Competition Law Alert-January, 2013

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 January, 2013:

1.             Belaire Owners’Association v. DLF Limited Haryana Urban Development Authority, Department of Town & Country Planning, State of Haryana, decided on January 3, 2013

CCI in its order dated August 12, 2011 held that the terms and conditions of the Builder-Buyers Agreement (“Agreement”) of DLF Limited (“DLF”), relating to its Belaire housing project were anti-competitive and abusive in nature. CCI directed DLF to make suitable modifications to the Agreement. DLF challenged the aforesaid order in the Competition Appellate Tribunal (“COMPAT”). COMPAT in it its order dated March 29, 2012 directed DLF to approach CCI to suggest modifications in the Agreement.

Pursuant to the above-mentioned order of COMPAT, CCI suggested following modifications to the Agreement:  

·      CCI suggested DLF to include certain representations in the recital clause of the Agreement regarding title of the builder over the project, obtaining required licenses from the competent authorities, representations regarding abiding by the relevant laws etc.

·      CCI noted that apart from the apartment, the buyer did not have any title over the open/common area in the complex. Exclusive ownership and right over the open/common area had been vested with the builder. CCI held these provisions to be highly abusive. Further, CCI stated that open parking and parking under stilt are also part of the common areas of the complex and promoters can sell it neither independently nor along with the flat. Accordingly, modifications were suggested to the relevant clauses pertaining to the ownership of the open/common area and parking in the Agreement.

·      The Agreement states that if an allottee does not get preferred apartment then allottee will only get the refund/adjustment of amount, without any interest on such amount. CCI held that in case the allottee does not get apartment with preferential location, the amount taken by the builder should be returned to the allottee, with a reasonable rate of interest. Such rate of interest shall also commensurate with the rate of interest being charged by the builder from the allottee on account of the delayed payment.

·      CCI noted that as per the Agreement, the builder has the right to increase or decrease the super area in its sole discretion. CCI held that if the builder wishes to increase or decrease the super area, then it shall duly inform the allottee about such change. Allottee must also be informed about calculations of the increase or decrease in the super area, so that the allottee can know and verify the grounds on which the super area has increased/decreased.

·      As per clause 1.7 of the Agreement, the builder in its sole discretion can decide the proportion of land on which apartment will be situated and the portions over which the allottee would have the ownership rights. Further, the builder has the right to increase the number of floors and has also reserved the terrace rights. It was held to be the abuse of dominance and DLF was directed to modify said clause. Similarly, builder’s absolute right over the community buildings/sites/recreational and sporting activities sites, including maintenance of those, pursuant to clause 1.7(iii) the Agreement were found to be abusive and accordingly modifications are suggested.

·      CCI observed that the builder has the right to interlink one project with another, in its sole discretion. CCI held that interlinking of the projects, except for mobility of residents and ingress & egress cannot be done. Accordingly, reference of interlinking of another project is suggested to be deleted.

·      CCI noted that External Development Charge (“EDC”) is charged by the government for development of main lines of roads, drainage, sewage, water and electricity. EDC is invariably passed over by the builders to the allottees. As per clause 1.11 of the Agreement, builder has the right to cancel the allotment or forcefully taking off possession from allottee, in case of non-payment of EDC. CCI observed that non-payment of EDC by an allottee can result only into a recovery, in accordance with the procedure established by law. Neither the allotment can be cancelled, nor can possession of the apartment be taken away by force. CCI held that provision in such clauses relating to resumption of the apartment in case of default in payment of EDC is contrary to the provisions of the Haryana Apartments Ownership Act, 1983 and needs to be modified.

·      Pursuant to clause 4 of the Agreement, the builder is entitled to forfeit the earnest money, if allottee does not fulfill conditions of the Agreement. However, there is no corresponding penal provision in respect of non-fulfillment of conditions by the builder. CCI suggested such clauses to be suitably modified.

