The Quarterly Newsletter of Competition Commission of India (CCI)
Fair competition
for greater good
VOLUME 7 : OCTOBER - DECEMBER 2013
In Focus : BRICS Way to Competition Cooperation
IN THIS ISSUE...
3
FROM THE DESK OF THE CHAIRPERSON
4
10
IN FOCUS BRICS WAY TO COMPETITION
COOPERATION
INAUGURAL ADDRESS OF
HON’BLE PRIME MINISTER
13
16
SECTION 3 & 4
ORDERS
SECTION 5 & 6
ORDERS
20
21
INVESTIGATIONS
INITIATED
ADVOCACY
INITIATIVES
22
24
ENGAGING WITH
THE WORLD
EVENTS
25
27
DEVELOPMENTS IN
OTHER JURISDICTIONS
KNOW YOUR COMPETITION ACT
EDITOR:
DR. SEEMA GAUR
SUB EDITOR:
DR. SANJAY PANDEY
Fair Play Volume 7 : October - December 2013
2
FROM THE DESK OF THE CHAIRPERSON
More than a hundred nations have enacted Competition Laws. Increasingly, however, the practices and
transactions that fall within the purview of the laws are in international commerce. Laws are national, but
markets do not stop at national borders. Money flows seamlessly and multinationals operate all over the
world. Hence, the need for broadly harmonized principles in the application of divergent Competition
Laws under different flags. A basic building block, in pursuance of this objective is co-operation between
and amongst competition authorities. This also serves to build capacity in newer jurisdictions. The
Competition Act, 2002 specifically provides for this; Section 18 provides that…. “the Commission may, for
the purpose of discharging its duties or functions under this Act, enter into any memorandum or
arrangement, with the prior approval of the Central Government, with any agency of any foreign country.”
The Competition Commission of India (CCI) has, right from its inception, taken this provision seriously. We
have signed Memorandam of Understanding (MOU) with the Russian Federation, United States Federal
Trade Commission and Department of Justice, the Australian Competition and Consumer Commission and,
more recently, with the European Commission. To carry this forward, we are considering MOU’s with
BRICS countries as a grouping, with China, Japan and some other countries.
The agreements will enable the professional staff of the CCI to interact with their counterparts and work
jointly to mutual advantage on matters, more specifically on global cartel investigations and on Mergers and
Acquisitions with the potential of adverse effects on competition in India. It will also provide the necessary
umbrella for cross-border learning through the instrument of secondments and short-training programmes.
All the BRICS economies have embraced modern competition law. Like so many other countries, they are
now more open and more connected to the world than in the past. They are facing several common
challenges in implementation of the law. When challenges are by and large similar, it makes sense to
cooperate and learn from each other rather than reinventing the wheel again. BRICS Competition platform
is a fit platform to do this and resolve to cooperate among BRICS competition authorities is very clear.
Ashok Chawla
3
Volume 7Volume
: October
5 : -April
December
- June 2013 Fair Play
IN FOCUS
BRICS
Way to
Competition
Cooperation
“Business and money know no geographical
boundaries. The increasing integration of the
world economy in the form of multi-jurisdictional
mergers and cross-border anti-competitive
conduct makes international cooperation vitally
important for all modern competition
authorities.”
Dr. Manmohan Singh, Hon'ble Prime Minister of India
Fair Play Volume 7 : October - December 2013
4
3rd BRICS International
Competition
Conference
The third BRICS International
Competition Conference was
organised by the Competition
Commission of India in New
Delhi during November 21-22,
2013. The theme of the
conference was “Competition
Enforcement in BRICS Countries:
Issues and Challenges”.
Approximately three hundred
delegates from India and other
jurisdictions, including
delegates from the BRICS
competition authorities
participated in the
conference. The conference
was inaugurated by Hon'ble
Prime Minister of India Dr.
Manmohan Singh, on
November 21, 2013. Hon'ble
Minister of Corporate Affairs
Mr. Sachin Pilot delivered the
key note address.
The two day Conference
consisted of 6 substantive
5
sessions, besides the inaugural,
plenary and closing sessions.
During the conference,
discussions focused on issues
and challenges in setting up an
effective agency, enforcement
vis-à-vis state owned
enterprises, public procurement
and creation of competition
culture. A separate session was
provided for experience sharing
by mature jurisdictions. The last
session deliberated on
transforming cooperation from
ideas into action. The
Volume 7 : October - December 2013 Fair Play
“...the competition
authorities of the BRICS
embark on an exercise of
jointly addressing the
common challenges they
face in enforcing
competition regimes. This
could be done on the
basis of home-grown
solutions proposed by
BRICS competition
authorities as well as the
experience of more
mature jurisdictions
shared during the
conference.”
Shri Sachin Pilot, Hon'ble
Minister of State (IC) for
Corporate Affairs.
Chairperson, Competition
Appellate Tribunal Mr. Justice
(Retd) V. S. Sirpurkar, delivered
the keynote address during the
closing session of the
Conference on November 22,
2013.
Experience Sharing as a
Tool of Competition
Cooperation
CCI Chairperson Mr. Ashok
Chawla traced the evolution of
BRICS from being a virtual
organisation to a global reality
and emphasised the vital role
played by the BRICS economies
in changing the landscape of
economic reforms at domestic,
regional and global level.
Hon'ble Prime Minister Dr.
Manmohan Singh observed, “…
BRICS competition authorities
face unique challenges in the
enforcement of competition law
such as under development,
institutional design problems
and government regulations.
International cooperation would
play a role in facing these real world challenges, which are
significant for successful
implementation of a competition
regime.” He also stated that
increasing integration of the
world economy in the form of
multi-jurisdictional mergers and
cross-border anti-competitive
conduct makes international
cooperation vitally important for
all modern competition
authorities. He appreciated that
the present conference has
brought together leading
practitioners and thinkers from
Fair Play Volume 7 : October - December 2013
6
the field of competition to
provide cross-learning and
appreciation of global best
practices. It is singularly well
suited to share experiences
regarding common challenges
and articulate a new consensus
on key issues. BRICS
Competition Authorities are
also ideally positioned to bridge
the gap between mature
competition authorities and
nascent ones.
