Competition Law News Letter
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 December, 2012:
1. Shri
Kaushal K. Rana v. DLF Commercial Complexes Limited, New
Delhi, decided on December 13, 2012.
Shri
Kaushal K. Rana (“Informant”) filed
the information to CCI against DLF Commercial Complexes Limited (“DLF”) alleging abuse of dominant
position by DLF. As per the information, in March 2008, the Informant booked an
office space in an upcoming project of DLF, at West Delhi. The parties
subsequently signed the Commercial office Space Buyer’s Agreement (“Agreement”). Under the said agreement,
DLF represented that the possession of the office space will be given within 36
months from the date of the Agreement. However, as per the Informant, the construction
work did not commence till November 2008. Informant further alleged that the
Agreement had unfair and unilateral terms and conditions.
CCI classified
the relevant market in the present case to be the market for ‘development of commercial/office space in
the region of Delhi’. On the basis of the information available in public
domain, CCI noted that, DLF is not the sole estate developer in the Delhi
region. There are many other developers offering similar commercial/office
space in Delhi region, presence of which indicates that the Informant was not
dependent upon the DLF for provisioning of an office space.
CCI
accordingly on the basis of the market share held that DLF cannot be held to be
a dominant player in the relevant market. Further, as dominance of DLF could
not be established, CCI did not consider the issue of abuse of dominance and
dismissed the case.
Sarthak
Note: As far as the allegations of unfair trade
practices and deficiency in services were concerned; CCI reiterated its views
delivered in the case of Subhash Yadav v. Force Motor Limited &
Others, decided on October 5, 2012. In the said case, CCI emphasized on the
existence of the Consumer Protection Act, 1986, which has been enacted for
protection of the consumer interests in case of deficient goods and services. Without
making specific reference to the Consumer Protection Act, 1986, CCI in the
present case also opined that the allegations relating to unfair trade
practices, deficiency in services etc. may be pleaded at other appropriate
forums but not before CCI, as the same were not within the ambit and
jurisdiction of the CCI.
2. M/s Mineral Enterprises Limited
v. Ministry of Railways, Union of India
and the Railway Board, decided on December 13, 2012
The
case was filed by M/s Mineral Enterprises Limited (“Informant”) against Ministry of Railways (“Ministry”) and The Railway Board (“Board”) for violation of Section 4 of the Act. Informant is engaged
in business of mining, trading and exports of iron ore. It uses rail transport
for transporting extracted iron ore. Pursuant to the provisions of the Indian
Railways Act, 1989 (“Railways Act”),
Board is empowered to prescribe the freight rates for any commodity by issuing
rate circulars. Informant alleged that the Board charges lesser freight for transportation
of iron ore to be used for manufacturing iron and steel domestically, as
compared to the iron ore transported for other purposes. Informant alleged that
such classification made by the Board was unfair and discriminatory, which was
affecting the competition in the sector in an adverse manner.
CCI
observed that the power to classify, reclassify and revise the rates/freights
is entrusted upon the Board by the Central Government under Section 31 of the
Railways Act. The rates were applicable to all entities availing similar
services of railways. CCI laid down that exercise of a statutory function by
itself, in absence of any other cogent evidence establishing that such conduct
is in violation of any of the provisions of the Act may not be anti-competitive.
Hence, on the basis of the above observations, CCI dismissed the case.
C.
Combination
Registrations
1.
Combination
Registration No C-2012/11/94 decided on December 11, 2012
The notice for combination was filed by Shriram City Union
Finance Limited (“SCUFL”), Shriram
Retail Holdings Private Limited (“SRHPL”)
and Shriram Enterprises Holdings Private Limited (“SEHPL”). As per the proposed combinaton, SEHPL will get amalgated
into SRHPL, which will later amalgamate into SCUFL. After the consummtion of
the proposed combination, SCUFL will be the surviving entity.