·      Clause 13 of the Agreement provides for execution of conveyance deed only on the full payment of consideration by the allottee. However, there are no corresponding clauses that provide for any obligation on the builder to execute the conveyance deed, upon receipt of stamp duty papers after paying entire price as per the Agreement by the allottee. Further, clause 14 does not give the allottees the right to manage the complex through resident welfare association. CCI held both clause 13 and 14 to be abusive and suggested modifications.

·      As per clause 20 of the Agreement, only builder has the right to make any addition, alteration, improvements, repair to unsold units within the building. However, similar rights to alter and improve their own flats are not provided to the allottees. CCI observed that the rights of the builder and the apartment owners in their respective apartments are equal. As builder cannot have more rights, CCI suggested suitable modifications.

·      As per clause 22 of the Agreement, builder in its sole discretion can make additional construction, if the competent authority increases FAR. CCI held that under group housing scheme, flat owner have common right over the open/common areas. Therefore, the builder cannot make additional construction, without the consent of the resident welfare association, if FAR gets increased.

·      Clause 23 of the Agreement gives right to the builder to raise finance, loan for its own purpose from any financial institution by mortgaging or creating charge over the building/apartment/portion of complex/building. Such charge is subject to the condition that when the conveyance deed will be executed, the builder shall convey the apartment, free from all encumbrances. CCI noted that the said clause only provide for delivering apartment/building to allottee free from all encumbrances and not the entire complex. As the allottees are joint owners of all the open areas, common facilities etc. within the complex, CCI held that the whole complex should be free from encumbrances, at the time of conveyance.

·      Clause 35 provides for heavy penalties to be paid by allottee, if he defaults on any clause of the Agreement. Builder can refuse to condone delay on part of allottee and can cancel the allotment, even if the allottee was prepared to pay interest on delayed payment. While on the other hand, the builder has reserved for itself many excuses for non-delivery of possession, for scrapping the contract altogether and for delaying the project. Further, under clause 12, the builder has provided for events of defaults of the allottee and consequences for the same. However, the builder has nowhere has provided events of defaults for itself. CCI held that the Agreement should provide for defaults of both the parties and consequences. CCI accordingly suggested suitable modifications to such clauses.

·      CCI observed that the applicants are not informed about the terms and conditions of the Agreement, at the time of booking the apartment. The Agreement is entered only after the builder has received a considerable amount from the applicant. CCI observed that after payment of the initial booking amount, the allottee had no option but to sign the Agreement, as otherwise the Agreement provided for heavy penalties and deduction from the amount deposited by the allottees. CCI accordingly held that a copy of the agreement shall be provided at the time of inviting applications. The agreement shall be entered within the reasonable time after allotment and all amount shall be demanded from allottee only after entering into agreement. Any allottee, who does not agree to the terms of agreement should have the liberty to withdraw his application and should be given the entire booking amount back.

·      As per clause 11.1, 11.2, 11.3 and 39 of the Agreement, builder can delay the possession or abandon the project altogether on account of non-availability of material, terrorist act, enemy act, strike, act of god, any order, rule, notifications of government etc. The aforesaid clause provides that allottee shall be liable to get back the ‘amount attributable to agreement’, without any interest. CCI observed that the phrase ‘amount attributable to agreement’ is vague and shall be properly defined. Further, in cases, where the builder is liable to pay late charges, the builder was liable to pay only 9% interest to the allottee. Such interest will be paid only on such amount, which builder deems refundable to the allottee. CCI held these clauses to be highly abusive and suitable modifications were suggested.

Sarthak Note: For a detailed analysis of the provisions suggested by CCI, and our insights and recommendations, please write to us at knowledge@sarthaklaw.com.

2.             Sanjay Kumar Gupta v. DLF Limited, decided on January 3, 2013

Sanjay Kumar Gupta (“Informant”) filed a case against DLF Limited (“Developer”) and DLF IT Park, Kolkata (“DLF Kolkata”) alleging abuse of dominant position. Informant stated that he booked two residential flats in the upcoming project of the Developer. Informant alleged that Developer kept on demanding heavy interest on due payments, without carrying out substantial construction. Subsequently, Developer cancelled Informant’s allotment for not making timely payments.