It is worth noting that the BRICS
International Competition
Conference since its inception
in 2009 has focused on
experience sharing on
competition enforcement
(amongst the BRICS countries as
well as with other competition
jurisdictions) as a tool of
competition cooperation. This
was aptly stated by Union
Minister of State (Independent
Charge), Ministry of Corporate
Affairs Mr. Sachin Pilot during
his keynote address, “Since the
first conference in 2009, the
BRICS countries have come a
long way. The theme of each
successive BRICS International
Competition Conference has
focused on deeper cooperation
and understanding of the
respective competition
authorities. BRICS competition
conferences provide the
building blocks for a formal
collaborative process.”
New Vistas of
Cooperation
BRICS Competition Authorities
identified several areas of co-
operation amongst them. The
role of competition cooperation
was considered relevant for a
competition authority in its
initial setup, capacity building,
institutional development,
operational effectiveness, and
tackling of various challenges
faced. Experience sharing on
advocacy for developing culture
of competition was also
identified as an area of
cooperation. State owned
enterprises are very important
part of BRICS economies and
BRICS competition authorities
face largely similar challenges in
enforcing competition law
Competition Law, Innovation and Economic
Development: Experience Sharing by Mature
Jurisdictions
A unique feature of the New Delhi conference was a special session
on experience sharing by mature jurisdictions (Australia, Canada
EU, France and the USA) on role of competition law in encouraging
innovation and economic development. Mr. Joaquín Almunia, Vice
President (EC) & European Commissioner for Competition delivered
the keynote speech. It was recognised that competition policy is
the best policy to foster innovation, economic development and
good governance.
7
Volume 7 : October - December 2013 Fair Play
cooperation, especially when
BRICS countries themselves are
competitors in global trade.
The Delhi Accord
Fusion of Indian and Western music - a performance by Tripti - The mystical sounds
of the Golden Bird at the welcome reception on November 20, 2013.
against them. Mutual
experience sharing on
competition enforcement
against them to ensure level
playing field, while keeping in
view socio-economic
obligations imposed on them is
a rich area for BRICS
competition cooperation.
Another area is public
procurement, which constitutes
a very significant proportion of
BRICS economies. Experience
sharing on how to detect bid
rigging in public procurement
markets and rid them of it and
ensure value for public money
may be highly useful for BRICS
competition authorities. The
mode or instrumentality of
cooperation may include
formation of working teams,
training, staff exchange and
MOU. BRICS competition
authorities also recognised
challenges they may face in
The BRICS Competition
Authorities recognised the
global nature of competition
law and its impact on the
development of the economy
and signed the “Delhi Accord”
during the 3rd BRICS
International Competition
Conference. The signing of the
Delhi Accord is a reiteration of
the commitment of the BRICS
countries to enhance
cooperation among them to
meet the challenges of
competition enforcement. They
also recognised the benefits of
technical cooperation in respect
of the sound and effective
enforcement of competition
laws and expressed their
commitment to exchange views
and experiences on different
aspects of competition policy.
The Accord also expressed the
commitment of Competition
Authorities of Brazil, Russia,
India, and China to support the
hosting of the Fourth BRICS
International Competition
Conference in 2015 by the
Competition Commission of
South Africa.
The Way Ahead
Classical Dances of India by Reela Hota Troupe at the dinner reception on
November 21, 2013.
Fair Play Volume 7 : October - December 2013
8
The need of international
cooperation in competition
enforcement has grown by
leaps and bounds due to the
increasingly global nature of
anti-competitive activities and
Russia
Brazil
China
South Africa
Bilateral Meetings with BRICS delegations
the role played by the BRICS
International Competition
Conference in this respect is
very vital. The New Delhi
BRICS competition conference
heralds a new phase of
competition cooperation
wherein competition authorities
of emerging economies and
mature jurisdictions shared
enforcement experience and
identified solutions to make
businesses and government
institutions competition
compliant. The experience
sharing by various competition
jurisdictions regarding
challenges faced in
enforcing their respective
competition law provides
a roadmap for the future
cooperation. This includes
inter –alia exchange of
experience in competition
advocacy, sharing of
confidential information
for enforcement, and
capacity building. BRICS
competition authorities
need to initiate joint
action in order to
transform ideas generated
in BRICS competition
conferences into action.
9
Chairperson, Competition Appellate Tribunal
Mr. Justice (Retd) V. S. Sirpurkar, delivering the
keynote address in the closing session.
Volume 7 : October - December 2013 Fair Play
3rd BRICS International Competition Conference
Inaugural
Address
By Hon'ble
Prime Minister
Dr. Manmohan
Singh
Minister for Corporate Affairs,
Shri Sachin Pilot ji,
Vice-President, European
Commission, Mr. Almunia,
Chairman, Competition
Commission of India, Shri Ashok
Chawla, Members of the
Commission, Distinguished
Delegates, Ladies and Gentlemen!
It gives me great pleasure to be in
your midst on the occasion of the
3rd BRICS International
Competition Conference. I extend
my warm greetings to all our
guests.
The BRICS partnership started as a
loose juxtaposition of
geographically dispersed countries
based on features such as growth
rates, sizeable educated
workforces, large domestic markets
and natural resource endowments.
The BRICS countries have a
combined population of 3 billion
with a total estimated GDP of
nearly $14 trillion and around $4
trillion of foreign exchange
reserves. China is on the path to
becoming the undisputed global
leader in export of manufactured
goods; India is poised to become
Fair Play Volume 7 : October - December 2013
10
the most significant exporter of
services. Russia and Brazil
dominate as exporters of raw
materials. South Africa is ideally
situated to reap dividends from the
untapped growth potential of the
African continent.
While the BRICS countries can
entertain many possibilities for
newer forms of economic and
political co-ordination, we also
face common challenges.
Monitoring and managing
speculative capital flows is a
challenging task in times of global
uncertainty. Maintaining a
sustainable fiscal policy, while
incurring significant public
expenditures to raise the standards
of living of a large population, is
also a task that we continually
grapple with. Developing
infrastructure at a pace that
supports the growth of industry
and the increasing aspirations of
the people is another challenge
before us. Last, but by no means
least, there is the need for building
credible institutions for sustained
and equitable growth.
Ladies and Gentlemen,
The BRICS countries have chosen
differing growth paths suited to
their macroeconomic conditions
and varied institutional strengths.
Yet, I have no doubt that their
emergence as economic
powerhouses, is now an
inescapable secular trend which
will have a powerful impact on the
world. Along with our goal of
strong and sustained economic
growth, we have made a
commitment to support the longterm growth of the global economy.