SEHPL is an unlisted investment holding company, which is a
wholly owned subsidiary of SRHPL. SEHPL holds investments in mutual fund units,
bank deposits etc. As per the information provided in notice, SEHPL currently
does not have any other operations. SRHPL is an unlisted investment holding
company, which also has investments in the form of mutual funds units etc.
Shriram Capital Limited holds 51% shares of SRHPL and rest is held by TPG India
Investment Inc.
SCUFL is a public listed company, which is registered as a
deposit accepting Non-Banking Financial Company. Shriram Housing Finance
Limited (“SHFL”) is a subsidiary of
SCUFL, which provides housing finance services. As per the information provided
in the notice, SHFL will continue to remain a subsidiary of SCUFL even after
the proposed combination.
On the basis of the information provided in the notice, CCI observed
that that the proposed combination is an arrangement between the companies of
same group and the control over SCUFL will remain unchanged after the
combination. Therefore, CCI held that the proposedcombination would not have
adverse effect on the competition and approved the proposed combination.
2. Combination Registration No- C/2012/11/92, decided on December 13, 2012
The notice for combination was filed by Dewan Housing Finance
Limited (“DHFL”), First BlueHome Finance Limited (“First
Blue”) and Dewan Housing Private Limited (“DHPL”). As per the proposed combination, DHPL and First Blue are
psoposed to be merged into DHPL.
DHFL is a listed company incorporated under Companies Act
1956 (“Companies Act”). DHFL is engaged in the business of
housing finance and is registered with National Housing Board (“NHB”). NHB regulates the housing
finance business in India.
DHPL is a wholly owned subsidiary of DHFL and is a holding
and investment company. First Blue is a private company and is engaged in the business of providing housing
finance. First Blue is also registered with NHB. As per the notice, DHFL holds
67.56% of equity shares of First Blue indirectly through DHPL. Therefore, on
the basis of the DHFL’s majority stake in First Blue, First Blue is also a
subsidiary of DHFL.
On the basis of the above information, CCI observed that at present DHFL has the
control over the management and operations of both DHPL and First Blue, which
will continue even after the consummaiton of the proposed combination. Therefore,
in the opinion of CCI, the proposed combination would not have adverse effect
on the competition in India and was accordingly approved.
3.
Combination Registration No- C/2012/11/93, decided on December 26, 2012
The notice for combination was filled by
Sumitomo Corporation (“Sumitomo Japan”),
Sumitomo Corporation Asia Pte Limited (“Sumitomo
Singapore”), Mukand Limited (“Mukand”)
and Technosys Metal Processing Limited (“Technosys”).
The proposed combination is pursuant to a Master
Agreement dated
October 29, 2012 executed between Mukand, Sumitomo Japan,
Sumitomo Singapore and Technosys (“Master
Agreement”).
As per
the information provided in notice, Mukand and Sumitomo Japan have agreed to form joint
venture for manufacturing bright bars and wires indirectly through Technosys.
Technosys is currently
a
wholly owned subsidiary of Mukand. As per the terms of the combination,
Mukand will transfer its business of manufacturing bright bars and wires to
Technosys. Subsequent to this transfer, Somitomo Japan and Somitomo
Singapore (“Acquirers”) will jointly
acquire 39.92% shares of Technosys, whereas Mukand
will hold 60.08% shares of Technosys.
Somitomo
Japan, a
company incorporated
under the laws of Japan and is engaged in the business of
metal products, transportation and construction system, infrastructure media,
network etc. Somitomo Singapore is a wholly owned subsidiary of Somitomo Japan
and is an investment holding company.
Mukand is a listed company incorporated under the
provisons of Companies Act and is engaged in the business of
manufacturing of steel products, industrial machinery and road construction
segments. Technosys is a wholly owned subsidiary of Mukand, engaged in the business of manufacturing bright bars and wires.