On the basis of information and documents placed on record, CCI observed that the Developer has cancelled the allotment, as the Informant did not make payment on time and in accordance with the agreed payment plan. CCI stated that the issue in the present case pertained only to the quantum of amount payable by Informant to the Developer, which does not involve any competition issue. Based on the above observations, CCI held that no prima facie case could be established against the Developer and therefore ordered for the closure of the case.

3.             Merino Panel Products Limited v.  Gujarat State Fertilizers and Chemicals Limited and Directorate General of Anti-Dumping and Allied Duties, decided on January 9, 2013

The case was filed by Merino Panel Products Limited (“Merino”) against Gujarat State Fertilizers and Chemicals Limited (“GSFCL”) and Directorate General of Anti-Dumping and Allied Duties (“DG Anti-Dumping”) alleging violation of section 3 and 4 of the Act.

Merino is engaged in the business of importing and selling Melamine. GSFCL is a public sector undertaking and is a sole manufacturer of Melamine in India. DG Anti-Dumping is a government body, which regulates anti-dumping behavior of firms in the Indian market.

In the year 2003, DG Anti-Dumping imposed anti-dumping duties on the imports from China. As per Merino, even five years later, DG Anti-Dumping continued with the anti-dumping duty on imports of Melamine from various countries on the basis of the recommendation of GSFCL. Merino alleged that imposition of duty has enabled GSFCL to give an artificial hike in the price of its Melamine, which is in violation of section 3 of the Act.

CCI while negating the contention of Merino held that it cannot examine the correctness or legality of the order of DG Anti-Dumping for imposing anti-dumping duty, as it is the prerogative of Custom Excise and Service Tax Appellate Tribunal (CESTAT).

CCI further observed that mere increase in price does not itself give rise to a competition issue. CCI also noted that the market share of GSFCL is below 50% of the total market of Melamine in India. Even after imposing anti-dumping duty, the import of Melamine has been increasing every year and the share of GSFCL in the market has been falling year after year. CCI held that the above pattern indicates that that there is enough competition in the market.

On the basis of the above analysis, CCI held that no prima facie case could be established against the GSFCL and DG Anti-Dumping and therefore ordered for closure of the case.

4.             Vijay Gupta v. M/s Paper Merchants Association, M/s Shashi Jain and Ramesh Jaina (Arbitrator) decided on January 10, 2013

In the year 2011, CCI under its order dated March 24, 2011 directed M/s Paper Merchants Association (“Defendant Association”) to modify the dispute resolution clauses of the Constitution and Regulation of Paper Merchants (“Constitution”). Defendant Association challenged the aforesaid order in the COMPAT. COMPAT in it its order dated August 29, 2011 allowed the Defendant Association to approach CCI to suggest modifications in the Constitution.

As per the existing provisions of the Constitution, non-members were forced to go for arbitration in case of any dispute with any member, even when they were not party to the Constitution. CCI held it to be in contravention of Section 3 of the Act and ordered for modification of the Constitution.

Clause 22 of Rule XVI of the Constitution in its current form states that if a member or a non-member does not abide by the instruction of the Defendant Association then the Executive Committee will issue notice to such person to abide by the instructions. In case the default continues even after issuing notice then the matter will be referred to Quida Committee, which may notify all members not to deal with such person.

Clause 1 of Rule XXX of the Constitution in its current form provide that in case of dispute between two members or a member and a non-member, the matter will be dealt by the arbitrator appointed by Defendant Association. Award of the arbitrator will be final. Rule XXX Clause 2 further provides that in case of non-members, the terms of arbitration will be printed on the sale invoice and both parties will be bound by them.