This is expected through increased
economic, finance and trade
cooperation as mentioned in the
Sanya Declaration of 2011. In
keeping with this, there has been
continuous development of BRICS
as an institution, which has created
structures for cooperation at
different levels, in various areas.
Two of the most significant
agreements in the pipeline are
those that will result in the setting
up of a BRICS Development Bank
and a Contingency Reserve
Arrangement.
Ladies and Gentlemen,
Growth, development and poverty
reduction are the most important
challenges that our governments
face. To meet these challenges,
governments look for a sound
architecture of policy in which the
beneficial effects of markets can be
maximised by action to prevent
market failure. The development of
a sound Competition policy is an
11
essential element of such
architecture. Anti-competitive
behaviour deprives markets of their
ability to deliver efficient results
and hurts the poor most of all.
But fair and effective competition
in markets is easier said than done.
It has to be created and enforced
through public policy. Otherwise,
private barriers may simply
substitute governmental barriers to
trade and prevent improvements in
social welfare.
In 1991, India embarked on a path
of economic reforms, the essential
elements of which were
liberalization, privatization and
globalization. The erstwhile
Monopolies and Restrictive Trade
Practices Act of 1969, enacted at a
time when India had a “command
and control” economic policy
paradigm, was inadequate to
regulate the market and ensure
promotion of competition therein.
A modern Competition Act in tune
with the new economic philosophy
was required. This led Parliament
Volume 7 : October - December 2013 Fair Play
to enact the Competition Act,
2002.Unlike the MRTP Act, the
new Competition law does not
restrict the size of firms or the
concentration of ownership.
Ladies and Gentlemen,
Emerging economies face unique
challenges in the enforcement of
competition law. In addition to the
problems of under development,
institutional design problems and
government regulation characterize
our economies. These are realworld challenges that have to be
recognised for the successful
implementation of an antitrust
regime.
A competition law enforcement
regime cannot operate in isolation
but instead is shaped and
transformed by the existing socioeconomic ideology and by other
available policy tools. The
economic objectives promoted by
competition law on the one hand
and prevailing socio-economic
ideologies on the other are often in
conflict with each other in
economies in transition. This could
limit the role and potential of
competition law enforcement
regimes. Increased awareness of
competition rules resulting in the
establishment of a competition
culture in our economies can,
therefore, go a long way in the
effective implementation of
competition law. I am glad that
creation of a competition culture is
being discussed at this conference.
There is an increasing need to
recognise the complementarities
between competition law
enforcement and liberalization of
markets for procurement. Public
procurement, more specifically, is a
substantial slice of State spending
in emerging economies.
Elimination of unnecessary
restrictions and better tender
design and specification can
enhance possibilities for effective
competition, thereby making bid
rigging more difficult. As a result,
competitive procurement markets
can help save valuable fiscal
resources and release funds for
development.
State owned or public sector
enterprises are another challenge.
By virtue of their ownership, they
have been shielded from
competition and have long enjoyed
captive markets. A crucial issue is
the exposure of these firms to
competition. The government may
own a public sector firm and
exercise the normal rights of
ownership. This does not mean it
should shelter it from competition
as well. Unfortunately, government
ownership inevitably brings with it
a bureaucratic style of decisionmaking and the end result is that
the enterprise cannot compete in a
market populated by equals. The
solution lies in giving public sector
firms greater functional autonomy
and freeing them from bureaucratic
control, and not in tolerating a slip
in their competitiveness and then
shielding them from competition.
Several possible distortions can
arise because of the advantages
some public sector businesses have
due to their government
ownership. Competitive neutrality
requires that the government not
use its legislative and fiscal powers
to give undue advantage to its own
businesses over the private sector.
Going forward, our governments
will have to increasingly adopt
competition neutral policies.
Fair Play Volume 7 : October - December 2013
12
Ladies and Gentlemen,
Cooperation in competition policy
and enforcement is of vital
importance in the above context
and I am glad that this conference
has selected these themes for
discussions and interaction.
Business and money know no
geographical boundaries. The
increasing integration of the world
economy in the form of multijurisdictional mergers and crossborder anti-competitive conduct
makes international cooperation
vitally important for all modern
competition authorities. This takes
on greater significance in view of
the increasing trade flows among
BRICS nations.
The International Competition
Conference is an important
platform that brings together
leading practitioners and thinkers
from the field of competition to
provide cross-learning and
appreciation of global best
practices. It is singularly well suited
to share experiences regarding
common challenges and articulate
a new consensus on key issues.
BRICS Competition Authorities are
also ideally positioned to bridge
the gap between mature
competition authorities and
nascent ones.
I am confident that the next two
days will see robust discussions
covering all the challenges faced by
the BRICS countries in the
enforcement of their respective
competition regimes. I wish you
the very best in this endeavour.
Thank you.
SECTION 3 & 4 ORDERS
Coal India
penalised for abuse
of dominance
transportation/other expenses from
the buyers on supply of ungraded
coal, deemed delivery quantity
(DDQ), force majeure capping on
compensation for supply of stones
for new power producers, review
and termination provisions of the
agreement and discrimination
between existing and new power
producers with respect to review of
grade for new power producers.
CCI imposed penalty of Rs
1773.05 Crore on Coal India Ltd
(CIL) for abuse of dominance
under section 4 of the Competition
Act, 2002 (the Act). CCI passed
penalising order under section 27
of the Act pursuant to investigation
by the Director General (DG) in
case Nos. 03, 11 & 59 of 2012
upon information filed by M/s
Maharashtra State Power
Generation Company Ltd. and M/s
Gujarat State Electricity
Corporation Ltd. CCI imposed
penalty on CIL at the rate of 3 per
cent of the average turnover of the
year 2009-10, 2010-11 and 201112 by taking into consideration its
consolidated accounts.
The opposite parties have also
been directed to 'cease and desist'
from indulging in any activity found
to be in contravention of the
provisions of the Act. CCI also
directed modification in fuel supply
agreements in the light of the
observations and findings recorded
in order. For effecting these
modifications in the agreements,
CCI directed CIL to consult all the
stakeholders and ensure parity
between old and new power
producers as well as between
private and PSU power producers,
as far as practicable. CIL has also
been directed to incorporate
suitable modifications in the fuel
supply agreements to provide for a
fair and joint sampling and testing
procedure. CCI suggested that CIL
may consider and examine the
feasibility of sampling at the
unloading-end in consultation with
power producers besides adopting
international best practices and
further advised CIL to consider
hastening the process of installing
Augur Sampling Machines and
washeries to help improve the coal
supplied.
