Competition Law Alert – October - 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 October, 2013:

1.    Shubham Srivastava v. Department of Industrial Policy & Promotion Ministry of Commerce & Industry decided on October 8, 2013

The present case was filed by Mr. Shubham Srivastava (“Informant”) against Department of Industrial Policy and Promotion (“DIPP”) alleging that DIPP has abused its dominant position while revising Press Note 6 of 2012 dealing with the Foreign Direct Investment (“FDI”) in civil aviation sector (“Press Note 6”).

Pursuant to Press Note 6, foreign airline companies have been allowed to invest upto 49% in the equity of an Indian airline company engaged in scheduled or non-scheduled air transport services. Prior to issuance of Press Note 6, no foreign airline company was allowed to participate in the equity of an Indian airline company dealing in scheduled or non-scheduled air transport services.

Informant submitted that the FDI Policy prevailing prior to issuance of Press Note 6 was applicable to all Indian airline companies, including M/s Air India Limited (“Air India”). However, Press Note 6 provides that the aforesaid revised position pertaining to FDI in scheduled or non-scheduled air transport services is not applicable to Air India. Informant alleged that said policy is discriminatory and will result in Government of India spending more public money for recapitalization/preferential treatment for Air India. Informant submitted that if such policy is revoked, Air India can finance its capital requirements through the options as are available to other private airlines.

Informant stated that DIPP enjoys monopoly in formulation and approval of FDI policy. Therefore it is a dominant player in the market of formulation, promotion, approval and facilitation of Foreign Direct Investment policy in civil air transport services in India.

Referring to its earlier order of Shri Debapriyo Bhattacharya v. The principle Secretary and Another, Case No. 54 of 2011, CCI held that a government department can be treated as an enterprise under the Act, if its decisions or polices provides control over provision of goods and services. In the aforesaid case, CCI held that Home Secretary of Andhra Pradesh can be covered under the definition of enterprise as given in section 2(h) of the Act, as he issued a notification in respect of licensing of e-tickets to cinemas. Issuing of notification in respect of licensing of e-tickets to cinemas was held not to be a sovereign function of state, as it amounts to control over services. Owing to its observations under the aforesaid order, CCI held that DIPP prima facie appears to be covered under definition of enterprise under the Act.

However, CCI subsequently observed that as per Government of India (Allocation of Business) Rules, 1961, framed under Article 77(3) of the Constitution of India, DIPP has been constitutionally empowered to issue policy on FDI. CCI further observed that Press Note 6 may promote competition in the relevant market by facilitating cash crunch airlines to avail FDI and the same does not affect the inter-se interest of the airlines. CCI also observed that the policy decision of not allowing FDI in Air India does not seem to hamper the competition in the relevant market and therefore does not have any appreciable adverse effect on the competition in markets in India.

CCI accordingly ordered for closure of the case. 

2.      In Re: A resident of Eldeco Elegance and Eldeco Housing and Industries Limited,  Eldeco Corporate Chamber I decided on October 3, 2013

The case was filed by a resident of Eldeco Elegance (“Informant”) against Eldeco Housing and Industries Limited (“Eldeco”) alleging abuse of dominance. 

Informant stated that he had booked a residential unit in one of the projects of Eldeco. As per the sale agreement with Eldeco (“Agreement”), the possession of the flats was agreed to be given by September 2009. However, the possession of flat was not given till recently. Even till the date of petition, only 250 flat owners out of 336 flats have got the possession. Informant further submitted that the Agreement have several unilateral terms which are highly favorable towards Eldeco. However, the penal provisions on Eldeco are not of same magnitude, where it fails to complete the project in time.   As per the sale deed between the flat owners and Eldeco, Eldeco was required to hand over the maintenance of the flats to a Resident Welfare Association (“RWA”). However, Eldeco did not take any action towards formation of RWA. As per the Informant, when the residents themselves formed an RWA, Eldeco termed it as illegal and gave negative publicity with the objective to disband it.