CCI modified the Clause 22 of Rule XVI of the Constitution to make it applicable only to the members of the Defendant Association. CCI also deleted the entire Clause 2 of Rule XXX, where non-members were asked to abide by the rules of arbitration. 

CCI held that disputes of non-member can be referred to arbitration only if they enter into a written agreement with the Defendant Association. CCI also clarified that arbitrator of Defendant Association will have no jurisdiction on the matter between a member and a non-member, in absence of express written contract for arbitration. 

5.             M/s Cinergy Independent Film Services Private Limited v. Telangana Telugu Film Distributors Association, Karnataka Film Chamber of Commerce, Indian Council of Impex for Films & TV Programmes, Andhra Film Chamber of Commerce and M/s Big Bang Media Private Limited, decided on January 10, 2013

Cinergy Independent Film Services Private Limited (“Cinergy”) filed a case against Telangana Telugu Film Distributors Association (“Telgu Association”), Karnataka Film Chamber of Commerce (“Karnataka Chamber”), Indian Council of Impex for Films & TV Programmes (“Impex”), Andhra Film Chamber of Commerce (“Andhra Chamber”) and M/s Big Bang Media Private Limited (“Big Bang”) alleging contravention of Section 3 and 4 of the Act.

It is stated that Cinergy and Big Bang are companies engaged in the business of producing and distributing cinematographic films and programmes. Telgu Association, Karnataka Chamber and Andhra Chamber are associations of film producers, distributors and exhibitors and they also act as regulatory bodies for production, distribution and exhibition of films (collectively referred to as “Defendant Associations”). Impex is an association of distributors engaged in the import and export of Indian films and TV programs.

Cinergy alleged that Defendant Associations have made it mandatory for every distributor to become its member and to get films registered with relevant Defendant Associations. If a distributor refuses to become member or refuses to register his film with the Defendant Association, then exhibition of his film will be barred in the respective territories of the Defendant Associations.

It was alleged that Defendant Associations have asked its members not to release the Hindi film Mausam, until the claim of one of their member is settled. It was submitted that M/s. Suresh Productions Limited (“Suresh Productions”), one of the members of Defendant Associations has a claim against Big Bang of Rs. 2.5 Crore and Big Bang has some interest in the film Mausam. Therefore, to secure the payment from Big Bang, Defendant Associations have intervened in the exhibition of film Mausam in their respective territories. 

CCI analyzed certain letters/circulars issued by the Defendant Associations and reached following conclusions:

·           Telgu Association vide its circular dated September 10, 2011 requested all the film distributors in Secunderabad to not release Mausam in Nizam area, unless the dues of Rs.2.5 crores are paid to Suresh Productions.

·           Karnataka Chamber in its letter dated September 09, 2011 advised M/s PVR Pictures Limited to attend the hearing fixed by the Arbitration Board on September 12, 2011.

·           Andhra Chamber in its letter dated September 09, 2011 to the producers of the film Mausam requested to settle the matter in order to avoid any inconvenience in the release of the film.   

On the basis of the DG report and above-mentioned circular/letter issued by the Defendant Associations, CCI held that the acts of Defendant Associations violated Section 3(1) read with Section 3(3) (b) of the Act. Section 3(3) (b) deals with agreements to limit or control production, supply, markets, technical development and investment.

CCI noted that anti-competitive behavior of Karnataka Chamber and Telgu Association has already been proved before CCI in a similar prior case. CCI under its order dated February 16, 2012 has directed both the associations to cease and desist from participating in following anti-competitive activities and to suitably modify their rules:

·      Association should not discriminate between regional and non-regional films.

·      No restrictions shall be put on the number of screens, allotted for exhibition of a film, on the basis of language or manner of the film.

·      Distributors should be free to release films through CD or satellite TVs.

·      Requirement of compulsory membership and registration of films should be done away with.