CCI found that CIL operates
independently of market forces
through its subsidiaries and enjoys
undisputed dominance in the
relevant market of production and
supply of non-coking coal in India.
It was also found that the opposite
parties are imposing
unfair/discriminatory conditions
and indulging in unfair/
discriminatory conduct in the
matter of supply of non-coking
coal to power producers. Further,
CCI agreed with the findings by the
DG and held that various clauses
of the fuel supply agreements
signed with the informants were in
contravention of the provisions of
section 4(2)(a)(i) of the Act. These
clauses related to the sampling and
testing procedure, charging the
13
Volume 7 : October - December 2013 Fair Play
Modifications in FDI norms by the Government
do not constitute abuse of dominance
While considering an allegation of
abuse of dominance by
modification of policy against the
Government, CCI found
Government Department as an
enterprise under the Act. However,
CCI did not find the modified
policy abusive under the provisions
of the Act. In Case No. 39/2013,
the informant challenged the
conduct of Department of
Industrial Policy & Promotion
(DIPP), Ministry of Commerce &
Industry in revising Press Note
No.6 (2012 Series) modifying
foreign direct investment policy in
the civil aviation sector in a
manner allegedly inconsistent with
the scheme, intent and object of
the Act.
DIPP's Press Note No. 6 (2012
Series) permits foreign airlines to
invest in the capital of Indian
companies engaged in scheduled
and non-scheduled air transport
services up to a limit of 49 per cent
of their paid-up capital except Air
India. As per Informant, airlines
were allowed to participate in the
equity of companies operating
cargo airlines, helicopter and sea
plane services, but not in the equity
of scheduled and non-scheduled
air transport services. Under the
then prevalent policy of the
Government of India, 49 per cent
FDI (100 per cent for NRIs) through
automatic route was permitted in
Scheduled Air Transport
Service/Domestic Scheduled
Passenger Airlines. No foreign
airline was allowed to participate
directly or indirectly in the equity
of an Air Transport Undertaking
engaged in Scheduled and NonScheduled Air Transport Services
except Cargo airlines and was
uniformly applicable to all the
airlines (including Air India). It was
alleged that DIPP, by virtue of its
role in formulation, promotion,
approval and facilitation of FDI in
India, enjoyed a monopoly under
'Formulation, promotion, approval
Fair Play Volume 7 : October - December 2013
14
and facilitation of Foreign Direct
Investment policy in civil air
transport services in India'.
Proposed exclusion of Air India
from the changes in FDI
architecture for Civil Aviation
sector would result in reverse
discrimination against Air India at
the cost of taxpayers.
CCI noted that the policy
pronouncement on FDI through
Press Notes/Press Releases by DIPP
prima facie amounts to control of
provision of services in the relevant
market. A department of the
Government can be classified as an
enterprise, if the functions
discharged by it amounts to
'control of articles or goods, or the
provisions of services'. Accordingly,
CCI opined that prima facie, DIPP
appears to be an enterprise as
defined under section 2(h) of the
Act. However, CCI held that as per
the Government of India
(Allocation of Business) Rules, 1961
framed by the President of India in
exercise of powers conferred under
Article 77(3) of the Constitution,
DIPP is constitutionally empowered
to frame such executive policy on
FDI. The referred Press Note gave
an additional option to all private
airlines to finance their capital
needs through foreign direct
investments from foreign airlines.
This does not affect their interest
inter-se and may promote
competition in the relevant market
by facilitating cash crunch airlines
to avail FDI for their operations,
growth and expansion. Not
allowing FDI from foreign airlines in
Air India does not appear to be
hampering competition in the
relevant market any way. As
such, this action does not
prima facie seem to create any
appreciable adverse effect on
competition in markets in
India. The matter was
accordingly closed under
section 26(2) of the Act.
Quotes in narrow band are not bid rigging
alleged cartelisation by the
opposite party Nos. 2 to 4 (liaison
work contractors in coal industry)
in collusion with the opposite party
No. 1 (a company created by the
Government of Maharashtra for the
purpose of generation of power for
supply in the State of Maharashtra)
in the matter of provision of liaison
work for its thermal power stations.
An information alleging
contravention of the provisions of
sections 3 and 4 of the Act was
filed by Mr. Surendra Prasad (Case
No.61 of 2013) against M/s
Maharashtra State Power
Generation Co. Ltd. (opposite
party No. 1), M/s Nair Coal
Services Ltd. (opposite party No.
2), M/s Karam Chand Thapar &
Bros. (opposite party No.3) and
M/s Naresh Kumar & Co (opposite
party No.4) ct. The Informant
Basic thrust of the grievance of the
Informant centred around the fact
that MAHAGENCO floats tenders
for coal liasoning and subsequently
cancels them for various assigned
reasons and there upon as a stop
gap arrangements, work orders are
issued to the opposite party
contractors. Further, the Informant
alleged that the opposite party
contractors have distributed the
markets inter se and make
exorbitant quotations for their bids,
and whenever new entrants seek to
enter the market, unnecessary
disputes about qualification of such
competitors are raised by the
entrenched contractors, all in
collusion with the procurer. CCI
observed that quotes in narrow
band cannot be termed as identical
15
or similar to constitute anticompetitive agreement, absent any
other evidence or circumstance.
Further, CCI held that the opposite
party No. 1 is a government
company and examination of any
allegation of corruption or
favouritism per se on its part or on
the part of its officers is beyond the
purview of the jurisdiction of the
CCI. Further, the Commission held
that allegations of the informant
relating to contravention of the
provisions of section 4 of the Act by
opposite party No. 1 along with the
three named contractors are
misconceived as they do not fall
within the definition of 'group'.
Even at a dis-aggregated level,
assuming opposite party No. 1 to
be dominant in the market of
procurement of liaison work
relating to coal in the State of
Maharashtra, the allegations made
by the Informant against it of
favouritism and corruption cannot
be said to fall within the purview of
section 4 of the Act. Accordingly,
CCI closed the matter and passed
order under section 26(2) of the
Act.
