge Iron Manufacturers Association (“Association”) against National Mineral Development Corporation (“NMDC”) and Essel Mining and Industries Limited,
M/s Indrani Patnaik, M/s K.J.S. Ahluwalia and M/s R.P. Sao for affecting
competition in iron ore production market by abusing its dominant position.
Association
alleged that NMDC has imposed unfair prices. NMDC increased its prices, even
when the production of ore was static, which provided a high profit margin of
85% to NMDC. It was also alleged that NMDC has discriminated in the pricing for
domestic and overseas buyers. Further, it was also alleged that NMDC has imposed
unilateral conditions in contracts with Association, including increasing
prices for e-auction without consulting Association.
CCI
observed that the relevant market for the present case shall be the market of iron ore production in India. CCI held
NMDC is not a dominant player in the relevant market as it only has 16% of the
market share.
On the
issue of unfair pricing, CCI stated that in an order Hon’ble Supreme Court has
held that NMDC has a transparent pricing policy. Besides, based on the changes
in Government policy and iron ore trade dynamics, NMDC had also been changing
its pricing policy from time-to-time. CCI further noted that since the
international market shifted to fixing the prices on quarterly basis, instead
of annual system, NMDC also started fixing prices for its domestic long-term
customers on quarterly basis with effect from April 01, 2010, along with export
contracts. CCI held that every enterprise was free to undertake such commercial
decisions to survive in the dynamic business environment and such changes prima
facie do not cause a competitive concern.
Based
on the above observations, CCI held that no prima facie case under the
provisions of the Act could be established.
7.
M/s
Santuka Associates Private Limited v
All India Organization of Chemists and Druggists and others, decided on
February 19, 2013
The case was filed by Santuka Associated Private
Limited (“Santuka”) against All India Organization of Chemists and Druggists (“AIOCD”), Organization
of Pharmaceutical Producer of India (“OPPI”), Indian Drug Manufacturers’
Association (“IDMA’) and USV Limited (“USV”) alleging violation
of section 3 of the Act.
Santuka is a clearing and forwarding agent in
medicines of various pharmaceutical companies at Cuttack. It supplies medicines of USV in entire State of Odisha
through its sister concern. It was also stated that Santuka is a member of
Cuttack District Chemists & Druggists Association (“CDCDA”).
AIOCD is an all India body registered under the
Societies Registration Act, 1860 and it has full control over the stockist of
drugs and medicines all over the country. State level druggist associations
become member of AIOCD and district level druggist associations take membership
of state level associations.
Santuka submitted that it had a dispute with AIOCD on the election of representative of
CDCDA and as a result of this dispute AIOCD has forced USV to cancel its
agreement with Santuka.
Santuka alleged that AIOCD is engaged in the following anti-competitive practices:
·
No stockist
can be appointed by a pharmaceutical company, without the approval of AIOCD.
·
AIOCD made it
mandatory for every stockist to obtain a No Objection Certificate (“NOC”) from respective District/State Chemist and
Druggist Association to become stockist for a pharmaceutical company.
·
No new product
can be launched in the market, without paying Product Information Service (“PIS
Approval’) charges to District/State Chemist and Druggist Association (as
the case may be).
·
AIOCD controls
fixed trade margins charged to both wholesalers and retailers.
·
AIOCD boycotts
such pharmaceutical companies, which do not abide by AIOCD’s, PIS or NOC,
requirement.
CCI observed that AIOCD is an association of
enterprises and its taking decisions relating to distribution and supply of
pharmaceutical products. Therefore, AIOCD’s acts can be analyzed on the
principles of section 3 of the Act.
NOC
On the issue of issuing NOC to stockist, CCI took
note of the letters written by AIOCD and replies of pharmaceutical firms. CCI found that without obtaining the
NOC from AIOCD, no stockist could be appointed. CCI held that by way of mandating
NOC, AIOCD has been limiting and controlling supplies in the market.