As Andhra Chamber was not party to the above mentioned order of CCI dated February 16, 2012, CCI has examined its activities for the purpose of present case. On the basis of examination of rules and regulations of Andhra Chamber, CCI concluded that Andhra Chamber is also engaged in the anti-competitive activities, which are similar to the activities of other Defendant Associations.

CCI stated that the directions and fines in the aforementioned order of 2012 shall apply to Defendant Associations in the present case as well. No additional fine was imposed on other Telgu Association and Karnataka Chamber, as they have already been fined under the order of 2012. However, Andhra Chamber was directed to pay fine at the rate 10% of its average of turnover and income for the last three preceding years.

C.            Combination Registrations

1.             Combination Registration No. C-2012/12/99 decided on January 03, 2013

CCI received a notice dated December 07, 2012 from Future Ventures India Limited (“FVIL”), Indus-League Clothing limited (“ILCL”), Lee Cooper (India) Limited (“LEE”), Pantaloon Retail (India) Limited (“PRIL”) and Future Lifestyle Fashions Limited (“FLFL”), pursuant to a composite scheme of arrangement and amalgamation (“Scheme”) under the provisions of the Companies Act, 1956.

ILCL is a public company, engaged in the business of branded apparel and accessories. FVIL holds 95.29% of the shareholding of ILCL. LEE is an unlisted public company, which is a wholly owned subsidiary of ILCL. LEE is also engaged in the business of branded apparel and accessories.

PRIL is a listed public company, engaged in the businesses of retailing fashion & lifestyle, financial services and other businesses. FLFL is a wholly owned subsidiary of PRIL, which is currently not engaged in any business. However, FLFL is proposed to engage inter-alia in the fashion business.

The Scheme envisages following series of transactions:

·      Amalgamation of ILCL’s and LEE’s entire fashion business with FVIL and subsequent transfer of ILCL’s shareholding in LEE to FVIL.

·      Amalgamation of PRIL’s entire fashion business into FLFL.

·      Amalgamation of FVIL’s entire fashion business into FLFL.

As per the notice, the rationale behind such intra-group arrangement is to integrate fashion businesses of FVIL, ILCL, LEE and PRIL into single entity, i.e. FLFL. CCI observed that the proposed combination pertains to the parties belonging to the same group of companies’, i.e.  Future Group. CCI for the above reasons held that the proposed combination is not likely to have any adverse appreciable effect on competition in India.

2.             Combination Registration No. C-2012/11/88 decided on January 08, 2013

On November 01, 2012 CCI received a notice from GSPC Distribution Networks Limited (“GDNL”) and Gujarat Gas Company Limited (“GGCL”). The notice was given for the proposed acquisition of 65.12% of equity share capital of GGCL by GDNL, pursuant to execution of a Share Purchase Agreement dated October 03, 2012 between BG Asia Pacific Holdings Pte. Limited (“BG Asia Pacific”) GDNL and BG Energy Holdings Limited.

GDNL is a wholly-owned subsidiary of GSPC Gas Company Limited (“GSPC Gas”). GDNL main objects include sale, purchase, supply, distribution and trading of natural gas in the form of Compressed Natural Gas (“CNG”) and Piped Natural Gas (“PNG”). However, as per the notice, GNDL being recently incorporated is currently not engaged in any business activity.

Gujarat State Petroleum Corporation Limited (“GSPC”) and Gujarat State Petronet Limited (“GSPL”) are the promoters of GSPC Gas and hold 98.56% of the share capital of GSPC Gas. GSPC Gas is engaged in the business of distribution of CNG and PNG to customers via its City Gas Distribution (“CGD”) network in ten districts of Gujarat.

GSPL, a listed company, is engaged in the business of development and operation of natural gas transmission pipelines and operate a network of 2065 km for transmission of natural gas in the state of Gujarat.