Volume 7 : October - December 2013 Fair Play
SECTION 5 & 6 ORDERS
Jet-Airways and Etihad Airways Combination is approved
Jet Airways (India) Limited ('Jet') is
an airline primarily engaged in the
business of providing low cost and
full service scheduled air passenger
transport services within and
to/from India. Etihad Airways PJSC
('Etihad') is the national airline of
UAE, based in the emirate of Abu
Dhabi. Etihad is primarily engaged
in the business of international air
passenger transportation services.
Jet and Etihad filed a joint notice
with CCI for the acquisition of 24
per cent equity stake and certain
other rights in Jet by Etihad
pursuant to an Investment
Agreement ('IA'), a Shareholders'
Agreement ('SHA') and a
Commercial Cooperation
Agreement ('CCA'). The Parties
entered into a composite
combination comprising inter alia
the IA, SHA and the CCA with the
common/ultimate objective of
enhancing their airline business
through joint initiatives. The effect
of the said agreements including
the governance structure envisaged
in the CCA establishes Etihad's joint
control over Jet, more particularly
over the assets and operations of
Jet.
The Commission found that the
relevant market for the purpose of
assessment of the combination is
the market for international air
Fair Play Volume 7 : October - December 2013
16
passengers: (a) on the origin &
destination (O&D) pairs originating
between 9 cities in India (Kochi
(COK), Bombay (BOM),
Hyderabad (HYD),
Thiruvananthapuram (TRV),
Bangalore (BLR), Kozhikhode
(CCJ), Ahmedabad (AMD), Delhi
(DEL) and Chennai (MAA)) and
United Arab Emirates (UAE); and
(b) on the O&D pairs originating
from or ending in India to/from
international destinations on the
overlapping routes of the parties to
the combination.
For the purpose of defining the
relevant market, the Commission
held O&D approach to market
definition as an appropriate starting
point for the competition analysis
in air transport cases. However, in
arriving at the relevant market
definition, the Commission made a
distinction between different
groups of passengers and observed
that Indian passengers on the 9
direct overlapping O&D pairs are
generally more price sensitive and
less time sensitive. Moreover,
passengers living in the catchment
areas of two or more airports may
consider these airports as
substitutable to each other.
Considering these, the Commission
noted that in the case of
passengers travelling to Abu Dhabi,
there are 3 international airports in
UAE that passengers might
consider as substitutable with each
other i.e. Abu Dhabi (AUH), Dubai
(DXB) and Sharjah (SHJ).
The Commission also undertook a
competition assessment of the
O&D city pairs between India and
Abu Dhabi and concluded that
there is sufficient restraint on
market power in all the O&D
routes between different call points
in India and Abu Dhabi. It was also
observed that the Parties and Air
India are likely to increase their
services in a phased manner on
Mumbai-Abu Dhabi and Delhi-Abu
Dhabi routes, which would
mitigate the potential
apprehension regarding reduced
competition, if any.
As regards the other overlapping
O&D pairs between different call
points in India and other foreign
destinations, the Commission
observed that there are 38 routes
to/from India to other destinations,
where both Etihad and Jet fly and
there is at least one competitor on
the route. Of these, only for 7
routes, Jet and Etihad have a
combined market share of greater
than 50 percent. Of these 7 routes,
on 3 routes either Jet or Etihad has
a market share of less than 5 per
cent. For instance, on the Bombay
(BOM)-Brussels (BRU) route, Jet has
a market share of 72.90 per cent
and Etihad has a market share of
3.30 per cent. On the AMD-BRU
route, Jet has a market share of
83.10 per cent, while Etihad has a
market share of 2.61 per cent.
Thus, post transaction change in
market share is marginal for the
combined entity and the deal does
not alter the competition dynamics.
The Commission, vide
majority order dated
November 12, 2013, approved
the combination under subsection (1) of section 31 of the
Act. However, CCI observed
that the approval is granted
pursuant to the underlying
competition assessment based
upon the information
provided by the Parties, in the
notice given under Section
6(2) of the Act (as modified
and supplemented from time
to time). The approval should
not be construed as immunity
in any manner from
subsequent proceedings
before the Commission for
violations of other provisions
of the Act.
The six of the se ven above
mentioned routes, where Jet and
Etihad have an indirect overlap and
the market share is greater than 50
per cent consist of Brussels (BRU)
and six Indian cities (BRU-AMD,
BLR-BRU, BOM-BRU, BRU-COK,
BRU-HYD and BRU-TRV) as O&D
pairs. The Commission considered
airport substitutability in the same
catchment area of these O&D pairs
and the possibility of their being in
the same relevant market. When
these airports are considered as
substitutable, the combined market
17
share of Jet and Etihad decreases
significantly (it comes down to
around 30 per cent). For the one
remaining route, Chennai-Toronto
(i.e MAA-YYZ), where market share
is greater than 50 per cent, Jet and
Etihad are not the closest
competitor and there is at least one
credible competitor in the market
from which the customers can
choose from an alternative
(Emirates, Lufthansa, and British
Airways). To summarise, on all
routes, passengers have a major
carrier to choose from other than
Jet and Etihad, which can
constraint the pricing behaviour of
Jet and Etihad. This will ensure that
the passengers can select amongst
more than one airline even after
the combination.
The Commission further observed
that Airline alliances create
substantial opportunities for
generating economic benefits,
many of which are dependent at
least in part on the closer
integration achievable. The
Commission, vide majority order
dated November 12, 2013,
approved the combination under
sub-section (1) of section 31 of the
Act. However, CCI observed that
the approval is granted pursuant to
the underlying competition
assessment based upon the
information provided by the
Parties, in the notice given under
Section 6(2) of the Act (as modified
and supplemented from time to
time). The approval should not be
construed as immunity in any
manner from subsequent
proceedings before the
Commission for violations of other
provisions of the Act. It is
incumbent upon the Parties to
ensure that the ex-ante approval
does not lead to ex-post violation
of the provisions of the Act. The
Commission also held that the
approval shall have no bearing on
proceedings under section 43A of
the Act.