CCI held the market for “provision of services for development and sale of residential apartments in Lucknow” to be the relevant market in the present case.

On the issue of dominant status of Eldeco in the relevant market, CCI observed that the Informant has not provided any information relating to the market share of Eldeco. However, on the basis of information available in public domain, CCI observed there are other players in the market of equal repute and standing as Eldeco. Hence, CCI held that Eldeco cannot operate independently of the competitive forces.

On the basis of the above observations, CCI held that Eldeco is not a dominant player of the relevant market and ordered for the closure of the case. 

3.       Amit Auto Agencies v. King Kaveri Trading Company decided on October 8, 2013

The case was filed by Amit Auto Agencies (“Informant”) against King Kaveri Trading Company (“Defendant Company”) alleging abuse of dominance and anti-competitiveness. Informant is dealer of truck and trailer parts in Rajasthan.

Informant stated that in the year 2007, it was appointed as the sole selling agent by the Defendant Company for selling Defendant Company’s products in the state of Rajasthan. Pursuant to such appointment, the Informant invested a huge amount of money for maintaining showrooms and promoting sale.

Informant alleged that the sole selling agent agreement entered into by Informant and the Defendant Company (“Agreement”) contains unilateral terms and conditions that favor the Defendant Company. As per the terms of the Agreement, Informant was not allowed to deal in products of the competitors of the Defendant Company. Agreement further required the Informant to appoint its sales officers and engineers only with the prior consent of Defendant Company. Contending that the Agreement is in the nature of exclusive supply agreement restricting the purchaser in the course of his trade from acquiring or otherwise dealing in similar goods other than those of the seller, the Agreement violates Section 3 of the Act. 

Informant further alleged that as per the Agreement, Defendant Company was restricted from appointing any other selling agent in the state of Rajasthan, without written consent of Informant. However, in year 2011 Defendant Company appointed four other dealers in Rajasthan. Subsequently, Defendant Company stopped the supply of products to the Informant. 

CCI held that the relevant market in the present case shall be ‘the market of Truck and Trailer Components/ parts and accessories in the State of Rajasthan”. Negating the contention of the Informant, CCI noted that Informant has not provided any information on the share of Defendant Company in the relevant market. However, based on the information available in the public domain, CCI observed that there many other players exist in the relevant market. Therefore, owing to the presence of various players in the relevant market, CCI held that Defendant Company is not a dominant player of the market. Therefore, there cannot be a case of abuse of dominance by the Defendant Company.

Apart from contending that the exclusive supply agreement was of the nature prohibited under Section 3 of the Act, the Informant further contended that the Defendant Company also fixed the prices of the products sold by the Informant, which is prohibited under Section 3(4) of the Act. CCI noted that for an agreement to be anti-competitive should not be of the nature stated under Section 3(4) but shall also have appreciable adverse effect on the competition in India. Considering the factors listed in Section 3(4) of the Act, CCI held that prima facie the Defendant Company does not seem to be creating barriers to new entrants or likely to drive existing player out of the relevant market.

Therefore, on the basis of above observations, CCI held that Defendant Company is not a dominant player in the market and the Agreement does not have appreciable adverse effect on competition.

4.       M/s HNG Float Glass Limited v. M/s Saint Gobain Glass India Limited decided on October 24, 2013

The present case was filed by M/s HNG Float Glass Limited (“HNG”) against M/s Saint Gobain Glass India Limited (“Saint Gobain”) alleging anti competitiveness and abuse of dominance in the market of clear float glass in India.

HNG stated that Saint Gobain is engaged in the market of sale and distribution of float glass and it has dominated the float glass market in India over the years. As per the notice, in the year of 2008-09, HNG and two other domestic companies namely Gold Plus Glass Industry Limited (‘Gold Plus’) and Sezal Glass Limited (“Sezal”) entered the market of float glass.

