Competition Law: Legal Milestones in 2018 and Future Prospects

Introduction:

2018 witnessed several notable developments in the competition law regime of India, with welcome changes, brought about by the Competition Commission of India ('CCI') and the Ministry of Corporate Affairs ('MCA', to promote a business-friendly ecosystem in India.

On the legislative front, the merger control process has been further simplified to benefit notifying parties. On the enforcement front, the National Company Appellate Tribunal ('NCLAT') and the Supreme Court of India have both laid down landmark precedents.

Major Developments in 2018:

1. Legislative Changes

A. Amendments to the Combination Regulations

(a) Modifications may be offered before a Show Cause Notice ('SCN') issued by the CCI

The amendment allows parties to the combination to offer voluntary modifications at the Phase I review stage prior to the CCI forming an opinion under Section 29(1) of the Competition Act, 2002 ('Act'). The change introduced to Regulation 19(2) of the Competition Commission of India (Procedure in regard to the transaction of Business relating to Combinations) Regulations, 2011, ('Combination Regulations'), expedites the CCI's process of forming a prima facie opinion of the combination as it now permits for an exclusion of a period of 15 days from the 30-working day period available with the CCI to form its prima facie view of the combination.

(b) Opportunity to offer modifications even after the issuance of SCN issued by the CCI

The amendment permits the parties to the combination to offer voluntary modifications post the issuance of an SCN under Section 29(1) of the Act, to address the prima facie concerns raised by the CCI. This amendment is a welcome move, as it gives the parties an opportunity to address the specific concerns arising out of the combination without prior to the initiation of an in-depth Phase II investigation.

(c) Appointment of supervising agencies for the implementation of the modifications

The amendment also permits the CCI to appoint supervisory agencies, such as monitoring trustees, to oversee the implementation of the modifications to the proposed combination. This amendment supplements the opportunity provided to the parties to the combination, to offer modifications under Regulation 19(2) and Regulation 25(1A) and thereafter, supervisory agencies being appointed to implement such modifications.

(d) Opportunity to withdraw and re-file notice

The amendment enables the parties to the combination with an opportunity to withdraw and subsequently re-file their merger notification at any time prior to the issuance of a SCN under Section 29(1) of the Act. This is a positive change as it permits parties to withdraw their merger filing and supplement with the required information based on their deal structure. This amendment is a step in the right direction and is in line with other mature antitrust jurisdictions.

B. Amendments to the General Regulations

Regulation 46A has now been introduced to the Competition Commission of India (General) Regulations, 2009 ('General Regulations') which requires prior authorization by the Director General ('DG') for an advocate to accompany any person summoned by the DG. It also cracks down on misconduct by advocate(s) and enables the CCI, pursuant to a complaint by the DG, to bar such advocate(s), guilty of misconduct, from appearing in proceedings before the DG or the CCI in the future or for a period that the CCI deems necessary. It also empowers the CCI, through the Secretary, to send such a complaint of misconduct to the concerned Bar Council of the State where the advocate is a member.

2. Landmark Judgments

A. Rajasthan Cylinders: LPG Cylinder Cartel

The Apex Court set aside the orders of the CCI and the erstwhile Competition Appellate Tribunal ('COMPAT'), holding that there was not sufficient evidence to hold the LPG cylinder manufacturers in violation of the Act. In its assessment of the prevailing market conditions in the LPG cylinder market, the Supreme Court held that the market was characterized by oligopoly which prevailed on account of limited buyers and the influence of buyers in the fixation of prices. In this regard, the Apex Court concluded that the LPG cylinder manufacturers had discharged their burden of proof by explaining that the parallel behaviour was not a result of concerted practice but of the market conditions where Indian Oil Corporation Ltd. ('IOCL') was calling the shots with respect to price control.