Volume 7 : October - December 2013 Fair Play
CCI approves the Acquisition of D&S Business of
by
Microsoft Corporation and
Microsoft International (a wholly
owned subsidiary of Microsoft)
filed a notice under Combinations
Regulations in October, 2013 for
the proposed acquisition of
Devices and Services (“D&S”)
Business of Nokia Corporation and
its related arrangements. The D&S
business of Nokia includes the
mobile phones and smart devices
business units, as well as industry
design team, operations including
production facilities, sales and
marketing activities, support
functions, and design patents of
the devices produced by the D&S
business. Microsoft is a
multinational software corporation
headquartered in USA, and is
primarily engaged in the design,
development and supply of
computer software, hardware
devices and related services.
Microsoft International is an
investment holding company
headquartered in Netherlands.
Nokia is a multinational
communications and information
technology corporation,
headquartered in Finland.
As part of the transaction, Nokia
will grant Microsoft a ten year nonexclusive license to its patents with
an option to extend the same to
perpetuity. Microsoft will grant
Nokia reciprocal rights to use
Microsoft patents in the services
offered by HERE North America
LLC, a subsidiary of Nokia.
Additionally, Microsoft will also
become a strategic licensee of
Nokia's HERE platform, as Nokia
will grant Microsoft a four-year
non-exclusive license to the HERE
geo-spatial data and services.
Microsoft would have a ten year
license arrangement with Nokia to
use the Nokia brand on current
and subsequently developed
products based on the Series 30
and Series 40 Operating System
and Nokia will continue to own
and maintain the Nokia brand.
In India, Microsoft operates
through its subsidiaries and
divisions, which represent its
products cycle, systems and
applications and various state-ofthe-art technologies. In India,
Nokia is engaged in the D&S
business and Nokia Solutions
Networks business through its
various subsidiaries and divisions. It
also conducts research and
development and has mobile
device manufacturing facilities in
India.
The Commission observed that, in
India, the proposed combination
relates to the business of mobile
Fair Play Volume 7 : October - December 2013
18
handsets (including the
smartphones and tablets) and
operating systems used in these
devices. Nokia is active in the D&S
business of mobile handsets, while
Microsoft is not active in that
business. Presently, Microsoft and
Nokia are also not active in the
business of manufacturing and sale
of tablets in India. It was further
noted that Nokia is not active in
the business of operating software
used in the mobile/smartphones
and tablets. The Commission
noticed the existence of a vertical
relationship between Microsoft and
Nokia as Microsoft's Windows
Phone OS is used in the Nokia
Lumia range of smartphones.
However, the Commission took
into consideration the minimal
share of Microsoft against the
presence of major players like
Google and Apple as well as other
players like RIM, Linux, Firefox etc.
in the business of the operating
software used in the
mobile/smartphones and tablets in
India. Further, the Commission also
took note of the minimal share of
Nokia in the business of
mobile/smartphones and the
presence of numerous other global
and local players like Samsung,
Apple, Blackberry, Sony, HTC, LG,
Lenovo, Micromax, Lava, Spice,
Karbonn etc. in the business of
mobile/smartphones in India. In
view of the above considerations,
the vertical relationship was found
to be relatively insignificant.
The Commission also observed
that these markets are extremely
dynamic and are constantly
evolving and thereby the product
life cycles in these markets are very
short. The technology in these
businesses is primarily driven by
the ecosystem and its ability to
swiftly integrate the different smart
products within a given ecosystem,
which incentivises the application
developers to constantly innovate
for new and better quality
products. Therefore, it is the
ecosystem in this business, which
drives the demand between the
users, application developers, and
designers/manufacturers.
The transaction aims to enhance
Microsoft's device business and
In addition to the
innovation and strength of
the devices at all price
points, the present
transaction would give
Microsoft a proven
capability and talent in the
critical mass including the
hardware design &
engineering, supply chain,
sales, and marketing.
Hence, with the proposed
transaction, Microsoft
intends to develop a
competitive ecosystem
other than that of Google
and Apple which would,
therefore, provide an option
to the consumers for more
choice, innovation and high
end quality products.
19
strengthen opportunities for
Microsoft and its developers across
the Windows phone ecosystem. In
addition to the innovation and
strength of the devices at all price
points, the present transaction
would give Microsoft a proven
capability and talent in the critical
mass including the hardware
design & engineering, supply
chain, sales, and marketing.
Hence, with the proposed
transaction, Microsoft intends to
develop a competitive ecosystem
other than that of Google and
Apple which would, therefore,
provide an option to the
consumers for more choice,
innovation and high end quality
products. The Commission
approved the proposed
combination under section 31(1)
of the Act, stating that it is not
likely to create any adverse effect
on competition in India.
Volume 7 : October - December 2013 Fair Play
INVESTIGATIONS INITIATED
Alleged Abuse of Dominance by
Telefonaktiebolaget LM Ericsson
CCI has directed investigation in
the information filed by the
Micromax Informatics Limited
(informant) against
Telefonaktiebolaget LM Ericsson
(Publ) (opposite party or OP). The
informant alleged abuse of
dominant position by the OP by
demanding an unfair royalty
structure from the informant with
respect to its Standard Essential
Patents (SEPs) covering GSM
technology.
OP is a member of the Standard
Setting Organisation (SSO),
European Telecommunications
Standards Institute (ETSI). ETSI
produces globally-applicable
standards for Information and
Communication technologies (ICT),
including fixed, mobile, radio,
converged, broadcast and internet
technologies. ETSI's website also
recognises that some of these
technology standards may be
covered by patents held by ETSI or
members of ETSI such as OP.
Consequently, ETSI has formulated
its own “IPR Policy” called the ETSI
Intellectual Property Rights Policy
(“ETSI IPR Policy”).
In the present information, OP
demanded from Informant to
secure the licenses of patents used
in its products on Fair, Reasonable
and Non-Discriminatory Terms
(FRAND Terms). Informant made a
request for details of the FRAND
licenses from the OP, but the same
were not provided. However, the
Informant at the instance of the OP
entered into a Non-Disclosure
Agreement with OP on
January 16, 2012. The
terms of the FRAND
licenses were disclosed
to the Informant after
this agreement for the
first time on
05.11.2012, i.e. after
almost 16 months of
request made by the Informant in
July, 2011. OP thereafter instituted
a civil suit against the Informant
before High Court of Delhi, alleging
infringement of eight Standard
Essential Patents (SEPs), used in 2G,
3G and 4G devices. The Single
Bench of the High Court passed an
ad interim ex-parte order in favour
of the OP.