PIS
Approval
CCI on the basis of evidences recorded in DG’s
report found that no new product could be launched by pharmaceutical companies,
without paying PIS approval to State Chemist and Druggist Association. CCI held
that by imposing PIS approval requirement, AIOCD is denying market access to
new entrants and products and depriving consumers of the benefits of the new
drugs. CCI held that AIOCD is therefore violating section 3(3)(b) read with
section 3(1) of the Act.
Trade
Margins
CCI noted that fixed trade margins were not
determined on the competitive basis but were fixed by AIOCD. Such trade margins
were fixed by AIOCD on the basis of several Memorandums of Understanding (“MOUs”) entered by AIOCD with OPPI and IDMA. CCI observed
that by fixing the trade margins to whole-sellers and retailers, AIOCD is
directly or indirectly determining the purchase or sale price of the drugs in
the market.
Boycott
CCI held that AIOCD and its affiliates boycott such
pharmaceutical companies, which do not fulfill the requirements of PIS Approval
or NOC. CCI stated that by boycotting, AIOCD has been restricting the products
and pharmaceutical companies in market and depriving customers from the
benefits of drugs. Hence, AOICD was held be violating provisions of section
3(3) (b) read with section 3 (1) of the Act.
Violation
of section 3 by members/office bearers of AIOCD
To
determine the liability of members/office bearers of AIOCD, CCI relied on its
earlier order in the case of Varca Druggist & Chemist and Ors. v.
Chemists & Druggists Association, Goa. CCI stated that “the anti-competitive decision or practice of
the association can be attributed to the members, who were responsible for
running the affairs of the association”.
CCI
directed AIOCD to provide the information of members and office bearers since
last three years. CCI observed that once such information is received, CCI will
pass a separate order under section 27 of the Act.
Order
under section 27 of the Act
Based
on the above analysis and observations, CCI held that AIOCD has been indulging
in the anti-competitive trade practices. Accordingly, CCI gave following
directions:
· AIOCD
and its member should cease and desist from practicing anticompetitive
activities.
· AIOCD
shall file an undertaking to discontinue with the practices of NOC, PIS
Approval and trade margin fixation.
· AIOCD
shall write a letter to OPPI, IDMA and USV, informing them that AIOCD’s NOC is
not required for appointing stockist.
· AIOCD
shall by way of letter/circular inform all chemists and druggists and all its
members and associations that they are free to grant discounts to customers.
· AIOCD
shall issue circulars to inform that PIS charges are not mandatory.
Manufacturers can avail PIS facility on their sole discretion.
· AIOCD
shall pay a penalty of Rs. 47,40,613 within 60 days from the receipt of the
order.
8.
B
P Khare,
Principal Chief Engineer, South Eastern Railway v. M/s Orissa Concrete and
Allied Industries Limited and 28 other firms, decided on February 21, 2013
The case was filed by Mr. B.P. Khare, Chief
Engineer, South Eastern Railways (“SE Railways”) against M/s Orissa Concrete and Allied Industries
Limited and 28 other firms (“Defendant Firms”), alleging collusive
bidding by the Defendant Firms and hence violating section 3 of the Act.
In the year 2010, SE Railways floated tenders for procuring 45, 50,000
anti-theft elastic rail clip with circlips from RDSO approved vendors. SE
Railways stated that 32 firms applied for the tender. Out of the 32 firms,
Defendant Firms quoted identical prices i.e. in the range of Rs. 66.49 to
66.51. It was also alleged that the offered quantity to be supplied by each
Defendant Firms was below 50% of the total quantity required under the tender.
However, the collective quantity of Defendant Firms was 46,45,475, which was
quite near to the quantity demanded. Hence,
SE Railways suspecting big rigging filed the case before CCI.
CCI based its order on the following findings of the
DG report:
·
DG noted that
Defendant Firms have different cost of production as they were located at
different parts of India and have different cost of fuel/power, labour, packing
of product and transportation charges. DG stated that the Defendant Firms have
manipulated cost components for arriving at identical price.