On the basis of the information provided, CCI observed that Acquires and
their subsidiaries are not in the business of manufacturing bright bars and wires. CCI noted that though Somitomo Japan
supplies cold drawn steel wire to a company in India, the quantity of supply is insignificant. Further, the market share of Mukund in the business of
manufacture of bright bars and wires in India is also insignificant. Therefore,
CCI held that the combined market share of Mukund and Acquirers is
insignificant to to raise any competition concern in India. Therefore, the combination was
approved.
4.
Combination Registration No.
C-2012/10/82, decided on December
21, 2012
The notice for combination was
jointly filed by Aditya Birla Nuvo Limited (“ABNL”), Peter England Fashion and Retail Limited (“PEFRL”), Indigold Trade and Services
Limited (“Indigold”) and Pantaloons
Retail (India) Limited (“PRIL”). As
per the proposed combination ABNL, through its wholly owned subsidiary PEFRL,
will acquire Pantaloons form of business form PRIL. The acquisition will take
place by way of demerger of Pantaloons form of business from PRIL and subsequent
acquisition of the same by PEFRL, as part of the scheme. As consideration, shares
of PEFRL will be issued to the shareholders of PRIL.
ABNL is public limited company
and is the ultimate parent company of PEFRL. ABNL is engaged inter alia in manufacturing and selling of
apparel, footwear and accessories (“AFA”),
through its division Madura Fashion & Life Style (“MFL”). Indigold is a wholly owned subsidiary of ABNL and is the
parent company of PEFRL. Indigold currently does not conduct any business.
PEFRL exports ready-made men’s wear for the Peter England brand of ABNL to many
countries in Asia and Middle East.
PRIL is a public listed company
and is inter alia engaged in the
retail of AFA under its brand names Pantaloons Megastores (“PMS”) and Pantaloons Factory Outlet (“PFO”).
As per the information provided
in notice, ABNL deals mostly in men’s formal wear segment, whereas PRIL offers
a wide range of value fashion wears for men, women and kids segment. As per the
proposed combination, ABNL will acquire primarily women and kids wear segment
of PRIL. Further, the parties have not entered into any non-compete arrangement
and therefore, PRIL will continue to compete in AFA business through its other
stores. As per the notice, the brands which are proposed to be acquired by ABNL
as part of Pantaloons Format Business will be licenced back to PRIL, for
selling them in other retail outlets of PRIL.
On the basis of the information
available in public domain, CCI observed that ABNL and PRIL have small market
share, out of the total organized retail market of AFA, which is estimated to
be around Rs. 42,500 crore. CCI also emphasized on the existence of various
Indian and international players like Lifestyle, Shoppers Stop, Westside etc. along-with
several online retailers, which have provided a wide range of choices to
consumers.
On the basis of the above
observations, CCI held that the proposed combination will not have adverse
effect on the competition in India and therefore approved combination.
5.
Combination Registration No-
C/2012/11/92, decided on December 26, 2012
The notice for combination was filed by Punjab National Bank
(“PNB”) and MetLife India Insurance
Company Limited (“MetLife”). The proposed
combination was pursuant to a share purchase agreement dated December 04, 2012
between PNB, MetLife, MetLife International Holdings, Inc. (“MetLife International”), M. Pallonji
& Company Private Limited, M Pallonji Enterprises Private Limited,
IGE(India) Limited, Chintalapatil Holdings Private Limited, the Jammu &
Kashmir Bank Limited and Manimaya Holdingd Private Limited.
As per the proposed combination, PNB will acquire 603, 865,
285 equity shares of MetLife, pursuant to which PNB would hold 30% stake in
MetLife.
PNB is a scheduled commercial bank of India and provides
banking services on pan India basis. MetLife is public listed company, which is
a joint venture between MetLife International, group of Indian promoters and
investors. MetLife is engaged in the business of providing life insurance
services.