The Informant submitted before
the Commission that OP abused its
dominant position by imposing
exorbitant royalty rates for SEPs as
it is well aware of lack of alternate
technology being available and OP
being the sole licensor for the SEPs
of globally acceptable technology
standards. Further, the royalty rates
imposed by the OP were not
product based i.e. royalty was not
being charged on the basis of cost
of product licensed but was being
charged on the basis of value of the
phone in which product of the OP
was being used and the Informant
had to pay a percentage of cost of
the phone as royalty. The royalty
rates being charged by the OP had
no linkage to patented product
contrary to what is expected under
a patent licence on FRAND terms.
Informant submitted that higher
cost of a smartphone is due to
Fair Play Volume 7 : October - December 2013
20
various other softwares / technical
facilities and applications provided
by the manufacturer/licensee for
which he had to separately pay
royalties/charges to other patent
holders/patent developers.
Charging of two different license
fees per unit phone for use of the
same technology prima facie is
discriminatory and also reflects
excessive pricing vis-à-vis high cost
phones.
Based on facts and submissions, it
seemed apparent that Ericsson is
dominant in the relevant market of
GSM and CDMA in India and
holds large number of GSM and
CDMA patents. Ericsson has
33,000 patents to its credit, with
400 of these patents granted in
India, and the largest holder of
SEPs for mobile communications
like 2G, 3G and 4G patents used
for smart phones, tablets etc.
Further, since the OP holds SEPs
and there is no other alternate
technology in the market, OP
enjoys complete dominance over
its present and prospective
licensees in the relevant product
market. Accordingly, CCI found a
prima facie case and directed the
DG CCI to investigate the present
case and submit a report.
ADVOCACY INITIATIVES
Advocacy with Central
Government Ministries/
Departments
Advocacy with
States
As State governments implement not only their
own polices but also central government policies,
CCI attaches great importance to sensitising the
States about importance of competition complaint
policies. A workshop on 'Application of
Competition Law' was organised in Mumbai on
October 1, 2013. The participants of the workshop
included Chief Secretary and senior officers of
government of Maharashtra. Mr. Anurag Goel,
Member led the CCI team in the workshop. Two
presentations were made in the workshop;
'Scheme of the Competition Act, 2002 including
Powers, Functions & Duties of CCI' and 'Potential
Anti-Competitive Conduct of Firms by way of Bidrigging/Cartelisation'.
As part of initiatives for government advocacy, a
meeting was held between Health Secretary &
Senior Officers of the Ministry of Health & Family
Welfare and team of Officers from CCI led by Mr.
Anurag Goel, Member on November 6, 2013 at
Nirman Bhawan. The Ministry was sensitised
about the provisions of the Competition law and
need to follow competition complaint policies.
Advocacy with Trade
Associations
Advocacy with
Government
Training Academies
As part of CCI initiatives for creating awareness
among Industry/Trade Associations, CCI gave a
presentation on 'Competition Law, Trade Association
& Competition Compliance Programme' at CII's 4th
Interactive Meeting with Industry Members
organised in Bhavnagar on October 17, 2013.
Similar presentations were made on 'Competition
Compliance & Trade Association' & 'sections 3 & 4
of the Competition Act' in an advocacy event
organised by FICCI in Mumbai on December 6,
2013.
As part of CCI initiatives in government training
academies, CCI made a presentation on
'Competition Law and Benefits to Government' at
Dr RCVP Noronha Academy, Bhopal on October
31, 2013 and discussed the need to introduce
'Competition Module' in their foundation courses.
Similar efforts were made at National Academy of
Direct Taxes on November 29, 2013.
21
Volume 7 : October - December 2013 Fair Play
ENGAGING WITH THE WORLD
MOU with DG Competition Signed
EU delegation with Competition Commission of India
Fair Play Volume 7 : October - December 2013
22
On the side-lines of the 3rd BRICS International Competition Conference, on November 21, 2013, the
Competition Commission of India and the Directorate General for Competition of the European
Commission (DG COMP) signed a Memorandum of Understanding (MoU) on cooperation between the
EU and Indian competition authority.
The MoU was signed by Mr Joaquín Almunia, the Vice President and Competition Commissioner of the
European Commission and Mr Ashok Chawla, Chairperson, Competition Commission of India. The
signing of MOU reiterates the importance of cooperation for effective enforcement of competition law
and policy. Under the MOU, both the competition authorities have agreed to exchange nonconfidential information on competition policy/legislation and enforcement, multilateral competition
initiatives, competition advocacy and undertake technical cooperation in addition to cooperating in
competition law enforcement. It is expected that MOU would strengthen the existing relations between
the two authorities and would allow both the authorities to work closer for effective competition
enforcement.
Meeting with US Antitrust Authorities
In 2012, CCI had signed
MOU with US antitrust
authorities - Federal
Trade Commission and
Antitrust Division of
Department of Justice.
CCI held bilateral
meeting with them on
November 23, 2013 in
New Delhi to discuss
operationalisation of
MOU.
23
Volume 7 : October - December 2013 Fair Play
EVENTS
International Events
Mr. Anurag Goel, Member, CCI participated in the meeting of OECD Competition Committee and its
working parties during October 28 – 31, 2013 in Paris, France. CCI also contributed papers for the
roundtable discussions on“Ex-officio cartel investigations and the use of screens to detect cartels”, and
“Competition issues in the Food Chain Industry”.
CCI officials participated in various workshops/ seminars/ meetings, some of which are:
6
2013 International Competition Network (ICN) workshop on Cartel during October 15-18, 2013, in
Cape Town, South Korea.
6
OECD-Korea Policy Centre workshop on Complex Mergers during December 11-13, 2013 in
Busan, South Korea.
6
17th International Workshop on Competition Policy during December 9-10, 2013 in Seoul, South
Korea.
6
2013 ICN Advocacy Workshop: “Advocacy: a driver for change” during December 12-13, 2013 in
Rome, Italy.
6
A short workshop on ‘Cartel Investigation’
Capacity Building Events
was organised in collaboration with the US
Department of Justice on November 20,
2013 for the officers of CCI.
In collaboration with the US FTC, CCI
6
organised a workshop on ‘High- Technology
and Competition Issues’ for its officers
during December 17-19, 2013.