GGCL is a subsidiary of BG Asia Pacific, which in turn is ultimate subsidiary of BG Group Plc. GGCL, is primarily engaged in the distribution of PNG and CNG over a geographic area of 8979 square km in the state of Gujarat. GGCL further operates a 73.2 km transmission pipeline network in the state of Gujarat. As per the notice, Petroleum and Natural Gas Regulatory Board (“PNGRB”) has granted GGCL’s, CGD network of twenty five (25) years, valid up to March 31, 2014 and three (3) years marketing exclusivity commencing from November, 2012. 

CCI noted that the proposed combination pertains to the natural gas sector in India. CCI further noted that GSPC Group is engaged in the business of E&P, transmission and distribution of natural gas in the state of Gujarat. However, as GGCL is not engaged in E&P of natural gas, the relevant market was narrowed down to only transmission and distribution of natural gas in the state of Gujarat.

CCI observed that GGCL has only 73.2 km transmission pipeline, which is primarily being used for supplying gas to its own CGD network, whereas, GSPL operates 2065 km transmission pipeline network on an open access to various customers in the state of Gujarat. Further, as per the publicly information, the capacity utilization of GSPL’s transmission pipelines was only 44% and therefore sufficient pipeline capacity was available on GSPL network for utilization by third parties on an open access basis.

CCI noted that the laws governing the relevant sector not only regulate the capacity utilization by a third party on common carrier on a non-discriminatory basis but also determine transportation tariff. As per the relevant laws, a CGD entity would be under an obligation to allow third party access on a non-discriminatory basis at network tariff determined by PNGRB. CCI further observed that both GSPC Gas and GGCL operate in different geographical areas.

CCI also referred to the undertaking given by GDNL to the effect that it will review all the contracts entered into between GGCL and its customers to ensure that such contracts are in compliance with Act, Petroleum and Natural Gas Regulatory Board Act, 2006 and the regulations issued there under.  On the basis of the forgoing observations, CCI held that the proposed combination will not have adverse effect on the competition in India and therefore approved combination.

3.             Combination Registration No. C-2012/12/101 decided on January 15, 2013

A notice of Combination was filed on December 20, 2012 by Sun Coke Europe Holding B.V. (“Sun Coke”) and VISA Coke Limited (“VISA Coke”) to CCI under Section 6(2) of the Act. The notice for the proposed combination is filed pursuant to execution of the Shareholder’s Agreement dated November 20, 2012 and Share Purchase and Subscription Agreement dated November 20, 2012 between Sun Coke, VISA Coke, VISA Steel Limited (“VISA Steel”) and Kalinganagar Metcoke Private Limited (“KMPL”).

As per the information provided in the notice, VISA Steel and VISA Coke entered into an Agreement For Sale of Business dated November 20, 2012 (“Agreement”), pursuant to which VISA Steel shall transfer its manufacturing business, sale of metallurgical coke and associated steam generation units (“Coke Business”) to VISA Coke. Post such transfer of Coke Business, Sun Coke will subscribe to 25% of equity shares of VISA Coke and will also acquire 24% of equity shares in VISA Coke from VISA Steel. As a result, the aggregate shareholding of Sun Coke will rise to 49% of the equity share capital of VISA Coke. VISA Steel would then hold the remaining 51% of the equity share capital through its wholly owned subsidiary KMPL.

Sun Coke is wholly owned subsidiary of Sun Coke Energy, Inc (“Sun Coke Energy”), which is an USA based largest producers of high-quality Coke. Sun Coke is engaged in the business of incorporating, participating in, co-operating with and managing and rendering services to other companies.  

VISA Steel is an Indian listed company engaged in the production and sale of low ash metallurgical coke, bars & wire rods, sponge iron etc. As part of the Coke Business, VISA Steel operates a 4, 00,000 ton per annum coke oven plant, which is proposed to be transferred to VISA Coke pursuant to the Agreement. As per the notice, KMPL is currently not engaged in any business activity. VISA Coke is engaged in business of manufacture and sale of coke.