Based on the information available in a magazine about the glass industry, HNG stated that Saint Gobain has the largest share in the float glass market.  HNG also informed that Saint Gobain has international connection due to which it acquires raw material at a low cost.

HNG alleged that taking the undue advantage of its dominant position, Saint Gobain was selling float glass at an unreasonably low price, even though the price of float glass was increasing. As per the glass industry magazine, in the year 2011 the prices of raw materials of glass industry has increased and therefore the sale prices have also increased. HNG further alleged that Saint Gobain has resorted to other anti-competitive activities, such as tie-in arrangements.    

HNG further explained that Saint Gobain is the only player, which produces value added products and therefore, it is able to subsidize its losses incurred on selling float glass at low prices.

HNG alleged that as an effect of predatory pricing, Sezal left the market of float glass and sold its business to Saint Gobain, which has further increased its shares in the market. HNG also contended that just after the acquisition of Sezal, Saint Gobain has increased its prices.

CCI held the relevant market as the market for ‘production and sales of clear float glass in India’. 

          Abuse of Dominance

On the basis of the information on annual production and sale by players of the market, CCI noted that the relevant market is highly competitive. CCI further stated that entry of new firms, such as Sezal and HNG shows unrestrictive entry of new entrants. On the basis of annual statements of other players of the market, CCI also noted that Saint Gobain has less fixed assets as compared to the fixed assets of Asahi India Glass Limited.

CCI also stated that though on the basis of total quantity sold and range of products, it seems that Saint Gobain is the market leader, however the same cannot be conclusive proof of its dominance. 

CCI noted that Sezal and HNG Gold Plus have entered market almost together, which proves free entry of players. As a result of entry of new players Saint Gobain also lost some share in market. 

Based on the annual statements of players, CCI noted that though Saint Gobain acquired Sezal but it could not completely clear-off the loss of sale, earlier suffered as a result of entry of Sezal in the relevant market. However, other players have maintained their shares.

Lastly, CCI took into consideration, the testimonies of glass manufactures, which states that HNG’s prices are lower than Saint Gobain. 

Therefore, CCI held that Saint Gobain is not the dominant player of the market.

          Predatory Pricing

On the issue of predatory pricing, CCI stated that the same could not be substantiated with the data on sale and production put before it. CCI further stated that in 2011, Saint Gobain’s prices were at the highest level. On the issue of increasing price after acquisition of Sezal, CCI stated that prices were increased successively and it was due to pressure of excess capacity and supply in the market.

Tie-in Arrangement

CCI stated that no document was produced to prove tie- arrangements. Testimonies of buyers and processors also provide negative report on the existence of any such arrangement.

On the basis of DG report, CCI observed that there was no evidence to show that Saint Gobain has used its market power to eliminate players from the market.  Further, on the issue of import of cheap raw material, CCI noted that the imported quantity was very small and had no effect demand and supply of product. 

Based on the above all analysis, CCI held that Saint Gobain is not a dominant player of the market and it is not engaged in any of the alleged anti-competitive activities.

5.     Association of Indian Mini Blast Furnaces v. National Mineral Development Corporation Limited decided on October 3, 2013

The case was filed by Association of Indian Mini Blast Furnaces (“Association”) against National Mineral Development Corporation Limited (“NMDC”). NMDC is a PSU and supplier iron ore in the State of Karnataka and Chhattisgarh, whereas members of the Association are consumer of NMDC.

Association informed CCI that as per the order of Supreme Court of India in the year 2011, the previous ban on mining was removed and only NMDC was ordered to resume mining from its 2 mines and to sell the extracted minerals in Karnataka through e-auction. Supreme Court further allowed NMDC to sell its old stock of ore under the supervision of Centre Empowered Committee (“CEC”).

Association mentioned that Supreme Court has also allowed NMDC to decide the prices of ore extracted from NMDC’s mines. Association further mentioned that as a result of relaxation from ban the share of NMDC increased to 61.54% from 29.43% and its operation margins reached to 78.13%.