Fair Play Volume 6
7 : November
October - December
- January 2013
2014
24
DEVELOPMENTS IN OTHER
JURISDICTIONS
EU Commission fines banks 1.7 billion Euros for
participating in Cartels in markets for financial derivatives
The European Commission has fined 8 international financial institutions including UBS, RBS, Deutsche Bank, JP
Morgan, Citigroup, RP Martin, Barclays, and Societe Generale a total amount of € 1 712 468 000 for participating
in illegal cartels in markets for financial derivatives covering the European Economic Area (EEA).
Four of these institutions including Barclays, Deutsche Bank, RBS and Societe Generale participated in a cartel
relating to interest rate derivatives denominated in the euro currency. Six of the settling parties including UBS, RBS,
Deutsche Bank, JPMorgan, Citigroup and RP Martin participated in one or more bilateral cartels relating to interest
rate derivatives denominated in Japanese yen. The Commission found that cartel operating in the interest rate
derivatives industry aimed at distorting the normal course of pricing components for these derivatives.
In setting the level of fines, the Commission took into account the banks' value of sales for the products concerned
within the EEA, the nature of the infringements, their geographic scope and respective durations.
25
Volume 7 : October - December 2013 Fair Play
EU Commission
fines
Johnson & Johnson,
Novartis 16
million Euros
for Generic
Drug deal
The European Commission has
imposed fines of € 10 798 000 on
the US pharmaceutical company
Johnson & Johnson (J&J) and its
Dutch unit, Janssen-Cilag, and € 5
493 000 on Novartis and its Dutch
subsidiary, Sandoz for blocking the
sale of a generic painkiller
'Fentanyl' in the Dutch market.
Fentanyl is a pain-killer 100 times
more potent than morphine. It is
used notably for patients suffering
from cancer. The Commission
found that after Johnson &
Johnson's patent on a patch
containing the drug Fentanyl
expired in 2005, it paid Novartis to
delay launching a generic version
in the Netherlands. The
Commission observed that the two
companies deprived patients in the
Netherlands including people
suffering from cancer from access
to a cheaper version of this
medicine.
According to the Commission, the
agreed monthly payments
exceeded the profits that Novartis
Dutch subsidiary Sandoz expected
to obtain from selling its generic
product. The deal ended in
Fair Play Volume 7 : October - December 2013
26
December 2006, when a third
party was about to launch a
generic fentanyl patch.
In setting the level of the fines, the
Commission took into account the
duration of the infringement and
its gravity.
KNOW YOUR COMPETITION ACT
In the previous issue, various
aspects of abuse of dominant
position and its mandate under
section 4 of the Act were
discussed. This issue focuses on
provisions relating to
Combinations under sections 5
and 6 of the Act and
Regulations made thereunder.
Combinations
Combinations mean mergers,
amalgamations of companies or
acquisitions of control, shares,
voting rights or assets of one
company by another company
or group. As such, combinations
are usual business activities,
which allow companies to
consolidate their position in
markets.
Combinations Regulation
Most combinations do not raise
serious prospect of an increase
in market power; some
however may raise serious
concerns, which can be
detrimental to competition. The
core purpose of regulating
combinations is to prevent the
prospective anti-competitive
effects of such combinations
through appropriate remedies,
including prohibition, if
necessary. It is ex-ante in nature
and aims to ensure that firms do
not acquire such a degree of
market power after the
combination so as to harm the
interests of consumers, the
economy and society as a
whole.
The Competition Act, 2002
provides for mandatory filing of
proposed combinations based
on thresholds, which were
further raised by 50 per cent
through notification by the
Government of India. The
relevant provisions of the Act
relating to Combinations have
come into effect from 1st June,
2011 after an extensive
consultation process with
stakeholders. In order to
minimise regulatory compliance
cost on the industry, the
Regulations lay down the
categories of transactions that
ordinarily are not likely to have
an appreciable adverse effect on
competition and, therefore,
ordinarily not required to make
any filing. The Regulations also
provide certainty on the
applicability of the law by
stipulating that only combination
proposals approved by their
respective boards, or for which
binding documents were
executed, on or after June 1,
2011, are required to make a
filing to the Commission. The
Combinations Regulations are
reviewed and amended from
time to time with a view to
simplify the filing requirements
and bring about greater certainty
in the application of the Act and
the Regulations. The
Commission has the power to
take suo-moto action by calling
for notice from parties to the
mergers, who do not comply
with the mandatory filing
requirements.
Procedure for Investigation of
Combinations
The procedure for investigating a
Combination comprises of three
steps: firstly a relevant market is
identified according to the
definition accorded under the
Act, this entails identifying both
27
the relevant product market as
well as the relevant geographic
market. Secondly, the
Combination is scrutinised to
determine whether the
combination has an appreciable
adverse effect on competition in
the relevant market. The criteria
for such an analysis are laid down
under section 20 (4) of the Act.
Lastly, on the basis of the above,
the Commission decides whether
the combination should be
approved, rejected or approved
with modifications to the
combination. The modifications
to the Combinations are made on
the basis of how the anticompetitive effects could be
minimised or eliminated.
Timelines
The Competition Act, 2002
provides a time period of 210
days to CCI to take a decision on
a Combinations filing. Since time
is a crucial element in
Combination cases, a provision to
reduce the time period to one
hundred and eighty days on best
endeavour basis has been
included in the Combinations
Regulations. The Commission has
to form a prima facie opinion
within thirty days as to whether
the Combination is likely to cause
an appreciable adverse effect on
competition. In pursuance of this
provision, most filings are likely to
be approved in this shorter time
frame. Only few filings with
serious competition concerns are
likely to go beyond this period to
the second stage of investigation.
These will be automatically
cleared at the end of 210 days, if
no order is passed.
Volume 7 : October - December 2013 Fair Play
Filing of
Combination Notice
Review of
Notice
Combination cleared
within 30 days
Detailed inquiry is
launched
Combination deemed
to be cleared if no
order passed within
210 days
Inquiry Report
Considered by the
Commission
Combination
approved
Combination approved
with
Modifications
Combination
not approved
Competition Commission of India
The Hindustan Times House
18-20, Kasturba Gandhi Marg
New Delhi- 110001
Please visit www.cci.gov.in for more information about the Commission.
For any query/comment/suggestion, please write to [email protected]
Disclaimer: The contents of this publication do not necessarily reflect the official position of the Competition Commission of
India. Contents of this newsletter are only informative in nature and not meant to substitute for professional advice. Information
and views in the newsletter are fact based and incorporate necessary editing.