·
The covering
letters of 17 firms have similar format, content and common omissions and
commission of language. Further, the covering letters from 4 other firms were
also similar.
·
The demand
drafts of few firms were consecutively numbered, which proves that demand
drafts were issued by same banker at the same time.
·
The hand
writings in the bid documents of 19 firms were found to be same. The prices in
number and words mentioned in the bid documents were written by the same
person.
CCI opined that in most cases, the existence of an
anti-competitive practice or agreement must be inferred from a number of
coincidences, which taken together may in the absence of another plausible
explanation, constitute evidence of the existence of an agreement. On the basis
of above findings of DG, CCI inferred from a number of coincidences such as
identical rates, division of quantity, similar handwriting, format of covering
letter, tender fee payment and past conduct that there was meeting of minds
among the Defendant Firms and they entered into an agreement to directly or
indirectly determine the prices as also to rig the bid.
CCI further observed that under section 3(3) of the
Act, if the existence of agreement is proved a presumption is drawn that the agreement has adverse effect on the competition.
However, such presumption is rebuttable and the onus to rebut lies on the
Defendant Firms. CCI noted that Defendant Firms have accepted the findings of
DG report by not disputing the findings. Further, it was noted that the replies
from Defendant Firms were incriminating, as they were in the nature of
undertakings for future, which has strengthen the presumption of adverse effect
of competition.
While concluding its order, CCI noted that as per
the tender document, applications offering quantity less 50% of the quantity
demanded were liable to be rejected if cartel is suspected. It proves that the
Defendants Firms could never have obtained the tender. CCI further noted that the facts reveal a complete
lack of awareness by the Defendant firms, which are small and micro
enterprises. The replies of many of these Defendant Firms were effectively incriminating in
nature. Therefore,
in order to meet the end of justice, CCI stated that it is not a fit case for
imposing financial penalties and only a cease and desist order was passed. However,
CCI stated that failure to comply with the order would attract a penalty.
C.
Combination
Registrations
1.
Combination Registration No.
C-2012/12/97, decided on February 26, 2013
The notice for
combination was filed by Relay B.V (“Relay”), which is an indirect
wholly-owned subsidiary of Diageo Plc. (“Diageo”) (both Relay and Diageo
are jointly referred to as the “Acquirer”), and United Spirits Limited
(“USL”). As per the proposed combination, Relay will acquire more than
50% stake in USL, in a phased manner.
Relay
B.V.is a company incorporated under the laws of Netherlands. It is an
investment holding company and currently does not have any operating business.
Diageo
is a listed company incorporated under the laws of England and Wales. It is
primarily engaged in the manufacturing and distribution of spirits, beer and wine in
around 180 countries across the world. It operates in India through its wholly
owned subsidiary Diageo India Private Limited.
USL,
a listed company incorporated under the laws of India and is engaged in the
business of manufacturing,
brewing, distilling, blending, compounding, preparing, processing potable or
marketable alcoholic beverages (including wine and spirits), bottled water and
bottled soda in India and around the world.
Analysis
CCI
noted that the parties to combination do not manufacture country liquor. USL
does not manufacture Beer and Diageo is not present in India Brandy segment.
Therefore, the relevant market for the purpose of the present combination was
stated to be the market for alcoholic beverages (except Beer, country
liquor and Brandy) in India.
CCI
observed that the alcoholic beverage market is a highly segmented market. In
one of the sub-segment of whiskey (in price range of Rs. 800/- to Rs. 1600/-),
products of USL and Diageo are close competitor; however there are many other
players in the market in that segment. Apart from this small overlapping price
segment, the products of USL and Diageo are mostly present in different price spectrums in the
branded spirits market with negligible overlap and
the overlapping sub-segment constitutes a very small part of the overall whisky
segment.