B. Cellular Operators: CCI v. TRAI

The Supreme Court dismissed the appeal filed against the Bombay High Court ruling that the CCI had no jurisdiction to pass orders in relation to issues which were covered by Indian Telegraph Act, 1885 and Telecom Regulatory Authority Act, 1997 and the appropriate forum was the Telecom Dispute Settlement and Appellate Tribunal ('TDSAT'). In the present matter, the Court was faced with determining the width and scope of the powers of the CCI under the Act pertaining to telecom sector vis-a-vis the scope of the powers of Telecom Regulatory Authority of India ('TRAI') under the TRAI Act, 1997. On the issue of jurisdiction, the Supreme Court held that the High Court was right in concluding that the concepts of 'subscriber', 'test period', 'reasonable demand', etc, arising out of TRAI Act and the policy so declared, are matters within the jurisdiction of TDSAT under the TRAI Act. Only when the jurisdictional facts in the present matter were determined by the TRAI against the respondents, the next question would arise as to whether it was a result of any concerted agreement between the respondents. It would be at that stage the CCI can go into the question as to whether violation of the provisions of TRAI Act amounts to ‘abuse of dominance' or ‘anti-competitive agreements'. Nevertheless, the Supreme Court concluded that the function that is assigned to CCI is distinct from the function of TRAI. It is within the exhaustive domain of CCI to find out as to whether a particular agreement will have an appreciable adverse effect on competition ('AAEC') within the relevant market in India. Such functions not only come within the domain of CCI, but CCI is best equipped to deal with such matters.

C. Defining Relevant Market under Section 3

In its 2017 judgment in CCI v. Coordination Committee of Artists and Technicians of West Bengal Film and Television Industry, the Apex Court had observed that Section 19(3) specifically uses the term ‘market' – interpreted to be ‘relevant market' – and thus, it was a pre-requisite under Section 3 to firstly delineate the relevant market where AAEC was to be assessed. Being a departure from CCI's prior decisional practice, this observation caused much confusion and uncertainty amongst parties and the CCI itself. Consequently, in 2018, by way of a Clarification Order, the Supreme Court clarified that the relevant market need not be delineated and is not a mandatory condition for determination of contraventions of Section 3, especially in cases where the impugned agreement or conduct falls within the presumptions prescribed statutorily in Section 3.

D. NCLAT in favor of Hyundai

The NCLAT set aside the CCI's order against Hyundai Motors India Limited ('HMIL'), found guilty by the CCI for entering into tie-in arrangements and resale price maintenance, on the following grounds:

• The DG and the CCI haven't decided the relevant market.

• The regulator has contradicted its stance on tie-in arrangement.

• The DG's report is merely an opinion primarily to assist the CCI for appreciation of evidence in arriving at a final conclusion during the inquiry.

• The CCI is expected to analyse the evidence and the report and required to read it in conjunction with other evidence on record and then to form its final opinion as to whether such report is worthy of reliance or not.

• The CCI's order is only based on findings of the DG which is not permissible.

Conclusion: The Road Ahead

In the past 10 years, since the Act came into effect, the Indian economy has seen unprecedented growth which has made India amongst the top five economies in the world today. This growth is expected to rise in the coming years. In this context, the Central Government felt the necessity of strengthening and recalibrating the Indian Competition Law regime in order to promote best practices. In the same breath, a Competition Law Review Committee has been established.

The broad key objectives of this Review Committee are as follows:

1. To review the Competition Act/ Rules/ Regulations, in view of changing business environment and bring necessary changes, if required;

2. To look into international best practices in the competition fields, especially anti-trust laws, merger guidelines and handling cross border competition issues;

3. To study other regulatory regimes/ institutional mechanisms/ government policies which overlap with the Competition Act; and

4. Any other matters related to competition issue and considered necessary by the Committee.

The Review Committee is an essential move at this stage of evolution of the Indian Competition Law regime, as the CCI has been in place for nearly a decade and must strive to align itself with its global counterparts and their best practices, in order to instill faith in the competition law regime and regulation with greater clarity and certainty, for the benefit of both businesses and customers. The recommendations submitted by the Review Committee will have far-reaching implications but are expected to be more business-friendly, in line with the Government's pro-business policy objective.

 

Abhishek Das 
on 09 September 2019
Published in Others
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