Association alleged that NMDC has adopted arbitrary and excessive pricing mechanism. Earlier, NMDC used to adopt the “Net Back Calculation” method for calculation of prices. Pursuant to this process, international prices of export market used to form basis of the pricing. However, NMDC adopted different method of pricing without consulting Association. As a result of such change, 90% of the stock went unsold in an e-auction. Association further alleged that in the year 2012, NMDC increased prices, even when the international prices of iron ore were decreasing.

CCI held that the relevant market in the present case is the market of production/supply of iron ore in the State of Karnataka.

On the basis of a Press Release of Ministry of Steel published in May 2013, CCI noted that the market share of NMDC was 16%. CCI also stated that data on the market share of NMDC, as produced by Association in the present case is of no credence, as it has no source.

CCI mentioned that the relevant market and dominance is relevant only in free market, however the market in present case is being operated under the orders of Supreme Court. Therefore, most of the actions of NMDC were guided by the order of the Supreme Court. As per the orders, NMDC was directed to sell entire production by way of e-auction and Supreme Court banned sale of ore by NMDC to its long term customers under the ongoing long term contracts.

CCI also referred to an order passed by Supreme Court, which states that the basis of price of NMDC is transparent and it need not be interfered with. CCI further noted that even CEC has said that the basis of price is fair. CCI further noted that the change in the pricing policy was a result of change in the international market, where the fixation of price was shifted from annual basis to quarterly basis. CCI held that the same does raise any adverse competition concern. 

Based on the above analysis, CCI held that no prima facie case could be established against NMDC and therefore it ordered for closure of case.

 

6.      South City Group Housing Apartment Owners Association v. Larsen & Toubro Limited Dinesh P. Ranka decided by October 23, 2013

The case was filed by South City Group Housing Apartment Owners Association (“RWA”) against Larsen & Toubro Limited (“L&T”) and Dinesh P. Ranka (“Mr. Ranka”), alleging abuse of dominance and anti-competitiveness.

RWA informed that in the year 1995, L&T and Mr. Ranka had entered into a development agreement to jointly develop a residential apartment project in South City, Bangalore. As per the term of the said development agreement, the project was to be completed by the year 2002. However, the same did not happen. Further, the handed over project was not complete in entirety, as many of the amenities were either not provided or were partially provide or were not in working conditions. RWA further informed that L&T got the occupation certificate from Bangalore Development Authority (“BDA”) to show that the project is complete in its entirety.

RWA alleged that at the time of booking, the prospective buyers were informed that a common area of 34 acre will be provided within the campus of project for park, civic amenities etc. However, RWA submitted that Mr. Ranka, who was erstwhile owner of the project land has already relinquished 12 acre, out of said 34 acre, in favor of BDA. RWA further informed that at the time of executing sale deeds, the information regarding relinquishment was not disclosed to buyers and the said area was also not excluded, while calculating stamp duty.

RWA contended that, the maintenance service provider of L&T is not providing sufficient information on maintenance expenses and has made arbitrary changes in the accounting procedure.    

Aggrieved with the conduct of L&T, RWA has approached CCI. After the preliminary meetings, CCI referred the case to DG for investigation. Based on the DG’s report and documents placed before it, CCI has passed the following order.

Anti-competitiveness

On the basis of the DG’s report, CCI observed that (i) the agreement between flat buyers, L&T and the maintenance agency; and (ii) the agreement between L&T and maintenance agency cannot be categorized as agreement under section 3(3) of the Act, as the agreement under section 3(3) are the agreement between enterprises or persons engaged in identical or similar trade. 

CCI also stated that the above stated agreements between flat owners and L&T and maintenance agency cannot be covered even under section 3(4) of the Act. As per CCI, the agreements given under section 3(4) are the agreements between persons and enterprises operating at the different level of production chain and in different market. Citing its earlier decisions, CCI held that the L&T, flat owners and maintenance agency cannot be held to be functioning at different level of production chain and in different market. Therefore, CCI decided that L&T has not violated section 3(3) and 3(4) of the Act. 