CCI
further noted that, Indian states have the power to regulate manufacture,
production, distribution and sale of alcoholic beverages. It is the market within the overall
regulatory framework of the states that determines the introduction of new
brands in market and its prices, and is not dependent solely on the whims of
existing players.
CCI
also opined that as a result of the proposed combination, new premium brands
will get introduced in the market and consumers will have wide range of choice. The synergy
of the firms will not detract competition.
Based
on the above analysis, CCI held that this combination will not have appreciable
adverse effect on the competition in India. Therefore, CCI approved the combination,
subject to the condition that Diageo will acquire 53.4 % equity shares of USL
within a period of 5 years.
2.
Combination Registration No.
C-2013/01/105, decided on February 04, 2013
The notice for
combination was filed by Mahindra and Mahindra Limited (“M&M”) in
its capacity as acquirer. The proposed
combination was pursuant to a share purchase agreement between M&M,
International Truck and Engine Mauritius Holding Limited (“IMH”),
Navistar International Corporation (“Navistar”) and International Truck
and Engine Corporation Cayman Islands Holding Company.
Mahindra
Navistar Automobiles Limited (“MNAL”)
is a public limited company incorporated under the provisions of Companies Act,
1956. M&M and IMH respectively holds 51% and 49% of the share capital of
MNAL. MNAL is stated to be engaged in the manufacturing of the designing,
developing and sale of light, medium and heavy commercial vehicles (weighing
more than 3.5 tonnes). As per the proposed combination M&M wishes to acquire remaining 49%
of MANL from IMH.
As per the information
published by the Society of Indian Automobile Manufactures (“SIAM”), the market share of M&M and MNAL in
the market of commercial vehicle in the year 2011-12 was 15.69% and 1.71%,
respectively. Based on this information, CCI stated that the increase in the
market share of M&M post the proposed transaction would not be significant.
CCI further observed that under the sub-categorization of commercial vehicles
on the basis of weight, M&M and MNAL operates in different segments of
commercial vehicles market (i.e. MNAL in more
than 3.5 tonnes and M&M in less than 3.5 tonnes).
Based on the above
analysis, CCI held that the proposed combination does not appreciable adverse effect on the
competition in India. Therefore, the proposed combination was approved.
3.
Combination Registration No. C-2013/01/108, decided on February 19, 2013
The
notice for combination was filed by Exide Industries Limited (“Exide’). As per the notice, Exide holds 50% shares of
ING Vyas Life Insurance Company Limited (“ING
Life’). As per the proposed combination, Exide will acquire remaining 50%
shares of ING life.
Exide
is a listed, public limited company, incorporated under the provisions of the
erstwhile Indian Companies Act, 1913. Exide is primarily engaged in the
business of manufacturing and selling a range of batteries. ING Life is a
public company incorporated under the provisions of Companies Act, 1956 and is
a registered insurance company. ING Life is stated to be a joint venture of
Exide and ING Insurance International B.V, Netherlands (“ING International”). Exide and ING International respectively holds
50% and 26% shares in ING Life and rest 24% shares are held by certain
enterprises.
CCI
noted that apart from holding shares in ING Life, Exide and ING International
do not have any presence in the insurance sector. CCI further noted that the
share of ING Life in the life insurance sector is relatively insignificant.
Based on these factors, CCI held that the proposed combination will not have
adverse effect on the competition in India and approved the proposed
combination.
4.
Combination Registration No.
C-2013/01/107, decided on February 19, 2013
The
notice for combination was given by UTV Global Broadcasting Limited (“UGBL”).
As per the proposed combination India UGBL will subscribe to 26% equity shares
of IC Media Distribution Services Private Limited (“IC”). IC currently is a wholly owned subsidiary of IndiaCast Media
Distribution Private Limited (“IndiaCast”).
UGBL
is a company incorporated under the provisions of the Companies Act, 1956. It
engaged in the business of aggregating and sub-licensing of pay television
channels for Genex Entertainment Limited and UTV Entertainment Television
Limited. UGBL is a subsidiary of the Walt Disney Company, which is part of
Disney Group.