As per the information provided in notice, PNB, pursuant to a
corporate agency agreement also acts as a distribution agent of MetLife. However,
PNB now desires to enter into a corporate agency coupled with equity
participation. Hence, the parties entered into the above-mentioned share
purchase agreement, as Metlife emrged as the selected bidder of the request for
proposal process isseued by PNB.
CCI noted that the business of PNB and MetLife are not
identical or substitutable with each other. CCI further stated that though PNB
acts as an agent for Metlife but the share of MetLife in the overall insurance
business is India is insignificant. Therefore, CCI held that the proposed
combination would not have adverse effect on the competition in India and
approved the combination.
6.
Combination Registration No.
C-2012/09/79 decided on December 21, 2012
The notice for combination was filed by Orchid Chemicals and
Pharmaceuticals Limited (“OCPL”) and
Hospira Healthcare India Private Limited (“HHIPL”).
The proposed combination was in pursuance of a Business Transfer Agreement (“BTA”) between Mr. K. Raghavendra Rao,
OCPL and HHIPL.
OCPL is a 100% Export Oriented Unit (“EOU”) and manufactures Active Pharmacuetical Ingredients (“APIs”) and oral formulations of
Cephalosporin. Penem, Penicillin and NPNC verticals. It does not manufacture
injectable formulation, as it has transferred this business to HHIPL in the
year 2009.
HHIPL is a private limited company incorporated under the
Companies Act. HHIPL is an indirect wholly owned subsidiary of Hospira Inc.
USA. HHIPL is also a 100% EOU and it manufactures and exports various
injectable formulations.
As per the terms of BTA, OCPL will sell manufacturing
facilitiesof Betalactum API business, manufacturing
facilities of API business and NPNC API manufacturing facility together with associate
process R&D facility at Chennai to HHIPL.
On the basis of the information provided in notice, CCI observed
that the parties to the combination have some vertical relations and there were
horizontal overlaps between the few products of parties. However, CCI noted
that the market share of the parties, both under vertical relation and
horizontal overlap are insignificant in the Indian market.
Other than the existing market share of the parties, CCI also
noted that BTA provides for a non-compete clause. CCI asked the parties to amend
the clause in respect of duration of restraint and restrained business activities.
Subsequently, parties responded by modifiying the non-compete clause, in the
following manner:
· The non-compete obligation was limited to four years in
relation to the domestic market in India.
· The BTA was amended to allow OCPL to conduct research,
development and testing to develop new Penem (including Carbapenem) and
Penicillin APIs for injectable formulations, which are currently non-existent
worldwide.
CCI accepted the above modifications and parties were asked
to incorporate the modified non-compete clause in BTA within three (3) months
from the date of the order of CCI.
Based on the above observations and subject to the above
condition, CCI held that the combination will not have appreciable adverse
effect on the competition and approved the combination.
D.
News
1.
CCI finds no evidence of cartelization by PSU
banks: Pilot
Honorable Minister of Corporate Affairs, Mr. Sachin Pilot on
December 20, 2012 informed the Lok Sabha that CCI has
not found any evidence of cartelization among public sector banks in deciding their savings bank
interest rates. CCI earlier decided to look into the common 4% interest
rate on savings bank deposit, being offered by all public sector banks, despite
Reserve Bank of India deregulating the savings accounts interest rates in
October, 2011.
As per the newspaper reports, CCI earlier was of the view
that public sectors banks seem to be in tandem on the interest rates, which
needs to be investigated. However, in the absence of sufficient information/
material, CCI has decided not to pursue the matter any further.
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DISCLAIMER
This competition law alert has been prepared by
Sarthak Advocates and Solicitors. It is meant to be merely an informative
summary and should not be treated as a substitute for considered legal advice.
We welcome your comments and suggestions. For any comments, suggestions or
further clarifications, please contact us at:
Sarthak Advocates
& Solicitors
A-35, Sector - 2,
Noida- 201 301,
Uttar Pradesh
Boardline: +91- 120-4309050
Fax: +91- 120-4249060
Email:
knowledge@sarthaklaw.com
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