Abuse of dominance

Relevant Market

As per the information provided by RWA and DG’s report, CCI noted that two relevant market exists in the present case i.e. “the market for provision of services for development of residential units in Bangalore” (First Relevant Market) and “the market for services of estate management and maintenance in Bangalore (Second Relevant Market).

Dominant Position

On the basis of finding of DG’s report, CCI observed that even though L&T has a sound infrastructure facilities and latest technologies but it has minimal presence in First Relevant Market. It was found in the DG’s investigation that L&T has only one project in the First Relevant Market and there are other major developers with similar projects in the First Relevant Market. Based on this finding, CCI noted that L&T is not operating independently of competing forces. Further, there are no entry barriers in the market as several other players are present in the said relevant market. CCI further noted that Mr. Ranka is an individual developer and his share is also minimal in First Relevant Market. Therefore, L&T and Mr. Ranka are not dominant players in the First Relevant Market.

On the issue of dominance in Second Relevant Market, CCI noted that L&T and Mr. Ranka do not operate in the said relevant market and L&T has appointed a third party maintenance agency. CCI further noted that there are several other maintenance agencies operating in the Second Relevant Market. Therefore, CCI held that L&T and Mr. Ranka are not dominant players in the Second Relevant Market, as they do not operate in it.

Based on the above findings and analysis, CCI held that L&T and Mr. Ranka are not engaged in anti-competitive activities and are not dominant in both the relevant markets. Therefore, CCI orders for closure of the case.

C.      Combination Registrations

1.       Combination Registration No. C-2013/09/131 decided on October 3, 2013

The notice for combination was filed by Ushdev Windpark Private Limited (“UWPL” or “Acquirer”) pursuant to a Business Transfer Agreement (“BTA”) entered into between Ushdev Power Holdings Private Limited (“UPHPL”),  UWPL, Gupta Corporation Private Limited (“GCPL”), Gupta Coal India Private Limited (“GCIPL”), Gupta Infrastructure India Private Limited (“GIIPL”) and Gupta Realinfra Ventures Private Limited (“GRVPL”). 

As per the proposed combination, UWPL will acquire certain wind power projects from GCIPL, which including its wind power generation units in the state of Maharashtra and Rajasthan (“Wind Power Business”). However, before effecting the said transfer of Wind Power Business to UWPL, GCIPL will get merged with GIIPL. GIIPL has agreed to subrogate itself into the position of GCIPL, to transfer the Wind Power Business to UWPL, subsequent to aforesaid scheme of arrangement coming into effect.

As per the notice, UWPL is an unlisted company engaged in the business of generation and sale of wind power in the state of Tamil Nadu. UPHPL is the holding company of UWPL engaged in the business of generation and sale of wind power in the states of Maharashtra, Tamil Nadu, Karnataka, Gujarat and Rajasthan.

As per the notice, apart from the business of generation and sale of wind power in the state of Rajasthan and Maharashtra, GCIPL is primarily engaged in the business of trading of coal. GCPL is the holding company of GCIPL and is engaged in the business of providing business, financial management and administrative services to several companies. GIIPL and its promoter company GRVPL are both engaged in the business of construction-development and management of infrastructure and real estate.

On the basis of information provided in the notice, CCI noted that as on February, 2013 the total wind power generation capacity in India was 18,551 MW. The share of Rajasthan and Maharashtra in the total wind power generation was of 2976 MW and 2355 MW, respectively.

As per the notice, pursuant to the proposed combination, the power generation capacity of Acquirer and its group companies will increase from existing 61.25MW to 75.65MW on pan India basis. Whereas, particularly in the state of Maharashtra and Rajasthan, the wind power generation capacity of UPHPL and its subsidiaries will increase from 6.55MW and 27.50 MW, respectively, post proposed combination.