IndiaCast
is a company incorporated under the provisions of the Companies Act, 1956. It
aggregates the television channels of TV18 Broadcast Limited, Viacom18 Media
Private Limited and other broadcasters. IndiaCast is subsidiary of TV18
Broadcast Limited. TV18 is a subsidiary of Network18 Media and Investment
Limited (“Network18”).
As
per the proposed combination, Disney Group and IndiaCast Group (i.e.
Network18 and its affiliates) will provide exclusive license to IC to
distribute their TV channels and will cease the separate distribution of TV
channels.
CCI
noted that Telecom Regulatory Authority of India had issued various regulations
and orders, which binds every broadcaster to follow its pricing guidelines and
to provide signals to on a non-discriminatory basis to every DTH
operator/Multi-System Operator. CCI further stated that post-combination there
will be 24 aggregators in the market that are enough to provide desired
competition. Post combination, the market share of UGBL will be insignificant
to have any adverse effect on competition. Therefore, CCI approved the proposed
combination.
D.
News
1.
CCI to
pass order against auto majors
CCI is likely to pass an order against 17
leading automobile manufacturers for allegedly using their dominant position.
In a complaint filed in year 2011 before CCI, it was alleged that automobile
manufacturers are abusing their dominant position by selling the spare parts
through their authorised dealers only and not making it available in open
market. This act of the car manufacturers leads in the increase in the cost of
servicing and maintenance. It is expected that a huge penalty would be imposed
on manufacturers, if order comes against them.
2.
Hyundai gets High Court stay against CCI probe
Hyundai Motor
India Limited (“Hyundai India”),
the wholly owned subsidiary of South Korean carmaker Hyundai, has obtained a
stay order from the Madras High
Court against the CCI’s legal proceedings on alleged
anti-competitive practice of selling spare parts at higher prices. Hyundai
India stated that the complaint was made against only 3 car manufacturers i.e.
Honda, Volkswagen and Fiat. It argued that CCI had suo moto expanded the
scope of investigation.
3.
CCI probes
cartelisation in asbestos cement sheets market
In
a suo moto action, CCI is probing the alleged cartelization in the
market of asbestos cement sheets. The
action was taken in pursuance with the reference from Serious Fraud
Investigation Office. CCI stated that highly concentrated market, homogeneity
of product and active association are the main factors for initiating probe.
CCI said that there are 20 big firms in the market, out of which 6 firms hold
87% of the total market share. The conduct of Asbestos Cement Products
Manufacturers Association is also being analyzed.
4.
Clear
imperfections in onion market, cartels exist:
CCI study
A
study conducted by a Bangalore-based Institute of Social and Economic Change
reveals the existence of cartelization and hoarding in the onion market in
India. The report stated that the onion market is being dictated by traders.
Lack of trading expertise, market knowledge and risk bearing capacity has
prevented farmers to make presence in this market. The report states: “results of seasonal indices, correlations,
daily, monthly arrivals their prices etc. indicated existence of
anti-competitive elements in the onion markets”.
As
a corrective measure, report has suggested that involvement of Agriculture
Produce Market Committee official would mitigate the collusion between traders.
5.
Vishwaroopam: CCI to probe Kamal Haasan’s complaint
On
a complaint from Kamal Hasan’s production house, CCI has started probe against
the alleged anticompetitive conduct of Tamil Nadu Theatre Owners Association.
It was informed that out of 1134 theatres, 698 are members of the said
association. Kamal Hasan has decided to release his film Vishwaroopam on satellite TV before the scheduled date of release
in theatres.
Members
of the theatre owners association have refused to exhibit the film as it got
released on satellite TV. CCI observed that a prima facie case could be
established against the theatre owners association and accordingly ordered for
DG investigation.
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DISCLAIMER
This competition law alert has been prepared by
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summary and should not be treated as a substitute for considered legal advice.
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