On the basis of the information that Sun Coke Energy has no existing direct or indirect presence in India, CCI observed that  and therefore, there is no horizontal overlap between the activities of Sun Coke (or Sun Coke Energy) and VISA Steel in the domestic market. Further, the market share of VISA Steel in the domestic market of metallurgic coke in India is also not significant enough to raise any competition concern.

CCI noted the existing vertical overlap between VISA Steel and VISA Coke, as VISA Steel propose to source its requirement of steam and coke from VISA Coke. However, given to the size of the business of VISA Steel as compared to the total size of coke sector in India, CCI observed that this vertical relationship will not raise any anti-competition concern.   

On the basis of the above observations, CCI held that the proposed combination will not have any adverse effect on the competition in India and therefore approved the proposed combination.

4.             Combination Registration No. C-2013/01/104 decided on January 22, 2013

CCI received a notice by Intel Corporation (“Intel”) and Motorola Mobility LLC (“MM LLC”), pursuant to execution of an Asset Purchase Agreement (“APA”) dated December 05, 2012. The proposed combination relates to acquisition by Intel of certain assets of MM LLC located in the United States of America.

As per the notice, Intel is engaged in the design and manufacturing of integrated circuits for computing and communications. Intel’s main product portfolio includes microprocessors, chipsets, motherboards and wireless components. MM LLC is engaged in the business of mobile devices, which produces and sells mobile devices such as smartphones, tablets and home technology business.

On the basis of the information provided in the notice, CCI noted that the proposed combination is taking place outside India and has no direct impact on competition in the market for cellular based processors in India. CCI further observed that the market for cellular baseband processors in India is competitive, on account of presence of major players such as Qualcomm, MediaTek, Texas Instruments and Broadcom. Further, the assets of MM LLC, which are being acquired by Intel do not presently generate any revenue in India. After considering the above-mentioned factors, 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-2013/01/103 decided January 22, 2013

CCI received a notice from Kotak Mahindra Bank Limited (“Kotak”) and Barclays Bank PLC, India branch (“Barclays India”) and Barclays Investments and Loans (India) Limited (“BILIL”) in relation to acquisition by Kotak of portfolios of certain unsecured loans of under (“Business Installment Loans”) from BILIL and Barclays India.

As per the notice, both Barclays India and BILIL have not been originating new Business Installment Loans since December, 2011. Barclays India and BILIL have entered into the proposed transaction with Kotak to transfer their Business Installment Loans.

On the basis of the report of Reserve Bank of India dated March 31, 2012, CCI noted that as at March 31, 2012 there were around 86 scheduled commercial banks and 12,385 non-banking finance companies operating in India. CCI further observed that the size of entire business installment loans portfolio of Barclays India and BILIL is relatively insignificant. Further, there are other players in Indian banking and financial services sector providing similar loans. Therefore, after considering the above factors, CCI held that the proposed combination will not have adverse effect on the competition in India and approved the combination.

6.             Combination Registration No.: C-2013/01/106 dated January 30, 2013

On January 11, 2013, CCI received a notice from SABIC Research and Technology Private Limited (“SRTPL”). SRTPL is a part of the SABIC group of companies (“SABIC Group”). The proposed combination relates to the acquisition of certain assets and equipment (“Assets”) by SRTPL, from GE India Technology Centre Private Limited (“GEITC”). GEITC is a company incorporated in India and is a part of the GE group of companies (“GE Group”).   

As per the notice, in the year 2007, GE Group and SABIC Group have entered into written agreements pursuant to which GE agreed to sell and procure its relevant affiliates to sell, to SABIC Group, its plastic business comprising of, among other things, research and application-development assets relating to the plastics business. The proposed transaction in India is being executed pursuant to the terms of above said agreements, by GEITC and SRTPL, who are affiliates of GE Group and SABIC Group, respectively.

As per the notice, both GEITC and SRTPL are the service providers to their respective group entities. Further, the Assets, which are being acquired by SRTPL, pursuant to the proposed combination, are currently used by GEITC for rendering R&D services to the GE Group companies. Similarly, SRTPL also intends to use the Assets for rendering R&D services only to the SABIC Group companies.