On the basis of the above observations, CCI held that post combination the total installed wind power generation capacity of UPHPL will remain insignificant in the state of Rajasthan and Maharashtra, as well as in the whole of India. CCI further noted that as post combination GCIPL will cease to operate in the business of generation and selling of wind power, the combination will not have appreciable adverse effect on competition in market. Hence, CCI approved the proposed combination.

           

2.       Combination Registration No. C-2013/09/132 decided on October 14, 2013

The notice for combination was filed by Terra Transmission & Distribution India Private Limited (“Terra” or “Acquirer”). The proposed combination was pursuant to a business transfer agreement entered into between Terra and Vijai Electricals Limited (“Vijai”).  As per the proposed combination, Terra would acquire certain assets of Rudraram Plant of Vijai, such as the distribution transformers, the power transformers, and the switchgears (“Business”).

As per the notice, Terra is part of Toshiba Group of Japan and is subsidiary of Toshiba Corporation. The Toshiba Group is engaged inter alia in the business of manufacturing electrical transmission and distribution equipment, including power transformers, distribution transformers and switchgears. The Toshiba Group has no presence in the market of electrical transmission and distribution equipment in India and Terra has been specially incorporated for the purpose of acquiring Business from Vijai.          
As per the notice, Vijai is an unlisted company engaged in the manufacturing and sale of electrical transmission and distribution equipment, such as transformers, switchgears and cables. It was further stated that Vijai is involved in the rural electrification and extra high voltage projects.

As per the notice, apart from the relevant Business, Rudraram Plant also manufactures copper, wire rod and amorphous metal, which will be retained by Vijai, even after combination. Further, post combination rural electrification and extra high voltage projects will also be retained by Vijai.

Based on the information provided in “Indian Electrical Equipment Industry Mission Plan 2012-2022” issued by Ministry of Heavy Industries & Public Enterprises, CCI noted that in the year 2011-2012, the size of Indian electrical industry was estimated to be 1.2 lakh crore. CCI further observed that out of the total size of electrical industry, the size of transformers was Rs. 12,400 crore and size of switchgears and control gears was Rs 9800 crore. Based on the abovementioned information and information provided in notice, CCI observed that the estimated share of Vijai in the electrical transmission and distribution equipment market is insignificant.

CCI noted that the Acquirer is currently not present in the market of electrical transmission and distribution equipment and even post combination, the share of Acquirer will be insignificant. CCI also acknowledged the fact that there are several other players in electrical transmission and distribution equipment market.

Based on the above observations and analysis, CCI approved the combination.

3.       Combination Registration No. C-2013/10/133 decided on October 22, 2013

The notice for combination was filed by Toho Titanium Company Limited (“TTC” or “Acquirer”). The proposed combination was in pursuance with a business transfer agreement entered into between Nippon Steel & Sumitomo Metal Corporation (“NSSMC”) and TTC (NSSMC and TTC collectively be referred as “Parties to Combination”).

As per the proposed combination, TTC will acquire 34% stake in Nippon Steel & Sumikin Naoetsu Titanium Company Limited (“NSSNTC”). NSSNTC is a proposed subsidiary of NSSMC, which will be incorporated pursuant to this combination.

The proposed combination will be executed in following three steps:

1.  NSSNTC will be incorporated as a wholly owned subsidiary of NSSMC. Subsequently, NSSMC will transfer a part of its titanium materials melting business being operated by it in Japan to NSSNTC.

2.   NSSNTC will acquire two vacuum arc re-melting furnaces of Osaka Titanium Technologies        Company Limited.

3.    TTC would acquire 34% stake in NSSNTC.

As per the notice, post combination NSSMC and TTC will jointly operate NSSNTC. NSSNTC will supply titanium ingots to NSSMC and/or TTC in Japan to manufacture titanium alloys in Japan. TTC is a Japan based company and is engaged in the manufacture of titanium sponges and titanium ingots. TTC does not have any operation in India.

NSSMC is also stated to be a Japan based company having primary business of manufacturing and sale of steel products. In addition to its primary business, NSSMC is also engaged in the business of engineering and construction, chemicals, marine and land transportation, electronic products, computer system solutions and titanium alloys. As per the notice, NSSMC has business operations in India through its various subsidiaries. However, none of its subsidiaries are engaged in the business of titanium.

On the basis of information provided in notice, CCI observed that Parties to Combination are engaged in the business of manufacture and sale of titanium products globally but not in India. CCI further observed that post combination, NSSMC and TTC will not have any vertical relationship.

Therefore, based on the above information, CCI held that the present combination will not have adverse appreciable effect of competition in India. Therefore, CCI approved the proposed combination.   

4.       Combination Registration No. C-2013/08/128 decided on October 23, 2013

The notice for combination was given by Publicis Groupe S.A. (“Publicis”) and Omnicom Group Inc. (“Omnicom”). The proposed combination was in pursuance of a Business Combination Agreement entered between Publicis and Omnicom (“BCA”).

As per the terms of BCA, the proposed combination will take place in following two steps:

1.  A holding company with a name Publicis Omnicom Group N.V. (“Holding Company”) will      be incorporate in Netherlands, and Publicis will be merged with the Holding Company. Holding Company will be the surviving entity.

2.  A wholly-owned subsidiary of Holding Company (“Subsidiary”) will be incorporate in New York, and Subsidiary will get merged into Omnicon. Omnicon will be the surviving entity.

It was stated that post combination, the shareholders of Publicis and Omnicon will hold 50.64 per cent and 49.36 per cent of the equity share capital of Holding Company, respectively.

As per the notice, both Publicis and Omnicom (“Parties to Combination”) are international communications and advertising groups provide advertising and marketing services globally, including India. Publicis is headquartered in Paris and Omnicom is headquatered in New York.

CCI observed that the present combination pertains to advertising and marketing services industry. CCI noted that advertising and marketing services can be classified in two categories i.e. Marketing and Communications Services (“MCS”) and Media Buying Services (“MBS”). MCS includes brand campaigning, producing and designing advertisement, whereas MCS includes purchasing of advertisement space on various media such as television and radio.

CCI noted that the Parties to Combination are present in the both MCS and MBS business in India. CCI observed that Parties to Combination faces competition from many international and domestic players in MCS market of India and post combination also their competition will continue.

On MBS business, CCI observed that akin to MCS business Parties to Combination have individually faced competition and will continue to face it even after the proposed combination. CCI further observed that few MCS agencies also have their in-house MBS agency, which bypasses the role of other MBS agencies.

Considering the quantum of competition faced by Parties to Combination and sufficient countervailing powers to customers, CCI held that the present combination will not have appreciable adverse effect on competition in India. Therefore, CCI approved the proposed combination.       

5.       Combination Registration No. C-2013/10/134 decided on October 24, 2013

The notice for combination was filed by Microsoft and Microsoft International (“Acquirers”). As per the proposed combination, Microsoft will acquire Devices and Services Business (“D&S Business”) of Nokia Corporation (“Nokia”). The proposed combination was pursuant to a Purchase Agreement entered between Acquirers and Nokia (“Agreement”).

Transaction

As per the notice, D&S Business of Nokia includes production, design, sales and marketing, support and design patents of mobile phones and smart devices. It was proposed that Nokia will grant a non-exclusive license of its patents to Microsoft for ten years and with an option to extend it for perpetuity. Whereas, Microsoft will allow Nokia to use Microsoft’s patent for services provided by HERE North America LLC (“HERE”). HERE is stated to be subsidiary of Nokia. In addition to above, Nokia will also grant a non-exclusive license of its HERE geospatial data and services to Microsoft for four years. Lastly, as per the notice, Nokia will continue to own and maintain the Nokia brand.         