D.            News

1.             CCI begins investigations in VeriFone case

On December 31, 2012 CCI directed its investigation wing to begin probe into the conducts of US-based electronic payments company VeriFone Systems Inc. and its Indian arm Verifone India Sales Private Limited. The complaint was filed by Atos Worldline India, an Indian arm of Atos SA, a French company that makes software for point-of-sale machines that are used to swipe credit and debit cards at shops and restaurants. In its complaint, Atos alleged that Verifone has abused its dominant position in this market by imposing unfair/discriminatory conditions and prices in the downstream market for value added service in India.

2.             CCI may look into rise in air cargo prices by several airlines

Consumer Unity and Trust Society has sent a report to CCI to investigate into the sudden hike in the cargo charges. The report states that there was no transparent mechanism to charge the fuel surcharge and “the increases are ad hoc and arbitrary.” Report also mentions that strict steps are taken against air cargo transport cartels in several other countries.

3.             CCI probes on Coal India

On the basis of the complaint filed by consumers, CCI has started investigating into the pricing policy of Coal India Limited. It was alleged that Coal India has increased prices of coal to maximise its profits but there was no substantial increase in the output and no substantial investments was made to develop infrastructure and raise production.

4.             Competition Commission to look into Diageo, USL merger

In November, Vijya Mallya struck a deal to sell 53.4% in USL to Diageo. As per the Competition Act, 2002 every company is bound to take CCI’s approval for a combination of such nature. Subsequently, both companies filed an application to CCI to get its approval on the proposed merger. As per the news reports, CCI is not comfortable with certain provisions of the proposed offer, including those related to preferential allotment of shares. CCI fears that the minority shareholders might be at disadvantageous position under the existing terms of the deal. CCI directed companies to remove ambiguity from the deal and make it more definitive. CCI has also asked for addition information inter alia prices and shares of the company’s products and those of its rivals.

5.             CCI rejects plea for sanctions against DLF’s new project

CCI has dismissed a petition, which sought to get an order against a new project of DLF. CCI stated that it will not entertain such petitions merely on the basis of penalties imposed on DLF for its Belaire housing project. In Belaire housing project case, CCI investigated and found DLF to have abused its dominant position. The same flat buyer association had filed a petition to seek similar sanctions for a new project of DLF. CCI while rejecting such claim stated that "the question regarding terms and conditions of agreement of the other projects that may be launched by DLF in Gurgaon was never before the Commission". "Therefore, an application in respect of terms and conditions of other projects cannot be entertained.”

6.             Anti-trust checks for IPOs

In coming future companies may have to compulsorily disclose its market share and other related information before it goes for raising money from stock exchanges. In an interview to Hindustan Times, CCI chairperson Ashok Chawla said that CCI is planning to discuss the matter with SEBI to make such disclosures as part of listing agreement.

E.            Legislative Updates

Exemptions to banking company from section 5 and 6 of the Act

CCI vide its notification dated January 8, 2013 has exempted such banking companies from the purview of Section 5 and 6 of the Competition Act, 2002, in respect of which Central Government has issued notification under Section 45 of the Banking Regulation Act, 1949.

Section 45 of the Banking Regulation Act, 1949, deals with the power of RBI to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstitution or amalgamation. As per section 45(12), where the scheme prepared by RBI is a scheme for amalgamation of the banking company, any business acquired by the transferee bank under the scheme shall be carried on by the transferee bank, subject to such modifications in the law or such exemptions of the transferee bank from the operation of any provisions thereof as the Central Government may make for the purpose of giving full effect to the scheme.

The attached CCI notification exempts such banking companies from section 5 and 6 of the Competition Act, 2002, in respect of which Central Government has also issued the exemption notification of the above nature. CCI notification further provides that the exemption to such banking companies has been issued only for a period of five years.

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