Parties to Combination 

As per the notice, Microsoft is a multinational software corporation of USA, and is primarily involved in the design, development and supply of computer software, hardware devices and related services. Microsoft International was stated to be an investment holding company incorporated in Netherlands. Whereas, Nokia was stated to be a multinational communications and information technology corporation of Finland, engaged in the business of development and supply of mobile devices. HERE is a subsidiary of Nokia and develops location based products and services. 

Operations of Parties in India

In India, Microsoft operates through its subsidiaries and divisions, which represent its products cycle, systems and applications and various state -of-the-art technologies. Whereas, Nokia is operates its D&S business and Nokia Solutions Networks business in India through its various subsidiaries and divisions. Nokia also conducts research and development and has mobile device manufacturing facilities in India.

Observations of CCI

On the basis of the information provided in notice, CCI observed that Microsoft does not have D&S business in India, whereas Nokia is not active in the business of developing operating systems and software in India. Therefore, CCI held that even though a vertical relationship exists between the Acquirer and Nokia, Microsoft has a minimal share in the vertical relation. Further, there are other players present in market such as Google and Apple.

CCI further noted that Nokia has a minimal share in the business of mobiles /smartphones in India and there are many other players present in the market such as Sony, Blackberry, Samsung, Apple.

CCI stated that D&S business of mobile/smartphones is dynamic and is constantly evolving, which makes products outdated within a short span time. Hence, the application developers are always encouraged to make new and better quality products. CCI further stated that this combination will provide an opportunity to Microsoft to develop a new eco-system other than Google and Apple, which will provide more options to the consumers.

Based on the above observations and analysis, CCI held that the present combination will not have appreciable adverse effect on competition in India. Hence, CCI approved the proposed combination.

D.      News

1.       Competition Commission of India to investigate government tender to GSK, Sanofi

CCI has asked DG, its investigation wing, to investigate into the tender process of Ministry of Health (“Ministry”) to procure Menengitis vaccine for Haj Pilgrims. Bio–Med, a vaccine maker has filed a complaint against Ministry and two international drug makers namely, Glaxo Smith Kline (“GSK”) and Sanofi Aventis (“Sanofi”).

Bio-Med has that Ministry has repeatedly changed its bidding qualification for favoring GSK and Sanofi. Bio-Med stated that in year 2004, the eligibility criterion required an applicant to have two years of experience of manufacturing the vaccine and an annual turnover of Rs. 10 crore. Subsequently, in the year 2008, minimum turnover requirement was increased to Rs. 20 crore. In the year 2011, the Ministry further changed the minimum turnover requirement to Rs. 50 crore for proceeding three financial years.

Bio-Med informed that due to the revised requirement of higher turnover, it was disqualified from tendering process and tender was left only for GSK and Sanofi. However, both the companies left the tender stating non-availability of vaccine. Therefore, Bio-Med was again asked to supply vaccine.

Bio-Med stated that in year 2012-13, Ministry again imposed Rs. 50 crore turnover qualification condition. Bio-Med also alleged that GSK and Sanofi colluded to split the supply of vaccine among each other through bid rotation and geographical allocation. Continuing its allegations, Bio-Med contended that in year 2013, Sanofi raised the price of vaccine by 15%. Bio-Med also mentioned that Sanofi was supplying vaccine for Rs. 5 crore, which Bio-Med would have provided only in Rs. 3 crore. 

Based on the above allegations, CCI opined that a prima facie case could be established against Ministry and both the vaccine manufacturers. Accordingly, it ordered DG to investigate the matter.     

2.       Role of key officials at corporates violating norms under CCI scanner

Mr. Anurag Goel, member of CCI has recently stated in a conference that to strengthen the efforts to curb unfair trade practices, CCI may levy penalty on directors or officers or any key person along with the company violating fair trade norms. 

He stated that CCI is empowered to do the same, even though in its first three years of operation, it has penalized only the defaulting entities and not their key officials. In the coming future, it may impose penalty on key officials as well. He further said that DG has been directed to investigate key officials of an entity as well, if such an entity is found violating competition norms.

****************************************************

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